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Copay, Coinsurance and Deductible A Complete Guide

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Copay, coinsurance, and deductible are three popular terms associated with health insurance. According to these clauses, a policyholder must bear a pre-decided percentage of his/her health insurance claim while the insurance company will take care of the rest. Since these options divide the risk between insurance companies and policyholders, the policy premium gets reduced by a certain percentage. Let's understand copay vs coinsurance vs deductibles in health insurance in detail.

What is copay?

A copayment in health insurance means the copayment of health insurance claims by the insurance company and the policyholder. The clause simply states that the policyholder will bear a pre-decided percentage of the claim amount, and the insurance company will pay the remaining.

For example, Suppose the copayment percentage of your healthcare plan is 10%. If your approved health insurance claim is INR 2 lakh, you must pay INR 20,000 from your pocket, and the insurance company will pay the remaining amount of INR 1,80,000.

Understanding coinsurance

Coinsurance is a fixed percentage of the medical expenses a policyholder must pay towards his/her medical expenses. Although similar to copay, coinsurance is applicable only after the policyholder has paid the deductible amount.

Here’s an example: Suppose you have an individual health insurance policy of INR 5 lakh with a deductible of INR 50,000 and a coinsurance percentage of 10%. You get hospitalised, and your hospital bills add up to INR 1,50,000. In this case, the deductible of INR 50,000 will be used up first. The coinsurance of 10% will now be calculated on the remaining claim amount, i.e., INR 1 lakh. So, you must pay the coinsurance of INR 10,000 (10% of INR 1 lakh) from your pocket, and the insurance provider will pay the remaining INR 90,000.

Difference between copay and coinsurance

Now that you know about deductible vs copay, let's look at the differences between copay and coinsurance in health insurance:

What are deductibles?

A deductible is the claim amount the policyholder must pay against his/her health insurance claim before the insurance company starts paying. Health insurance deductibles are fixed by the insurance company when you purchase a policy.

If your hospital bills add up to more than the deductible amount, you must pay the deductibles first, and the insurance company will pay the remaining expenses. This simply means that the insurance company will start paying for your hospital bills only after you have used up the entire deductible amount.

For instance, you have a health insurance policy of INR 5 lakh, and the deductible is INR 50,000. You get hospitalised, and your hospital bills amount to INR 40,000. In this case, you must pay the entire amount from your pocket. Suppose you get hospitalised again during the same policy period, and your medical bills run to INR 80,000. In this case, you will pay the remaining deductible, i.e., INR 10,000, from your pocket, and the insurance company will take care of the outstanding amount, i.e., INR 70,000.

How do deductibles affect out-of-pocket costs?

If you choose health insurance with a deductible, you must pay the deductible against your medical bills, and only then will the insurer pay the remaining amount. Therefore, in case of a deductible, the insurer is liable to pay only if your health insurance claim amount is more than the pre-decided deductible.

Deductibles can affect your out-of-pocket costs, especially if you choose a high amount to reduce policy premiums. For example, suppose you buy health insurance of INR 10 lakh with a deductible of INR 2 lakh. If your healthcare bills add up to INR 2.5 lakh, you must pay INR 2 lakh from your pocket, and the insurer will be liable to pay INR 50,000 only.

Therefore, although deductibles reduce policy premiums, they increase your out-of-pocket costs by a significant amount.

Copay vs coinsurance vs deductible

Copay, coinsurance and deductible are important terms that affect your policy premiums and out-of-pocket expenses during health insurance claims. Therefore, before opting for any of these clauses, it is important to understand how they differ from each other. The following table will give you a better idea of these health insurance clauses.

Pros and cons of copay, coinsurance and deductible

Copays, coinsurance, and deductibles are important clauses in health insurance. While they offer policyholders many benefits, they also have some disadvantages. Let's take a look at the pros and cons of these health insurance clauses.

Pros

1. These clauses reduce health insurance premiums by a significant percentage.

2. They prevent policyholders from filing small and unnecessary claims.

3. When policyholders know they have to pay a certain part of the claim amount, they will refrain from opting for expensive hospitals and luxury facilities.

