Understanding Cost Sharing: Deductibles, Copayments, & Coinsurance

By: Suzanne Berman, MD, FAAP & Angelo Peter Giardino, MD, PhD, FAAP 

All health insurance requires consumers to pay some of the cost of covered health care services. This is called "cost sharing" or "out-of-pocket" costs. Cost sharing varies with different types of health plans, but most will have a copayment, coinsurance or deductible amount. 

Types of Cost Sharing Arrangements & Situations

How much is paid by the insurance company, and how much is your responsibility, depends on your plan's cost sharing arrangement:

  • Copay: In a traditional copay plan, you pay a fixed amount per service. For example, if your copay is $40, you are expected to pay $40 and your insurance will pay the remaining $45 ($40 + $45 = $85). You may have a copayment for emergency room services; check your plan for details emergency services for non-emergency problems.

  • Coinsurance: In a coinsurance model, you pay a fixed percentage of each service. For example, if your coinsurance is 20%, you would pay 20% of the $85 allowable (0.2 x $85 = $17) to the doctor, and the insurance company would pay the remaining $68 ($85-$17 = $68).

  • Deductible: With a deductible, you pay the entire amount allowed for all services provided until the deductible is met. If your insurance has a $1,000 annual deductible, you would pay the entire $85 allowable to the doctor. In fact, you would pay the entire amount for 11 such visits ($1000/$85 = 11.8) before your insurance began to pay anything to the doctor directly. The deductible starts over every plan year. So, if you see the doctor for this type of office visit 15 times, but at least 11 of those 15 visits are not within the same plan year, your insurance will not pay anything against his or her fees.

  • Out-of-pocket maximum: This is the absolute maximum you are expected to pay in cost sharing within a plan year. In contrast to your deductible, the out-of-pocket maximum refers to your cost sharing arrangement after your deductible has been met. An insurance plan with a $1,000 deductible might have a $1,500 out-of-pocket maximum, coupled with 20% coinsurance. In that case, you would pay the entire $85 for 11 visits to the doctor under your deductible. Having met your deductible, you would then pay $17 per office visit (20% coinsurance) until you spent $500 in coinsurance ($1,500 - $1,000), or about 29 more office visits ($500/$17 = 29.4). At that point (40 total visits in a year), you would pay nothing more for medical care for the remainder of the plan year.

Here's an example of the different ways insurance cost sharing can work:

Dr. Martinez' typical charge for a certain kind of office visit is $100. As a courtesy to you, she files a claim with your insurance plan for the visit. The insurance plan permits $85 of the $100 charge (the "allowable"). Because Dr. Martinez is in network with the plan, she has already agreed by contract to accept a $15 reduction in her fee (the adjustment) for this service. Dr. Martinez must write off the $15 and not bill you for this amount. Dr. Martinez will be paid a total of $85 for that office visit.

To add to the complexity, different cost-sharing arrangements may apply depending on different situations:

  • Variable copays or coinsurance. A plan might have a $25 copay for every doctor visit, 20% coinsurance for every prescription, but a $10 copay for every visit to a speech therapist.  Similarly, a visit to your pediatrician might incur a $30 copay, but a visit to a pediatric allergist might incur a $50 copay.

  • In-network or out-of-network status. To encourage your use of in-network providers, a plan might have a 20% coinsurance for an in-network provider but a 50% coinsurance for an out-of-network provider. Continuing the above example, where a doctor's allowed fee is $85, you would be responsible for $42.50 of his or her fee if he or she is out-of-network with your plan, but only $17.50 if he or she is in-network. More commonly, out-of-network doctors may not even accept the $85 allowable and expect the full $100 of the charge to be paid. See FAQs: Preferred & Out-of-Network Providers for more information.

  • Individual vs. family deductibles and out-of-pocket limits. This is important if more than one family member is covered on the same plan. For example, your plan may have a $2,000 deductible. If you spend $700 on allowed services for each of your three children on the plan, you will have met a family deductible, having paid $2,100. However, if your plan also has individual deductibles of $1,000, you would still be short $300 ($1000 - $700) of each child's individual deductible.

  • What counts against the deductible? Deductibles only apply to money you spend on covered services that are billed to the insurance plan. For example, you might reasonably spend $100 or more a year on over-the-counter products like fever reducers and allergy medications. However, since you paid cash at the pharmacy and a claim was not sent to your insurance plan, the insurance plan has no way of tracking what you spent. The $100 does not get credited against your deductible. Similarly, you might spend $250 on eyeglasses at the optometrist's office. The optometrist might bill your insurance, but if your insurance determines that vision services are not covered, you are still responsible for the entire $250, and you do not receive credit for the $250 against your deductible. However, you might be able to use a health savings account (HSA) in these cases.

Children's Preventive Services

Children's preventive services, such as well-child checkups and immunizations, may or may not be covered without cost sharing. You should carefully review your plan's benefit description for details. The best time to review a plan is before you sign up with it.

Methods of Payment

Before visiting your child's doctor, check the accepted methods of payment for your out-of-pocket expenses. Options for payment may include cash, check, or credit card. Remember to bring your insurance card with you to each visit.

