Copayment
Encyclopedia
In the United States
, the copayment or copay is a payment defined in the insurance policy and paid by the 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 maximums 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 (eg: 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.
However, a copay may also discourage people from seeking necessary medical care and higher copays may result in non-use of essential medical services and prescriptions, thus rendering someone who is "insured" effectively "uninsured" because they are unable to pay higher copays. If the insured cannot afford the copay, they effectively have no insurance (high copays can cause a false sense of security). Thus there is a balance to be achieved: a high enough copay to deter unneeded expenses but low enough to not render the insurance useless.
reasons cannot be produced as a generic drug.
To cushion the high copay costs of brand name drugs, some pharmaceutical companies offer drug coupons or temporary subsidized copayment reduction programs lasting from two months to twelve months. Thereafter, if a patient is still taking the brand name medication, the pharmaceutical companies might remove the option and require full payments. If no similar drug is available, the patient is "locked in" to either using the drug with the high copays, or a patient takes no drugs and lives with the consequences of non-treatment.
, breast cancer
, and asthma
. In a 2007 meta-analysis, RAND
researchers concluded that higher copayments were associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy..
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, the copayment or copay is a payment defined in the insurance policy and paid by the insured person each time a medical service is accessed. It is technically a form of coinsurance
Coinsurance
Co-insurance is an insurance-related term that describes a splitting or spreading of risk among multiple parties.-In the United States:In the US insurance market, coinsurance is the joint assumption of risk between the insurer and the insured...
, 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 maximums whereas coinsurance payments do.
Insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
companies use copayments to share health care costs to prevent moral hazard
Moral hazard
In economic theory, moral hazard refers to a situation in which a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.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 (eg: an infection by the common cold
Common cold
The common cold is a viral infectious disease of the upper respiratory system, caused primarily by rhinoviruses and coronaviruses. Common symptoms include a cough, sore throat, runny nose, and fever...
). 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.
However, a copay may also discourage people from seeking necessary medical care and higher copays may result in non-use of essential medical services and prescriptions, thus rendering someone who is "insured" effectively "uninsured" because they are unable to pay higher copays. If the insured cannot afford the copay, they effectively have no insurance (high copays can cause a false sense of security). Thus there is a balance to be achieved: a high enough copay to deter unneeded expenses but low enough to not render the insurance useless.
Prescription drugs
Some insurance companies set the copay percentage for non-generic drugs higher than for generic drugs. Occasionally if a non-generic drug is reduced in price insurers will agree to classify it as generic for copayment purposes (as occurred with simvastatin). Pharmaceutical companies have a very long term (frequently 20 years or longer) lock on a drug as a brand name drug which for patentPatent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
reasons cannot be produced as a generic drug.
To cushion the high copay costs of brand name drugs, some pharmaceutical companies offer drug coupons or temporary subsidized copayment reduction programs lasting from two months to twelve months. Thereafter, if a patient is still taking the brand name medication, the pharmaceutical companies might remove the option and require full payments. If no similar drug is available, the patient is "locked in" to either using the drug with the high copays, or a patient takes no drugs and lives with the consequences of non-treatment.
Observed effects
Medication copayments have also been associated with reduced use of necessary and appropriate medications for chronic conditions such as chronic heart failure, chronic obstructive pulmonary diseaseChronic obstructive pulmonary disease
Chronic obstructive pulmonary disease , also known as chronic obstructive lung disease , chronic obstructive airway disease , chronic airflow limitation and chronic obstructive respiratory disease , is the co-occurrence of chronic bronchitis and emphysema, a pair of commonly co-existing diseases...
, breast cancer
Breast cancer
Breast cancer is cancer originating from breast tissue, most commonly from the inner lining of milk ducts or the lobules that supply the ducts with milk. Cancers originating from ducts are known as ductal carcinomas; those originating from lobules are known as lobular carcinomas...
, and asthma
Asthma
Asthma is the common chronic inflammatory disease of the airways characterized by variable and recurring symptoms, reversible airflow obstruction, and bronchospasm. Symptoms include wheezing, coughing, chest tightness, and shortness of breath...
. In a 2007 meta-analysis, RAND
RAND
RAND Corporation is a nonprofit global policy think tank first formed to offer research and analysis to the United States armed forces by Douglas Aircraft Company. It is currently financed by the U.S. government and private endowment, corporations including the healthcare industry, universities...
researchers concluded that higher copayments were associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy..