All you need to know about co-payment in health insurance

Posted on: Feb 24, 2022 | 3 mins | Written by: HDFC ERGO Team

All you need to know about co-payment in health insurance

Considering that inflation has increased healthcare costs by a significant percentage, even a small medical procedure can easily burn a hole in your pocket. This is when having health insurance can help. A healthcare plan can cover a chunk of your medical expenses and help keep your savings intact. And with insurance companies offering a co-payment facility for medical insurance, you can easily buy an adequate plan without worrying about paying huge policy premiums.

Most insurance companies in India offer the co-payment option for both individual and family health insurance policies. Hence, you can shortlist a few plans, compare their inclusions, exclusions and co-pay percentage, and choose the most suitable option. This will help you safeguard yourself and your loved ones during medical emergencies and prevent financial setbacks. If you are not sure what co-payment is in health insurance, let’s understand this term in detail.

What is co-payment in health insurance?

If you’re wondering what copayment in health insurance is, let us try to decipher its meaning. Co-pay or co-payment in health insurance is a unique facility insurance companies offer. In a medical emergency, the insurer pays a fixed or pre-decided percentage of the claim amount while the policyholder pays the remaining.

The insurance company decides the percentage of co-payment at the time of policy purchase. The policy documents mention the same, so you can check the applicable co-payment before buying health insurance.

What is the meaning of co-pay in health insurance?

Co-pay in health insurance means the insurer will pay a pre-decided percentage of your medical expenses in case of a health insurance claim, and the remaining will be paid from your pocket.

For example, you have a healthcare plan with a sum insured of INR 5 lakh. The co-pay clause of your health insurance policy states that the insurer will pay 90% of the medical expenses, while the policyholder, i.e., you, will meet the remaining 10%. So, if your medical bills amount to INR 3 lakh during the policy period, the insurer will pay INR 2,70,000 against your claim, and you must pay the remaining INR 30,000 to the hospital.

How does co-pay work?

Here’s how the co-pay clause in health insurance works for cashless and reimbursement claims:

1. Cashless claim

If you undergo treatment at a network hospital, the insurance company will settle your medical bills directly with the hospital. If there is a co-pay clause in your policy, you must settle the pre-decided percentage of your medical bills as per the co-pay clause.

2. Reimbursement claim

If you opt for a non-network hospital for a medical procedure, you must pay the hospital bills yourself and then file a reimbursement claim with the insurance company. In this case, the insurer will reimburse the medical bills as per the co-payment clause. They will deduct the co-pay amount from your health insurance claim value and reimburse the remaining.

Is co-pay a compulsory clause?

Co-pay is not a compulsory clause in all health insurance policies. While some insurance companies make co-pay mandatory for policyholders, others allow one to take a call.

In most cases, health insurance policies for senior citizens have an in-built co-pay clause. Since insurance premiums for senior citizens are typically on the higher side, the co-pay clause helps reduce the premium amount and makes health insurance affordable for them.

Some insurance companies also keep the co-pay clause for treatment at non-network hospitals.

Why do insurance companies levy the co-pay clause on policyholders?

Many insurance companies in India levy the co-pay clause for the following reasons:

1. Reduced financial liability

The co-pay clause in medical insurance reduces the financial liability of insurance companies. In case a policyholder files a claim, the insurer will reimburse the pre-decided percentage of the claim amount, and the policyholder will bear the remaining expenses.

2. No misuse of health insurance

When policyholders will have to pay a certain percentage of their medical bills, they are less likely to misuse their health insurance policy. For instance, they will choose an affordable option instead of opting for treatment at expensive hospitals with top-class facilities.

3. Fair use of health insurance

Since policyholders will have to pay a part of the claim amount, they will not file any unnecessary and false claims with the insurance company. Hence, co-payment can help ensure the judicious use of health insurance.

Types of co-pay clauses in health insurance

Some of the most common types of co-pay clauses in health insurance are:

1. Age-related co-pay clause: Most insurance companies have a mandatory co-pay clause for senior citizen healthcare plans.

2. Location-related co-pay clause: Some insurance companies have a co-pay clause for treatments taken at expensive hospitals in metropolitan cities.

3. Hospital-related co-pay clause: Some insurers have a co-pay clause for treatment at non-network hospitals.

4. Illness-related co-pay clause: If the policyholder is suffering from a pre-existing condition that may require expensive treatment, the insurer may apply the co-pay clause for the treatment of that condition.

Should you take a policy with a co-pay?

If you want to reduce medical insurance premiums, a co-pay is a good option. The higher the co-pay percentage, the lower will be the premium amount and vice versa.

Co-pay has both advantages and disadvantages. So, you can consider both these factors and decide if you should take a policy with a co-pay.

The main advantage of a co-pay is that it reduces policy premiums and makes health insurance affordable. This works in favour of those who cannot pay high premiums against their healthcare plans.

The disadvantage of a co-pay is that in case of a major health issue that requires hospitalisation and leads to exorbitant medical bills, the policyholder will have to pay a huge amount from his/her pocket.

Things to keep in mind when opting for co-payment

The following are some important things to keep in mind before opting for co-payment:

1. Your age

If you are young, healthy and less likely to use your health insurance policy, you can opt for co-payment in health insurance. This will reduce policy premiums by a significant percentage and ensure adequate coverage in a medical emergency.

2. Your finances

If you are financially well-off and can bear a certain percentage of your hospital bills during medical emergencies, you can opt for a co-pay in health insurance.

3. Your health

If you have pre-existing conditions or are prone to illnesses, taking a policy without the co-pay clause is better.

Conclusion

To sum up, understanding the meaning of what is copay in health insurance and its implications is essential. The co-pay clause in health insurance has its own set of advantages and disadvantages. It helps divide the financial risk between the insurer and the insured and benefits both parties. So, when you are taking medical insurance or family health insurance, you can check with the insurance provider about their co-pay clause and make a decision accordingly. Most insurance companies also offer health insurance without the co-pay clause, so you can weigh both options and zero in on one that best fits your requirements and pocket.

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

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