4. These health insurance clauses also reduce the probability of fraudulent claims.

5. They help senior citizens suffering from pre-existing conditions to avail of adequate health insurance at affordable rates.

Cons

1. When the claim amount is high, policyholders will be forced to pay a hefty sum from their pockets.

2. Hospitalisation and healthcare expenses increase with age. Therefore, a senior citizens’ health insurance policy with a high copay or coinsurance can create significant financial woes for the elderly who have limited retirement funds.

3. In case of multiple hospitalisations and claims during a policy period, copay and coinsurance can increase the financial burden of policyholders.

Factors to consider when choosing between copay, coinsurance and deductible

While copay, coinsurance and deductible reduce health insurance premiums, they may increase your out-of-pocket expenses during expensive hospitalisations. Therefore, it is important to consider the following factors before opting for any of these health insurance clauses.

Your liability:

If you want to reduce your financial liabilities during health insurance claims, copayment is a better option. However, keep your healthcare needs and expenses in mind and choose the copayment percentage accordingly.

Your medical expenses:

If your medical expenses are usually on the higher side, it is wise to choose the deductible clause. Under this clause, you must pay a fixed amount during a policy period. Once you have paid the entire deductible amount, the insurer will take care of your remaining medical bills.

Policy premiums:

If you think your policy premiums are on the higher side, opting for copay or coinsurance can make health insurance affordable. These clauses are especially beneficial if you enjoy good health and are less likely to file health insurance claims.

Tips for choosing health insurance options effectively

The following are some tips that can help you choose these health insurance options.

1. Your age and health:

If you are young and healthy, you can choose health insurance with higher copay, coinsurance or deductible to reduce policy premiums. On the other hand, if you suffer from pre-existing conditions and require regular healthcare, opting for these health insurance clauses will increase your out-of-pocket expenses.

2. Your financial liabilities:

Choose a feasible copay or coinsurance percentage and deductible amount. While a higher copay, coinsurance and deductible will reduce policy premiums, they will increase your financial liabilities during a claim.

3. Medical expenses:

Evaluate your medical needs and expenses and choose these clauses accordingly. If your medical expenses are on the higher side, opting for these clauses will affect your finances.

4. Policy premiums:

If high policy premiums are preventing you from buying health insurance, you can opt for one or more of these clauses. For example, you can take copay and deductible together to reduce your premium liabilities. However, opt for these clauses wisely to prevent high out-of-pocket expenses during medical emergencies.

5. Emergency funds:

If you have reserve funds or savings to pay during medical emergencies, choosing these clauses with health insurance will reduce your premium liabilities every year.

FAQs

1. How can health insurance copay, coinsurance or deductible benefit policyholders?

These health insurance clauses help reduce policy premiums. Therefore, if you are young and healthy, you can choose one of these clauses with your healthcare plan to keep health insurance affordable.

2. How do these health insurance clauses benefit insurance providers?

Copay, coinsurance and deductible clauses in health insurance help mitigate the risk of insurance companies. When policyholders opt for these clauses, they are liable to pay a part of the claim amount, and the insurer pays the remaining. This helps reduce the financial liability of insurance companies.

3. Are these clauses applicable during cashless treatment?

Yes, these clauses are applicable during cashless treatment. For instance, if you choose health insurance with the copay clause, you must pay the pre-decided percentage of your hospital bills, and the insurer will pay the remaining.

4. Can I take health insurance with both a copay and a deductible?

Yes, you can choose both of these clauses for your health insurance policy. If you raise a claim, you must pay the deductible first, and then the copay will be calculated based on the remaining claim amount.

5. What will happen if I don’t pay the pre-decided deductible?

If you take health insurance with the deductible clause, the insurer will settle your claim only after you have paid the deductible. Therefore, if you don’t pay the deductible, the insurer will not settle your hospital bills.

Conclusion

To sum up, while copay, coinsurance and deductibles can reduce the premium amount and make health insurance affordable, it is always wise to take a healthcare plan with complete coverage. This will save you from the hassles of paying a part of the hospital bills from your pocket. However, you can always consider these options if you cannot afford high health insurance premiums. In this case, make sure you compare copay vs coinsurance vs deductibles and go through the policy's terms and conditions to make a well-informed decision.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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