Health insurance copayments are one of the central facets of the American healthcare system, but many clients wonder why companies choose this method of making insurance usable, and are concerned about how choosing copayments can affect the entirety of their health insurance coverage. For customers, the balance in a good copayment lies in not paying too much each time a health service is used, while still receiving an adequate level of care. When it comes to choosing copayments, the first thing any insurance client should do is understand their function.

Copayments are monies paid by an insurance client that must be paid each time a medical service is accessed. If a copayment is not made on a policy that requires one, an insurance company will not pay for any of the treatment being sought, leaving an insured without the benefit of their coverage. Typically, these payments are separate from insurance deductibles that are payable on any policy, meaning that a client will have to pay their deductible and the copayment required in order to access a service. Copayments are also often considered not to count toward out-of-pocket maximums for health insurance policies.

Insurance companies use copayments in order to limit the frivolous use of medical services by clients. This system of copayments is based off of the economic theory of the moral hazard, in which individuals that are fully insulated from a risk will behave differently than those that have some or total exposure to the same risk. From a healthcare perspective, the belief held by insurance companies is that an insured that does not have to pay anything for each service they use will be more likely to use services when they are not really needed. The addition of a small copayment is meant to make a client value their services and not abuse them simply because they are available. But while companies can suffer financially if health insurance copayments are too low, customers can suffer if they are too high. In cases where copayments are too expensive, clients are effectively left with no insurance, as using it would cost too much for their budget to bear. This can create a false sense of security for health insurance users, as they have coverage, but can never use it, and are at medical risk.

Choosing copayments comes down to understanding how much a company wants for each service, and what the maximum amount charged for each service will be. In combination with a deductible, this cost must be small enough that a client can bear it, but not so small that the coverage offered becomes insignificant or that they cannot access the services they need.