Understanding Sub-limits and Co-payments in Senior Citizen Health Plans

Posted on: Jan 17, 2025 | 3 mins | Written by: HDFC ERGO Team

Understanding Sub-limits and Co-payments in Senior Citizen Health Plans

Ageing often comes with an increased risk of health issues and a significant rise in medical expenses. Therefore, in addition to following healthy lifestyle habits and taking care of your well-being, investing in a comprehensive senior citizen insurance policy is essential to stay protected against unforeseen health challenges. This health plan provides several benefits and ensures peace of mind during medical emergencies and planned hospitalisations. Moreover, you can get adequate coverage while keeping premiums affordable by opting for co-payments or sub-limits. Let’s understand how sub-limits and co-payments work in health insurance.

Understanding sub-limits in health insurance

A sub-limit is a restriction or cap on the amount a policyholder can claim for a medical procedure or service. The insurance provider may set sub-limits on one or more benefits offered by the policy to ease their financial liabilities during claims.

Sub-limits are particularly available with senior citizen health insurance policies. Some policies may have a sub-limit for cataract surgery, kidney dialysis, knee replacement surgery, room rent charges, and more.

For example, your insurance policy has a sub-limit of INR 5,000 for daily room rent, but the actual room rent in the hospital is INR 8,000 per day. In this case, the insurer will reimburse up to INR 5,000 per day for the room and you would have to pay the remaining INR 3,000 per day out of pocket.

Understanding co-payments in health insurance

A co-payment is a clause in health insurance policies in which the policyholder is required to pay a pre-determined percentage of the claim amount out-of-pocket while the insurer pays the remaining. This helps reduce the financial risk of the insurer, so insurance providers lower premiums in return.

The co-payment clause is particularly common in senior citizen health insurance policies. As healthcare expenses tend to rise with age, insurers use the co-payment clause to mitigate the risk of high claims. Moreover, since premiums of senior citizen healthcare policies are typically higher due to increased health risks, the inclusion of this clause helps reduce the premium cost, making it more affordable for senior citizens to stay covered under health insurance.

Therefore, the co-payment clause lowers premiums, ensuring that senior citizens have access to necessary healthcare without the burden of high premiums.

How do sub-limits affect senior citizen healthcare plans?

Sub-limits can affect senior citizen healthcare plans in the following ways —

Pros

1. Lower policy premiums: This health insurance clause divides the financial risk between policyholders and insurance companies. Therefore, if seniors choose a policy with a sub-limit or co-payment, the insurer will reduce policy premiums by a certain percentage.

2. Cost control: Since senior citizens are more likely to require frequent medical treatment, insurers use sub-limits to manage the risk of high claims. Therefore, this clause helps insurance providers control the overall cost of coverage.

Cons

1. Reduced coverage for certain expenses: A health insurance plan with sub-limits can restrict coverage for certain types of medical treatments and services, thereby increasing the policyholder’s financial burden.

For example, you require an expensive surgery, but the policy has a sub-limit of INR 50,000 for surgical procedures. In this case, the insurer will cover up to this amount, and you must pay the remaining costs from your pocket.

2. Potential for gaps in coverage: There can be instances when senior citizens may require high-cost treatments, especially for certain life-threatening conditions like cancer. However, the presence of a sub-limit may reduce the coverage and increase their out-of-pocket expenses. This can be a financial burden for senior citizens, especially those with limited income and savings.

How do co-payments affect senior citizen plans?

The co-payment clause has both positive and negative effects on senior citizen plans:

Pros

1. Lower premiums: The co-payment clause is often included in senior citizen health insurance policies to make them more affordable. It reduces the financial risk for insurance companies, allowing them to lower policy premiums in return.

2. Higher co-payment implies lower premiums: Insurance companies often allow senior citizens to choose the co-payment percentage for their health plan. If you select a higher co-payment, you can get health insurance coverage at lower premiums. While this makes the plan more affordable initially, it increases the amount you must pay when making a claim. Therefore, it is essential to carefully weigh the pros and cons and choose a co-payment percentage that suits your financial situation.

Cons

1. Out-of-pocket expenses: The co-payment clause can be a financial burden for senior citizens in the event of a major treatment or prolonged hospitalisation. It requires the policyholder to pay a portion of the claim, and this can be a significant amount in case of huge healthcare bills.

For example, you undergo a major surgery costing INR 7 lakhs. The co-payment in your health plan is 20%, so you would have to pay INR 1,40,000 from your savings. If you have a fixed income or limited savings, this can be a significant financial challenge.

2. Impact on frequent medical needs: Senior citizens are more likely to need frequent medical care, and a high co-payment could become a financial burden in case of multiple treatments or hospitalisations. The cumulative cost of the co-payments can make the health insurance policy less cost-effective in the long run.

How to choose the right premium for a senior citizen health insurance policy?

The following are tips for choosing the right premium for a senior citizen health insurance policy —

1. Identify coverage needs

The premium of a health insurance policy is directly linked to the sum insured. The higher the sum insured, the higher will be the premium. Therefore, before deciding on the sum insured, consider factors such as pre-existing conditions, medical inflation, critical illnesses, long-term treatments, and modern procedures, and make an informed decision.

2. Policy sum insured and premium

After identifying your coverage needs, choose a sum insured that adequately covers potential medical expenses. However, keep in mind that while a high sum insured will ensure comprehensive coverage and better financial security during medical emergencies, it will increase policy premiums. Therefore, evaluate your budget and choose an amount that ensures good coverage without financial strain.

3. Sub-limits and co-payments

Many senior citizen health insurance policies come with sub-limits and co-payments. These provisions can reduce policy premiums significantly. Therefore, you can opt for a health plan with such clauses if you are looking for affordable coverage. However, make sure you understand the implications and adjust the sum insured accordingly.

4. Top-ups and riders

Adding top-ups or riders to a policy can increase the premium. Therefore, select only those top-ups and riders that will help you meet your healthcare needs.

5. Compare multiple plans

Don’t purchase the first policy you come across. Shortlist and compare a few based on coverage, premiums, and additional benefits. Choosing a policy that offers a good balance between sufficient coverage and affordable premiums is important. You can use comparison tools or seek advice from an insurance advisor to make a well-informed decision.

Conclusion

Summing up, while sub-limit and co-payment clauses can significantly reduce the premium of senior citizen health insurance plans, they have certain potential drawbacks. Sub-limits may restrict the coverage for specific treatments, and co-payments require the policyholders to bear a pre-decided percentage of their medical expenses. Therefore, when purchasing senior citizen insurance, carefully evaluate these factors and choose a plan accordingly so that it does not cause financial strain during claims.

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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