Deductibles and Co-pays

Deductible and Co-pay Types

Health care services and fees can vary greatly. There are many plans out there, but we'll narrow them down to two main types: fee-for-service plans and managed health care plans.

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A fee-for-service plan is what most Americans think of as traditional health insurance. The deductibles and co-pays for this type of plan are generally higher than those of a managed health care provider. These fees can add up over the course of a year, but they also buy more options. Under a fee-for-service plan, you're free to choose your own doctors, usually don't need a referral to see a specialist, and can choose your hospital.

These types of plans usually have out-of-pocket expense caps. Once you reach the cap, a basic plan will cover doctor's visits and hospital stays, along with all the attendant expenses, like X-rays, medications, treatments and surgery. Major plans pick up where basic plans leave off -- they are usually best for those with yearly medical bills exceeding $250,000.

If you receive health insurance through your employer, it's most likely a managed health care plan. Managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS). A managed health care plan is the best way for insurance providers to control their costs, so they can offer much lower co-pays and deductibles­.

Of the three main types of managed health care plans, HMOs are by far the cheapest and most restrictive. An HMO arranges a provider network by gathering contractual agreements with specialists, general practitioners, hospitals and other health care professionals -- you can receive treatment from this network alone. You have to choose a primary care physician (PCP) who authorizes and coordinates your health care needs by working within the network. As long as you stay within this network, co-payments and deductibles are kept to a bare minimum.

A PPO operates under the same guidelines as an HMO, but it casts a much wider net, and you don't have a PCP acting as an intermediary for your health care. With a PPO, you can choose from within the network of providers for smaller co-pays and deductibles, or pick an out-of-network provider for a substantially higher price.

A POS plan is a fusion of these two managed health care models. It is sometimes referred to as an "open-ended HMO" because you can choose either the HMO or PPO model whenever you need health care. Because of this, your co-pays and deductibles can vary from treatment to treatment, doctor to doctor and month to month.


For more information about co-pays and deductibles, check out the links on the next page.


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More Great Links


  • JAMA: Health Insurance, The Basics.
  • AHRQ: Check Up On Health Insurance Choices.
  • The Seattle Times: "Health-insurance costs up 78 percent in 6 years".
  • American Heart Association: Managed Health Care Plans.
  • Insurance Information Institute.