Therapy Insurance Terms Demystified: Copay, Coinsurance, and Deductible Explained
Making the decision to attend therapy and finding the right therapist for you can be overwhelming. Navigating insurance copays and deductibles can make caring for your mental health feel even harder. But, it doesn’t have to feel this way. In this article, we’ll explain common therapy insurance terms. This will make paying for therapy easier. We’ll also share how Octave can support you during this process.
Why Understanding Therapy Insurance Terms Matters
Starting therapy can bring up some nerves, so adding in deciphering insurance terms on top of this can bring on unneeded stress. If you do find understanding insurance terms confusing, you’re not alone; many people find them challenging to understand, and common insurance terms are often mixed up. For example, copay and coinsurance are often confused, despite having different meanings. Taking the time to understand some mental health insurance basics can help you understand insurance coverage for therapy and know what you’ll actually pay before starting care, which can help you manage your budget and remove the anxiety around any unknowns.
What is a Copay in Therapy?
If you’ve taken a look at your insurance benefits, then you might have noticed a copay amount. Knowing how therapy copays work helps you determine your out-of-pocket costs. This knowledge can assist you in budgeting better. Copay (or copayment) is defined as a flat fee per therapy session. For example, you might pay $30-50 for each therapy session, while your insurance company covers the remaining cost of the session.
The amount of your copay varies based on your insurance plan. Usually, people with higher premiums pay lower copays. In contrast, those with lower premiums face higher copays. Your copayment may vary based on your therapist's network status. In-network providers usually have lower copays than out-of-network ones.
Copays and coinsurance are frequently confused, with copay vs. coinsurance being a common search term. The major difference is that a copay is a fixed amount (e.g., $40 per session), whereas coinsurance is a percentage (e.g., 20% of the total cost of the therapy session).
What is Coinsurance and How Does it Affect You?
Understanding coinsurance is another important step to help you understand your out-of-pocket costs for therapy. Coinsurance is explained as paying a percentage of the therapy cost. For example, if the total cost of a therapy session is $150 and you have a 20% coinsurance rate, then you’ll pay $30 as your out-of-pocket cost. Some key differences between copays and coinsurance include:
Coinsurance is a percentage, whereas copay is a flat rate.
The out-of-pocket cost with coinsurance can change based on the cost of the service. With a copay, the rate is flat, so the amount you pay remains the same regardless of the service's cost.
Because coinsurance doesn’t kick in until after you’ve met your deductible, it’s important to be aware of your costs before meeting your deductible. Some insurance plans may offer a copay or negotiated rate, whereas others require you to pay 100% of the cost of service until you reach your deductible.
What Does a Therapy Deductible Actually Mean?
A therapy deductible explanation is the amount that you pay before insurance contributes. Understanding deductibles for therapy includes knowing how deductibles can impact your out-of-pocket costs. Unless your insurance offers copays or negotiated rates before reaching your deductible, you’ll need to pay the full amount for your therapy sessions. For example, if your deductible is $600 and therapy sessions are $150 each, then you’ll need to pay the full $150 cost for four sessions to reach your deductible. Once your deductible is met, your insurance company will start to cover a portion of your therapy session costs.
How high your deductible is depends on your insurance plan. High deductible plans have higher deductibles but lower monthly premiums. This means that your costs for therapy can be higher upfront, but you’ll be paying less to your insurance company every month. Low deductible plans have lower deductibles but higher monthly premiums. This means that you’ll reach your deductible sooner, but will have higher monthly premium costs.
How Copay, Coinsurance, and Deductible Work Together
Knowing the difference between copay, coinsurance, and deductible is an important part of understanding mental health insurance basics. Generally, your out-of-pocket costs for therapy will be higher until you reach your deductible. Once your deductible is met, your insurance company will cover more of the costs, and you’ll begin paying a copay or coinsurance fee.
Usually, your insurance plan will have either a copay or coinsurance for a single service, such as therapy services. For example, if your insurance plan has a $600 deductible and a 20% coinsurance rate, then your payments might look like this:
You’ll pay the full cost of your therapy sessions until your deductible is met. If the cost of a therapy session is $150, then you’ll pay for 4 sessions before reaching your deductible.
After your deductible is met, you’ll pay the coinsurance fee. This means that you’ll pay $30 per session, while your insurance will cover the remaining $120.
Here are some more details about how copays, coinsurance, and deductibles differ.
Copay vs. Coinsurance vs. Deductible
| Copay | Coinsurance | Deductible | ||
|---|---|---|---|---|
| Definition | Fixed out-of-pocket fee for a therapy session | Percentage of therapy cost | Amount of money that needs to be paid before insurance coverage begins | |
| Purpose | Shared cost between the individual and the insurance provider | Shared cost between the individual and the insurance provider | Initial cost before coverage begins | |
| Amount | Fixed amount; doesn’t change with different service costs | Percentage of the total cost of the therapy session | Set amount |
Real-Life Scenario: What Will I Pay for Therapy?
In order to help you better understand how therapy copays work, let’s take a look at an example. Meet Alex, who has a PPO (preferred provider organization) plan and begins therapy. This means that he can see both therapists who are in and out of network, but in-network therapists will be more affordable. If he chooses to see an in-network therapist:
He’ll pay the full amount for therapy sessions until he reaches his deductible.
After reaching his deductible, he pays a 20% coinsurance rate per therapy session.
He’ll pay this 20% coinsurance until he reaches his out-of-pocket maximum, at which point his insurance will cover 100% of the cost of therapy.
If he chooses to see an out-of-network therapist:
He’ll pay the full amount for therapy sessions until he reaches his deductible. Deductible rates are often higher for out-of-network services.
After he reaches his deductible, he’ll continue to pay the full amount, but he can submit a claim to be reimbursed for a portion of the service. For example, his insurance company might reimburse him 70% for out-of-network providers, meaning that his total cost will be $45 per therapy session.
Every therapy plan is unique. Knowing your plan's coverage and benefits can help you feel clearer and more confident about the process. You’ll also want to understand your out-of-pocket maximum. Once you reach this amount, your insurance will cover 100% of covered services.
How Octave Makes Therapy Costs Easier to Understand
Octave helps to make understanding your insurance coverage for therapy easy. When you search for a therapist, enter your state and insurance provider. Octave will then give you an estimated cost of care. This helps you see how much you might pay out of pocket.
Octave can also help you verify your insurance coverage. Once you finish the onboarding form, our billing team will reach out to your insurance company. They’ll find out more about your coverage and benefits. They’ll then provide you with a price range so that you have an understanding of how much you’ll pay before you start your sessions at Octave.
Need Help Navigating Your Benefits?
Insurance plans can vary, even with the same provider. So, it’s best to reach out to your insurance provider. They can tell you which therapy services your specific plan covers. You can call the number on the back of your card to get help, and many insurance companies also offer email support. Questions that you might want to ask include:
Are mental health services, including talk therapy, covered under my plan?
Do I need a referral from my primary care doctor to see a therapist?
Is both in-person and online therapy covered?
What is my copay or coinsurance for therapy sessions?
What is my deductible, and does it apply to mental health services?
Is there an annual limit on therapy visits covered?
What is the difference in coverage between in-network providers and out-of-network providers?
Because Octave’s billing team will contact your insurance company on your behalf, you can spend less time on the phone and more time on self-care.
Ready to Make Therapy Work for You?
If you’re ready to get started with therapy, knowing what coverage your insurance offers can help with budgeting and provide you with transparency about how much you’ll be paying for therapy sessions. Check your insurance coverage with Octave.