Medical co-pays are among the most accessed benefits of modern major medical insurance policies. Since Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) replaced indemnity health insurance policies as the most common health care option, medical co-pays have provided patients access to physicians they couldn't previously afford to visit. The medical co-pay represents the percentage of the total charge for a doctor's office visit that is paid by the insured. Medical co-pays are not to be confused with co-insurance, another facet of managed care health insurance policies.
History
Early health insurance policies were almost always indemnity policies. These policies worked very well in times of catastrophic medical crises. Generally speaking, indemnity policies carried a relatively high annual deductible and covered all medical expenses above the deductible up to one hundred percent, depending upon the individual policy. Indemnity policy holders were responsible for all medical expenses up to their deductible, including doctor office visits, labs and any referrals received.
After the passage of the Health Maintenance Organization Act of 1973, co-pays were established to give policy holders more affordable access to their doctors. Part of the cost-containment strategy of managed care is preventative medicine and detecting illnesses earlier when they are more affordable to treat. With that in mind, co-pays enabled policy holders to have annual check-ups and to visit their doctors for as little as five dollars when they felt ill.
Function
When a patient covered by an HMO or PPO wants to visit his primary care physician, he makes an appointment and pays the doctor the co-pay stipulated in his policy. While there are many levels of co-pays, usually the higher the co-pay amount, the lower the monthly premium on the policy. Once the doctor's office receives the co-pay, the billing department subtracts the co-pay amount from the office visit rate negotiated in advance with the insurance company, and bills the insurance company for the difference. Within a few weeks, the patient will receive an Explanation of Benefits in the mail outlining the charges and disclosing the fees paid by the insurance company.
Types
The two types of managed care policies that offer co-pays are the HMO and the PPO. The primary difference between the two are the levels of patient access to different physicians. With an HMO, the patient has a primary care physician that he must see first, and then the primary care physician may refer the patient to a specialist if necessary. With a PPO, the patient has the option of going straight to the specialist without a referral, as long as the specialist is in the PPO's network.
Misconceptions
Some policy holders believe that the co-pay will cover everything that happens during a doctor's office visit. This is not the case. If labs or X-rays are ordered, there will often be a separate co-pay requirement. Also, some procedures and prescriptions must be approved by the insurance company in advance. Proceeding without approval may put the policy holder in the unfortunate position of being responsible for 100 percent of the costs.
Warning
Medical co-pays offer easy access to doctors and are therefore sometimes abused by policy holders. Always vigilant about costs, many insurance companies are beginning to limit the number of doctor office visits on an annual basis. If a policy holder goes to the doctor frequently, it would behoove her to find a policy without these types of limits.
Tags: doctor office, policy holders, insurance company, insurance policies, care physician, health insurance
