Copayment

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A copayment or copay (called a gap in Australian English) is a fixed amount for a covered service, paid by a patient to the provider of service before receiving the service. It may be 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 maximum, whereas coinsurance payments do.^[1]

Insurance companies use copayments to share health care costs to prevent moral hazard. It may be a small portion of the actual cost of the medical service but is meant to deter people from seeking medical care that may not be necessary, e.g., an infection by the common cold. In health systems with prices below the market clearing level in which waiting lists act as rationing tools,^[2] copayment can serve to reduce the welfare cost of waiting lists.^[3]

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.