What does copayment refer to?

Copayment refers to a fixed amount that a policyholder pays for a specific service or prescription at the time of receiving care. This predetermined fee is a common feature in many health insurance plans, helping to share the cost between the insurer and the insured. For example, a health plan might require a copayment of $20 for a doctor's visit or a $10 copayment for a prescription medication. This structure encourages individuals to seek necessary medical care while also managing costs for the insurance provider.

In contrast, the other options represent different insurance concepts. The total annual cost of a health insurance policy encompasses premiums and other potential out-of-pocket expenses, which differs from the specific nature of a copayment. The sum paid for deductibles each year refers to the amount an insured individual must pay out-of-pocket before the insurance begins to pay its share of covered services. Lastly, a percentage of costs shared with the insurance company describes coinsurance, which is a different arrangement where the insured pays a percentage of the total costs for services received after the deductible is met. Thus, understanding copayments as a fixed cost is essential for grasping how routine healthcare expenses are managed in many insurance plans.