The Difference Between Cash Pay, Copay and Deductibles

It’s likely you’re like most people going through the U.S. healthcare enrollment process—confused. Understanding the nuances of health insurance often turns into a game of the six degrees of Kevin Bacon. You’re not sure how it works, but it does. 

One of these degrees of confusion is often found in the difference between cash pay, deductibles and copay (copayments). Some insurance plans use either copay or deductibles and some opt for a combination. In this blog, we’ll cover the definitions of each, how they relate to one another, why they’re important and how the transition from cash pay to coverage has affected the telehealth industry. 

What is cash pay, copay and a deductible?

Cash pay

Cash pay is the out-of-pocket cost each time you go to the doctor or need a prescription without the use of insurance. Meaning, you have to pay 100% of the cost of any service or prescription. In the early days of telehealth, most virtual care visits were operated through cash pay services. This, however, is no longer the case. Most major private insurers reimburse some form of synchronous care.

Deductible

If you’ve ever heard someone say they needed to make their deductible before their policy renewal, this is what they are referring to. A deductible is the amount you pay every year for eligible medical expenses before your health plan starts sharing in the cost. So what does this mean exactly?

For example, say you have a $2,000 yearly deductible. That means you have to pay the first $2,000 of total eligible medical costs before your plan will help pay. So, if you have a total medical bill of $10,000, you’ll pay the first $2,000 and your plan will help you cover the cost of the other $8,000.

Copay

A copay is the flat rate that you pay on the spot when you see a provider in-person or virtually. If you go in to see your provider for preventative care, need to refill a prescription or other eligible costs, this is the flat rate you’ll have to pay. 

Some health plans use a combination of both copays and deductibles. Depending on the payer, the copays you make may go toward the yearly deductible requirement.

When does cash pay make sense?

Some medical facilities and providers may choose to not offer a cash pay option, but for those that do, a few may offer reduced fees if a patient pays in cash (this includes debit and credit payments). While more expensive medical procedures often benefit from insurance, there are some procedures, typically diagnostic, that are prone to having a cheaper cash fee. 

Some of these include:

• X-ray

• CAT scans

• Ultrasound

• Lab work

• Certain prescription drugs

• Therapeutic services

With cash pay, it can be easier for both the healthcare companies and their providers and patients to pay up front for a low-cost procedure instead of filing a claim that could take months.

Moving from cash pay to coverage

At the start of the pandemic, many telehealth companies operated under a cash pay system. This was because insurance payers didn’t have the evidence, at the time, to show it was a viable replacement to in-person care. Therefore it was not deemed an eligible medical cost for patients or their providers. 

This lack of reimbursement opportunity for both providers, patients and healthcare companies was and still is a huge barrier to entry for telehealth as a practice. Despite this, telehealth and its services proved to be quite successful as an alternative for in-person care. 

According to the American Medical Association (AMA), physicians have responded overwhelmingly positively to telehealth’s implementation. Some statistics reported that support this claim include:

• 85% indicated that telehealth increased timeliness of care.

• 75% said telehealth allowed them to deliver high-quality care.

• More than 70% were motivated to increase telehealth use.

But what does this have to do with moving from cash pay to coverage? It was the data and research that insurance payers needed to see to include telehealth services in their healthcare policies.

Government intervention

Currently, most private insurers cover some form of synchronous telehealth. The kind of services varies from state to state. In July, the House passed the Advancing Telehealth Beyond COVID-19 Act set to allow key waivers that have been barriers to Medicare telehealth reimbursement to run through Dec. 2024. The bill is currently waiting to be passed in the Senate and then, potentially, made into law. 

This has been a positive indicator into the future of telehealth and where it’s going. Major companies like Amazon and Walmart are joining providers in pushing the senate to pass the bill. It will give government agencies like the Centers for Medicare and Medicaid (CMS) more time to compile enough data to solidify a reimbursement plan. 

Enrolling in payer coverage

As more private and public insurers add telehealth services to their list of eligible medical costs, companies that were once strictly cash pay are adding in insurance payment plans. Building out a payer coverage network can expand the patients a telehealth company and its providers can reach. Helping to scale the company at the same time.

If you’re a telehealth or digital health company looking to transition away from cash pay or start offering the option to use insurance, OpenLoop has a blog post and a whitepaper that dives deeper into how to expand your coverage. 

Powering Digital Health Companies

We love that you're taking the initiative to start / expand your payer coverage network! But you don’t have to do it alone. OpenLoop has spent years building a certified network of clinicians covered by 600+ insurance plans. Our providers support over 250 million patient lives and exceed 80% coverage by nationwide insurance payers.

What partnering with OpenLoop looks like:

• Comprehensive 50-state payer coverage

• Full range of telehealth codes

• Virtual care & cash pay focus

• Flexible provider credentialing options

• Every major insurance payer

• Incident to billing coverage

Our expansive network of payer coverage is built to strategically streamline your reimbursement and payment process while expanding your patient network. We have everything you need from first visit to final payment.

If you’re ready to learn more about how to improve your payer coverage network, Get in touch here!