How Do Deductibles and Co-Payments Work in Private Plans?
Learn how these cost-sharing features affect your out-of-pocket expenses and how to plan around them
When you have private health insurance, not every service is covered in full. Most plans include features like deductiblesand co-payments, which help control costs for insurers and share responsibility between you and the plan provider. Understanding how these work is essential for budgeting and avoiding surprises when you use your benefits.
These terms can feel technical, but they represent real dollars — and knowing how they function can help you make smarter decisions about your coverage and care.
What Is a Deductible?
A deductible is the amount you must pay out of pocket each year before your insurance begins to reimburse your eligible expenses. It resets annually and can apply to your whole policy or to specific services like prescriptions or dental care.
For example:
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If your deductible is $250, you must pay the first $250 of covered medical expenses in a year before your insurance starts sharing the cost.
Some plans have:
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Individual and family deductibles (e.g., $250 per person or $500 per family)
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Service-specific deductibles, such as a drug-only deductible separate from the rest of the plan
Tip: Check whether your plan’s deductible applies to all services or only to specific categories. Some preventive services may bypass the deductible entirely.
What Is a Co-Payment (or Co-Insurance)?
A co-payment, or more broadly co-insurance, is the portion of each claim you must pay after your deductible has been met. It is usually expressed as a percentage.
For example:
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If your co-payment is 20 percent and you have a $100 physiotherapy visit, you would pay $20 and your insurer would pay $80.
Co-payments may vary by service. Your plan might cover:
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90 percent of drug costs
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80 percent of dental care
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100 percent of hospital room upgrades
Some plans also include maximum out-of-pocket limits, which cap how much you pay in co-payments over the course of a year.
How Deductibles and Co-Payments Work Together
| Feature | What It Means | How It Affects You |
|---|---|---|
| Deductible | Set amount paid before insurance starts | You cover this fully at the start of the benefit year |
| Co-payment | Portion of each claim you continue to pay | You share costs on every service after the deductible is met |
| Out-of-pocket max | Annual cap on what you spend through co-payments | Once reached, insurance covers 100 percent of remaining costs |
Note: Co-payments do not typically count toward your deductible, but both contribute to your total annual health spending. Some plans reimburse you after payment, while others apply the discount automatically through your provider.
Planning Around Out-of-Pocket Costs
Understanding how deductibles and co-payments are structured in your plan helps you:
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Budget for expected and recurring expenses
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Choose cost-effective service providers
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Compare plans during open enrollment or policy selection
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Use services strategically based on timing and need
Caution: Even a plan with generous reimbursement can feel expensive if you are not prepared for the deductible and co-payment structure. Review your policy carefully to avoid surprises, especially at the start of the benefit year.
Smart Use Means Fewer Surprises
Deductibles and co-payments are standard parts of private insurance plans. They can be manageable, even predictable, with a little planning and awareness. By understanding these features and tracking your annual costs, you can get the most from your benefits without being caught off guard.