, or copay
, is a capped contribution defined in the policy and paid by an insured person each time a medical service is accessed. 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 maximums. Insurance
companies use copayments to share health care costs to prevent moral hazard
. Though the copay is often only a small portion of the actual cost of the medical service, it is thought to prevent people from seeking medical care that may not be necessary (eg: an infection by the common cold
), which can result in substantial savings for insurance companies. The underlying philosophy is that with no copay, the perception is that medical care is "free" and then is used more often.
However, a copay may also discourage people from seeking necessary medical care. The RAND Health Insurance Experiment, a landmark study performed in the 1980s, demonstrated that cost sharing reduced appropriate and necessary office visits and preventive care as well as inappropriate visits, with adverse effects on visual acuity, blood pressure control, and survival among high-risk patients.
Medication copayments have also been associated with reduced use of necessary and appropriate medications for chronic conditions.
In a 2007 meta-analysis, RAND researchers published a review of the literature on cost sharing between 1985 and 2006. They concluded: