A copayment or copay is a fixed payment for a covered service, paid when an individual receives service. In the United States, copayment is a payment 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 maxima 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 (e.g., 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. In health systems with prices below the market-clearing level in which waiting lists act as rationing tools, copayment can serve to reduce the welfare cost of such waiting lists.
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. 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 patent reasons cannot be produced as a generic drug. However, much of this time is exhausted during pre-clinical and clinical research.
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.
FreeCopay.com is a resource to find every available copay card for brand name prescriptions.
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 disease, 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.
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