Copay vs. Coinsurance: What's the Difference?

Navigating insurance is similar to learning a new language: There are so many new terms that making your way through even a few sentences can leave your head spinning. Two of these terms are copay and coinsurance, and they sound pretty similar. 

Both are forms of cost sharing, meaning the portion of covered healthcare costs employees pay out of pocket. They’re similar but distinct, and understanding the difference helps HR teams manage employee plans and explain coverage clearly.

In this guide, we compare copay versus coinsurance and cover what small businesses should know when reviewing plan terms.

How Do Copays and Coinsurance Work?

Let’s see how copays and coinsurance stack up. Before we dive in, here’s a quick overview of the differences between copay and coinsurance:

What’s a Copay, and How Does It Work?

Copay is short for copayment, which is a fixed amount that employees pay out of pocket for a covered healthcare expense, typically at the time of service. Plans usually set different copays for varying care types, such as one for primary care and another for specialist care.

Some plans apply copays from the first visit, while others apply them only after the employee meets their deductible.

Real-world example: An employee’s plan (one that applies copays before the deductible is met) has a $50 copay for specialist care. The worker sees a dermatologist and pays $50 at the visit. The plan covers the rest, regardless of the visit’s total cost. 

What’s Coinsurance, and How Does It Work?

Coinsurance is the percentage of a covered service’s cost that an employee pays. The plan covers the remaining percentage. Because it’s a percentage, the employee’s share rises and falls with the cost of care. 

Insurers calculate the employee’s share based on the allowed amount, which is the amount a plan approves for a given healthcare service. Coinsurance rates vary across healthcare services. Typically, coinsurance only applies after the employee has met their deductible. 

Real-world example: An employee (who’s met their deductible) has 20% coinsurance. For an outpatient procedure carrying a $500 allowed amount, they pay $100. For an MRI with a $1,200 allowed amount, and the same coinsurance rate, they pay $240. The plan pays $400 and $960, respectively. 

How Do Deductibles and Out-of-Pocket Maximums Affect Copays and Coinsurance?

Here’s a look into how deductibles and out-of-pocket limits influence copays and coinsurance. 

Deductibles

A deductible is the dollar amount an employee pays for covered healthcare services each plan year (also called the 12-month coverage period). They pay it incrementally as they receive care, and each payment toward covered services counts toward the deductible. Certain healthcare services are not subject to deductibles, and others are. Plans vary in which services they exempt. 

In typical circumstances, coinsurance only applies once the deductible is met. Until then, the employee pays the full allowed amount for services subject to deductibles. 

Copays work slightly differently. Whether or not copays apply before the deductible is met depends on the plan. There are certain healthcare services that usually carry a copay from the first visit (before the deductible is met). Primary care is a common example. 

Out-of-Pocket Maximums

An out-of-pocket maximum is the most an employee pays for covered in-network services* in a plan year. Deductibles, copays, and coinsurance count toward it, but premiums don’t. 

Once an employee reaches the out-of-pocket maximum, the plan pays the entire cost of covered in-network services for the remainder of the plan year. This means employees no longer owe copays or coinsurance for that care. 

*In-network services are those offered by healthcare providers that have a contract with a plan’s insurer.

What Should Employers Consider When Comparing Copays and Coinsurance?

Here are a few considerations for employers reviewing healthcare plans. 

1. Employee Affordability

Choosing a plan that fits your organization involves balancing two key factors: what the business pays (particularly premiums) and what the employee pays (such as copays and coinsurance). Lower cost sharing typically translates to higher premiums, and vice versa. 

Ensure the plan fits your budget, but keep its affordability for employees front of mind, too. Lower costs increases the likelihood of employees getting the care they need and makes benefits packages more attractive. 

Insight: Factor predictability into your considerations. Copays offer predictability, since they’re a fixed amount. Because coinsurance is a percentage, it's less predictable. A major health event can mean a large coinsurance bill for the employee, up to the out-of-pocket maximum. 

1. Benefits Competitiveness 

Compare your plans’ cost sharing with what other employers offer. KFF’s 2026 Employer Health Benefits Survey(opens in a new tab) provides useful benchmarks: Among covered workers with copays, the average copay was $27 for primary care visits and $46 for specialist visits. Among those with coinsurance, the average rate for these visits was 20% for primary care and 21% for specialist care. 

Offering more than one plan, each selected in light of industry benchmarks, lets employees pick the one that best suits their needs.

Insight: Building a competitive benefits package can be confusing. Purpose-built solutions, like Justworks PEO, can help. As Roula Vastis, Kinsta’s HR Generalist, explained: “Justworks takes the manual research of so many things away from us, and still allows us to offer a vast portfolio of benefits… Justworks took the guesswork out of it for us.”

1. Employee Education

Plan design influences how much time you dedicate to employee education. Copays, because they’re a set amount, typically require less explanation. Coinsurance, because it intersects with several cost factors, may take more time to cover. 

Forecast employee education requirements upfront, and reflect them in resource planning. Insurers typically provide employee educational resources, such as the Summary of Benefits and Coverage (SBC), so you can use them as part of your efforts. 

Insight: When employees have a question about copays or coinsurance, HR is typically their first stop. Make sure HR has a deep understanding of plan terms themselves. 

How Justworks Helps Businesses Navigate Employee Benefits

Managing benefits is difficult, and employees and HR teams alike need simple ways to review and compare plans. You can reduce the administrative burden with a centralized platform like Justworks.

Justworks PEO provides small businesses with streamlined access to a wide variety of plans. Our platform lets HR teams compare terms and find the best rates, without hours of research. 

Kyrie Stevens, Chief Business Officer at US Lab Partners, explained why this matters: 

“With Justworks, we’re able to attract and keep our talent by offering high-quality benefits. Because we want to give our employees a good environment to work in. If we’re helping them, it makes for better productivity and better corporate culture.”

Justworks PEO takes the admin headache away from employees, too. Your people can enroll in, manage, and check coverage information from one central hub.

Get started with Justworks today.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.

FAQ

Can a Health Insurance Plan Require Both a Copay and Coinsurance for the Same Service? 

Yes. For example, a plan may separate cost-sharing methods across different parts of a service. An ER visit may carry a $250 copay, plus 20% coinsurance on certain associated tests (such as a CT scan).

Where Can Employees Find Their Copay and Coinsurance Amounts?

Employees can find copay and coinsurance terms, including amounts, in their plan’s SBC.

Can Employees Use an HSA or FSA To Pay Copays and Coinsurance?

Yes. Copays and coinsurance are qualified medical expenses. Employees can pay them with funds from a health savings account or flexible spending account. 

Does Coinsurance Count Toward the Deductible?

No. Coinsurance, in typical cases, applies when the deductible is met. 

How Does Coinsurance Work?

Coinsurance is a percentage of a covered healthcare service’s allowed amount that employees pay. The gap between the service’s allowed amount and the employee’s share is covered by the plan.