A policy has a $1,000 annual deductible, 80/20 coinsurance, a $50 copay for office visits, and a $5,000 maximum out-of-pocket. Which statement correctly describes how these cost-sharing features work together?

Why A is correct

In a typical major medical plan, the insured first satisfies the deductible (paying 100% of covered expenses up to that amount), then shares remaining covered costs at the coinsurance percentage (the insured's share being 20% under 80/20) until total out-of-pocket spending reaches the maximum out-of-pocket limit. Copays for services such as office visits apply separately. After the maximum, the insurer pays 100% of covered expenses for the rest of the year.

Why the other options are wrong

• B) A copay is a fixed charge for a specific service such as an office visit; the deductible applies to other covered expenses — they do not both apply fully to every visit.
• C) After the deductible, coinsurance still applies; 100% coverage begins only after the maximum out-of-pocket is reached.
• D) The maximum out-of-pocket is a cap on the insured's total cost-sharing for the year, not a threshold that must be paid before any coverage begins.

Memory hook

Spend up (deductible) → split the tab (coinsurance) → cap it (max OOP). Three thresholds, in that order.