Copayment

A copayment or copay is a fixed payment for a covered service, paid when an individual receives service. In the United States, copayment is a payment defined in an insurance policy and paid by an insured person each time a medical service is accessed. It is technically a form of coinsurance, but is defined differently in health insurance where a coinsurance is a percentage payment after the deductible up to a certain limit. It must be paid before any policy benefit is payable by an insurance company. Copayments do not usually contribute towards any policy out-of-pocket maxima whereas coinsurance payments do.

Insurance companies use copayments to share health care costs to prevent moral hazard. Though the copay is often a small portion of the actual cost of the medical service, it is meant to prevent people from seeking medical care that may not be necessary (e.g., an infection by the common cold). The underlying philosophy is that with no copay, people will consume much more care than they otherwise would if they were paying for all or some of it. In health systems with prices below the market-clearing level in which waiting lists act as rationing tools, copayment can serve to reduce the welfare cost of such waiting lists.