Medical Billing in Dentistry; What is the difference between coinsurance and copay?
Are you, as a dental office, starting to bill medical insurance? If so, you may have noticed that some of the terms in the medical billing arena require further explanation. One of the primary questions we get at Nierman Practice Management is, “are the terms coinsurance and copay essentially the same thing”? The answer is no; they are different! Although coinsurance and copay are sometimes used interchangeably, there is a notable difference between them! It is essential to understand the difference to set expectations to estimate out-of-pocket costs for your patients accurately.
Coinsurance and copays are similar: they are both out-of-pocket costs paid by the patient to the healthcare provider. The most significant difference between them is that copays are preset dollar amounts based on the type of service. At the same time, coinsurance is a percentage of the allowed amount of a medical service after the deductible is satisfied. How do you determine a patient’s copay or coinsurance? You can find out that information by a benefit verification. Verifications are performed by the provider’s office (or third-party medical billing service) before providing a service. The benefit verification will gather essential policy details for estimating out-of-network payment amounts.
Copay is an established fixed amount a patient has agreed to pay for specific services under their health plan. Copay is more commonly associated with in-network benefits instead of out-of-network. It is common to see some copay amounts listed on the front of a patient’s insurance card. Examples of this are the copay amounts for primary care physician (PCP) office visits, specialist office visits, and urgent care or emergency room visits. Copay amounts are common to other categories like prescription medications, radiology/imaging, and laboratory testing. For example, a patient may have a copay of $25 for a PCP visit, $75 for a specialist visit, and $150 for an urgent care visit.
Coinsurance is the patient’s share of the costs of a covered health care service that is calculated as a percentage of the allowed amount for the service after the deductible has been satisfied. Coinsurance may be communicated as a percentage or referred to in the form of a fraction totaling 100. For example, during a benefit verification call, the medical insurance representative may state, “the plan has 20% coinsurance” or say, “the patient has an 80/20 policy.” Both mean the same thing! The patient is responsible for paying 20% of the allowed amount for a covered service, while the medical insurer’s responsibility is 80%. It is important to note coinsurance can vary within a patient’s plan based on the type of service.
Another term to be familiar with is out-of-pocket maximum, which can affect the coinsurance and copay! The benefit verification process reveals the out-of-pocket maximum. Once the out-of-pocket maximum is satisfied, the patient is no longer required to pay coinsurance and copays; instead, reimbursement by the health plan for the total allowed amount of the service is 100 percent.
Most dental practices that file medical insurance for medically necessary services performed in the dental practice setting are out-of-network providers. Therefore, coinsurance is more commonly applied when performing the benefit verification and estimating the patient’s out-of-pocket costs.
Gathering this information and presenting it to your patients helps them to make informed decisions about their healthcare. Understanding medical billing terms and processes is more critical than ever for dental offices providing medically necessary treatment!
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Article by: Rose Nierman and Courtney Snow, Nierman Practice Management