Additional Information:

About Dr. Berman:

Suzanne Berman, MD, FAAP, is co-founder and managing partner of Plateau Pediatrics, the first NCQA-certified level 3 patient centered medical home in Tennessee. She serves the American Academy of Pediatrics (AAP) in a variety of roles―including the executive committee of the Section on Administration and Practice Management and the Committee on Child Health Financing. Dr. Berman frequently contributes to AAP projects and publications regarding medical home practice transformation, rural health, coding, data mining, and policymaking. She and her husband have three sons.

About Dr. Giardino:

Angelo P. Giardino, MD, PhD, MPH, is the Wilma T. Gibson Presidential Professor and Chair of the Department of Pediatrics at the University of Utah's School of Medicine and Chief Medical Officer at Intermountain Primary Children's Hospital in Salt Lake City, Utah. He holds subspecialty certifications in Pediatrics and Child Abuse Pediatrics from the American Board of Pediatrics. He is also a Certified Physician Executive (CPE) within the American Association for Physician Leadership. He completed the Patient Safety Certificate Program from the Quality Colloquium, is certified in medical quality (CMQ) as designated by the American Board of Medical Quality and is a Distinguished Fellow of the American College of Medical Quality. Within the American Academy of Pediatrics, Dr. Giardino is a member of the Committee on Child Health Financing, the Council on Child Abuse and Neglect, and the Council on Children with Disabilities.  

5 Reasons Why Parents Might Receive a Bill After a Well-Child Visit

By: Suzanne Berman, MD, FAAP & Angelo Peter Giardino, MD, PhD, FAAP 

Parents are sometimes surprised when they get a bill from their pediatrician's office for part―or all―of their child's well visit. Sometimes parents are even concerned that their pediatrician has made an error in their bill.

While any billing office should be happy to review its records for errors, the following are common reasons you might receive a bill after a well-child visit:

Reason 1: Your child's insurance plan is not ACA-compliant.

  • While new group health plans and exchange plans are required to cover all parts of the well child visit with no cost sharing, many health insurance plans are exempt from the ACA and, as a result, this requirement. These include existing unchanged health plans from before the ACA became law ("grandfathered" plans), federal employee plans, government plans like Tricare or ChampVA, ERISA-based self-insured plans, and membership plans like faith-based cost-sharing services.

Reason 2: Your child's insurance plan is ACA-compliant, but you received some preventive services which are not part of the ACA-recommended list.

  • The list of services that ACA-compliant plans are expected to cover can be found at the US Preventive Services Task Force. For example, routine vaccines―not travel vaccines―are in the list of covered preventive services. If a child received a travel vaccine as part of a well-child visit, an ACA-compliant plan may not full cover the cost of the travel vaccine (even though it is a preventive service).

Reason 3. Your child's insurance plan is ACA-compliant, but you received some non-preventive services as part of the visit.

  • Examples might include lung function testing for asthma or evaluation of chronic headaches done at a well-child visit. While both of these services help promote wellness, neither are included in the definition of a standard well-child visit service and may result in an additional charge based on the rules of your insurance plan. Some families only want covered preventive services at a well child visit; other families appreciate that a pediatrician can provide all needed services at the same time so you don't have to come back for a separate visit. Ask your pediatrician's practice about its policy regarding providing sick and well child visit services on the same date.

Reason 4. Your child's insurance plan is ACA-compliant, but you received more frequent services than is typical.

  • This occurs when well-child visits are scheduled closer together than what the insurance company considers to be "annual." Some insurance companies pay for one well child visit per calendar year. This means a child might have a check-up in September one year and July the next. Other insurance companies have more stringent rules and say that at least 365 days must pass between well exams. If not, the second well visit will be denied by your insurance company, and you will be responsible for the charge. Be sure you understand your insurance company's definition of "annual" before scheduling the appointment.

Reason 5. You received ACA preventive services, but your insurance company does not recognize the billing code(s) your pediatrician use for that service.

  • For example, vision screening for children ages 3 to 5 is an ACA preventive service. In 2017, there are three codes that are commonly used to report vision screening in children: simple eyechart and two types of electronic instruments.

    • Some insurance plans recognize the eyechart code as an ACA code, but not the electronic instrument code. In that case, a family would have no cost-sharing responsibility for an eye chart, but they would if their child could not use an eye chart, and the pediatrician screened vision using an electronic instrument. Families might understandably ask the pediatrician's office to use the covered code―even if the pediatrician used the other method. However, it is a violation of insurance contracts and federal and state laws to knowingly report the wrong code.

    • Other insurance plans might permit all the vision screening codes as ACA preventive, but not accept them when billed by a pediatrician. The plan only pays for them when the family makes a separate trip to an eye doctor.

The American Academy of Pediatrics (AAP) is constantly working with insurance plans to educate them on pediatric-specific codes. Learn more about this here.

