What distinguishes coinsurance from copayment in health insurance?

Coinsurance and copayment are both cost-sharing mechanisms in health insurance, but they operate differently. Coinsurance is typically expressed as a percentage of the total costs of a covered service that the insured must pay after meeting their deductible. For example, if a health plan has a coinsurance rate of 20%, the insured would pay 20% of the cost of a medical service while the insurer pays the remaining 80%.

On the other hand, a copayment, or copay, is a fixed dollar amount that the insured pays for specific services at the time of receiving care. For instance, an insured person might pay a $25 copay for a doctor's visit.

The distinction is crucial because it influences how consumers experience their healthcare costs. While coinsurance percentages can lead to varying out-of-pocket costs depending on the total expenses of care, copayments provide predictable costs for specific services.

This understanding of the two mechanisms clarifies the correct answer, highlighting that coinsurance is based on a percentage of the total cost incurred, while copayment is a predetermined dollar amount paid at the time of service.