Health Insurance Co-Pays, Deductibles and Pre-Certification

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jun 29, 2022

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There are many qualifications and limitations regarding what health insurance covers and to what extent. This is before we consider the expressly stated limitations listed in the health insurance policy. Certain requirements must be satisfied, which means paid by or on behalf of the insured, before the insurance company will begin to pay for your medical care. All co-payments (co-pays) and deductibles must be paid out-of-pocket first.  

What Is a Co-Payment? 

A co-pay or co-payment is the contractual amount you must pay for your use of a specific medical service covered by your policy. In the sample policy below, there is no co-pay required for doctor office visits or other outpatient treatment and services that sometimes require a co-pay on other policies. But there are significant co-pays required in this policy for inpatient confinement (when you are in the hospital) and for surgery. There is an inpatient provider visit co-pay, which means you have a co-pay when your doctor comes to see you in the hospital. You can choose the size of your inpatient confinement co-pay and your surgery co-pay in amounts ranging from $1,000 to $5,000. The provider visit co-pay is $50 per visit. None of these three co-pays can be used to satisfy another.

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Introductory Wording for Co-Payments Due

The following is typical introductory wording for co-payments due when you receive treatment from a health provider in your insurance company’s network. This health provider is called a participating provider. A participating provider is one that the insurance company has contracted to provide services to its insured at a discounted rate. The introductory wording is the same for a non-participating provider—a provider outside your insurance company’s network: 

The following is an example of an insurance company’s promise to pay what they owe, when you use a participating provider, and it is subject to all the definitions, provisions, exclusions and limitations outlined in the policy.

“Participating Provider Services Subject to Co-Pay: Subject to all applicable definitions, exclusions, limitations, waiting periods and other provisions contained in this policy, as well as any riders, endorsements or amendments attached hereto, and satisfaction and payment by each insured of the Failure to Pre-Certify Treatment Deductible, if applicable, as well as each applicable Surgery Co-Pay and Inpatient Confinement Co-Pay amounts. We promise to pay to or on behalf of each Insured the applicable Company Insurance Percentage of the remaining amount of professional fees and other applicable medical, diagnostic or treatment expenses and charges of Participating Providers that constitute Covered Expenses incurred by each Insured for the following described Inpatient and Outpatient services, which in each instance was medically necessary.”

Examples of How Co-Pays Work 

Say for instance that you chose a $2,500 inpatient confinement co-pay and the $3,000 surgery co-pay. You may be hospitalized and have surgery wherein your doctor may visit you three times a day. Before the insurance company will consider paying each of these benefits, you must demonstrate to them that you have incurred a hospital bill of at least $2,500 and a surgery bill of at least $3,000. In addition, the doctor must charge you more than $50 for each of his visits. If you cannot prove these charges, the hospital stay, surgery, and doctor visits are on you. 

Understanding What Qualifies or Limits Your Benefits

Make a note of all of the potential ways that either qualify or limit your benefits. It’s best not to purchase a health insurance policy with the expectation that because you are paying a hefty premium for your insurance coverage, all of your medical expenses and financial worries are over. Even though the cost of the insurance policy is expensive, you need to look carefully at the details of your policy to be sure what is and is not covered so that you are sure you have the best possible policy benefit plan for your specific situation.

With group insurance, you will likely have to take what is being offered through the group. There may be some options, but there won’t be too many. However, if you are purchasing an individual policy, you do have more of an opportunity to design the coverage to fit your needs. You have a number of companies to choose from and each of those companies will have various options.

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Understanding How Insurance Companies Determine Deductibles 

The second requirement that must be satisfied before the insurance company will consider paying any insurance benefits is the deductible. The deductible is an amount you must pay for your medical bills in addition to your co-payment before the insurance company will begin paying benefits.

In our sample policy, the deductible is a calendar year deductible, which is the case for most policies. The calendar year deductible is the amount of covered expenses each insured person must incur within a calendar year before the insurance company will pay any benefits. A calendar year is typically defined as the period beginning on the issue date of the policy and ending on December 31 of that year. In subsequent years, it is the period from January 1 through December 31. Co-pays may not be used to satisfy the calendar year deductible. 

Demonstrating Deductible Options 

If you make the choices in red text for your co-pays and your calendar year deductible, you will have to incur $2,500 in hospital bills, $3,000 in surgical expenses, and $5,000 more in medical expenses before this sample policy will pay anything for your medical bills after a stay in the hospital. If you choose lower a deductible and lower co-pays, your premium will be higher. Choose a higher deductible and co-pays, and your premium will be lower. The choice is yours. The provider visit co-pay and failure to pre-certify treatment deductible are set and you are not given a choice (see below).


Co-pay Choices for Inpatient Confinement $1,000 $2,500 $5,000    
Co-pay Choices for Surgery $1,000 $2,000 $3,000 $4,000 $5,000
Calendar Year Deductible Choices $2,500 $5,000

$7,500 $10,000  
 Provider Visit Co-pay $50 (no choice)        
Failure to Pre-certify Treatment Deductible $1,000 (no choice)        


Understanding Failure to Pre-Certify Treatment Deductible

Another type of deductible often used by insurance companies is a failure to pre-certify treatment deductible. This deductible, in addition to the calendar year deductible, is another amount of covered expenses you must incur before any benefits are payable under the policy, but this is only triggered when you fail to get the insurance company’s approval prior to treatment.

This certification is required prior to all hospital inpatient admissions, except in an emergency situation. In essence, you are asking the insurance company for permission before you get the treatment you need. In some cases, the insurance company may even ask you to get a second opinion as to the appropriateness or medical necessity of the surgery. If they do, it will be at their expense.

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Is Pre-Certification a Guarantee of Payment of Benefits?

Pre-certification is a requirement, but not a guarantee of payment of benefits. All of the other policy provisions still apply, some of which may have the affect of limiting the amount of benefits payable, even thought the treatment was pre-certified. The failure to pre-certify treatment deductible in the sample policy is $1,000. So, if you were to fail to pre-certify, you can tack another $1,000 on to the above expenses you must incur before the insurance company is required to consider any payment of benefits. So far, that makes a total of $11,500 in out-of-pocket expenses you must pay before the insurance company begins to look at what it must pay.

Getting Help

If you are having problems with an insurance company or understanding what your rights are as a policyholder, contact an insurance law attorney today.

*Wording may vary from contract to contract and from state to state.

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