Additional Information:


About Dr. Berman:

Suzanne Berman, MD, FAAP, is co-founder and managing partner of Plateau Pediatrics, the first NCQA-certified level 3 patient centered medical home in Tennessee. She serves the American Academy of Pediatrics (AAP) in a variety of roles―including the executive committee of the Section on Administration and Practice Management and the Committee on Child Health Financing. Dr. Berman frequently contributes to AAP projects and publications regarding medical home practice transformation, rural health, coding, data mining, and policymaking. She and her husband have three sons.

About Dr. Giardino:

Angelo P. Giardino, MD, PhD, MPH, is the Wilma T. Gibson Presidential Professor and Chair of the Department of Pediatrics at the University of Utah's School of Medicine and Chief Medical Officer at Intermountain Primary Children's Hospital in Salt Lake City, Utah. He holds subspecialty certifications in Pediatrics and Child Abuse Pediatrics from the American Board of Pediatrics. He is also a Certified Physician Executive (CPE) within the American Association for Physician Leadership. He completed the Patient Safety Certificate Program from the Quality Colloquium, is certified in medical quality (CMQ) as designated by the American Board of Medical Quality and is a Distinguished Fellow of the American College of Medical Quality. Within the American Academy of Pediatrics, Dr. Giardino is a member of the Committee on Child Health Financing, the Council on Child Abuse and Neglect, and the Council on Children with Disabilities. 

What is an Insurance Carve Out

By: Suzanne Berman, MD, FAAP & Angelo Peter Giardino, MD, PhD, FAAP

Sometimes insurance plans subcontract a set of benefits to another plan or network. A health plan might cover a broad range of medical services like prescriptions and surgeries, but "carve out" all mental and behavioral health services to a different plan to manage.

For example, an in-network pediatrician might evaluate a child for ADHD and give him or her a flu vaccine at the same visit. If behavioral health is "carved out," the pediatrician will have to send a bill for the flu vaccine to the child's health insurance plan and a separate bill to the mental health benefits plan for the ADHD treatment.

Avoid Surprise Carve-Outs:

Many pediatricians and parents are surprised at what some health plans carve out as "mental health." Developmental delay, anxiety, temper tantrums, and even bedwetting fall under "behavioral health" carveouts in some plans. Occasionally, the main medical plan will classify a diagnosis as "behavioral health" while the behavioral health company denies the diagnosis as "medical." Similarly, reconstructive oral surgery might be classified as either medical or carved out as dental; certain eye conditions might be classified as medical or vision.

Network Carve-Outs:

State and federal laws require that health insurance networks are accessible based on the needs of a population and its geographic distribution. For example, all medical networks must have primary care physicians, hospitals, labs, and specialists within a reasonable distance of every patient in the network whenever possible. 

What's a reasonable distance?

Due to the wide geographic and population variations across the United States, the reasonable distance definition varies by state and by service. You can check the following resources to find information specific to your state:

Pediatric Network Adequacy:

Because the needs of children are different than those of adults, networks should also have appropriate specialists for children.

  • Some plans don't distinguish between, for example, gastroenterologists and pediatric gastroenterologists. A general surgeon may be able to do some procedures on older children, but will not treat young children for surgical conditions like a pediatric surgeon.

  • A network listing for an adult neurologist might show that he or she "accepts patients under 18;" this can mean that he or she also treats 16- and 17-year-olds.

  • A children's hospital might be in network for emergencies, and be out of network for things like prescheduled MRIs and echocardiograms (ultrasounds of the heart). Even the definition of "emergencies" might need to be defined. For example, a hospital might be in-network for emergency hospital admissions, but not ER visits.  

For these reasons, be sure to confirm your child's insurance network contains in-network pediatricians, pediatric medical, behavioral health, and surgical subspecialists, children's hospitals, and other pediatric services (like speech, occupational, and physical therapists) within a reasonable distance.

Additional Information:


About Dr. Berman:  

Suzanne Berman, MD, FAAP, is co-founder and managing partner of Plateau Pediatrics, the first NCQA-certified level 3 patient centered medical home in Tennessee. She serves the American Academy of Pediatrics (AAP) in a variety of roles―including the executive committee of the Section on Administration and Practice Management and the Committee on Child Health Financing. Dr. Berman frequently contributes to AAP projects and publications regarding medical home practice transformation, rural health, coding, data mining, and policymaking. She and her husband have three sons. 

About Dr. Giardino: 

Angelo P. Giardino, MD, PhD, MPH, is the Wilma T. Gibson Presidential Professor and Chair of the Department of Pediatrics at the University of Utah's School of Medicine and Chief Medical Officer at Intermountain Primary Children's Hospital in Salt Lake City, Utah. He holds subspecialty certifications in Pediatrics and Child Abuse Pediatrics from the American Board of Pediatrics. He is also a Certified Physician Executive (CPE) within the American Association for Physician Leadership. He completed the Patient Safety Certificate Program from the Quality Colloquium, is certified in medical quality (CMQ) as designated by the American Board of Medical Quality and is a Distinguished Fellow of the American College of Medical Quality. Within the American Academy of Pediatrics, Dr. Giardino is a member of the Committee on Child Health Financing, the Council on Child Abuse and Neglect, and the Council on Children with Disabilities.