Co-Payment Clause in Group Health Insurance
With medical inflation, high medical bills, and the constantly rising cost of healthcare services, group health insurance policies have become a staple in an employee’s benefits package. Many times, employees feel once they are a part of an employer-funded group insurance scheme, all their medical expenses would be taken care of automatically. However, this is not always the case. A group health insurance with a co-payment clause can be a hindrance wherein the employee might have to pay a certain amount from his pocket.
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Co-payment
Co-payments, also sometimes referred to as copays, are a common way of cost-sharing method under many health insurance plans. Under this clause, the policyholder is required to pay a certain percentage of the claim amount.
Some policies have co-payment as a mandatory clause, whereas some offer an option to voluntarily opt for a copay with a reduced premium. Senior citizen policies often come with this clause as the waiting period for the pre-existing disease is low. It is thus adjusted with a co-payment clause.
Group Health Insurance and Co-payment
In most cases, the premium of a group medical insurance is fully paid by the employer. Thus, the terms and conditions are also set by the employer, who is the policyholder. The employee is the prime insured or the beneficiary.
Now, if the employer opts for group health insurance with a co-payment clause, the insured (employee) will have to bear a certain percentage of the claim amount. This percentage is decided by the insurer (insurance company).
For a better understanding, let us consider the below example.
Naina works for an organization that offers its employee group health insurance benefit with a sum insured of Rs. 5 lakhs and a co-payment clause of 20% of the admissible claim amount. When Naina was hospitalized recently, her hospitalization expenses were as follows.
|
Expenses |
Amount |
|
Room rent expenses (5 days) |
Rs. 50,000 |
|
Treatment cost |
Rs. 40,000 |
|
Doctor visit charges |
Rs. 30,000 |
|
Reports |
Rs. 20,000 |
|
Total Hospitalization Expense / Admissible Claim Amount |
Rs. 1,40,000 |
As mentioned above, the policy has a co-payment clause of 20 percent. Thus, Naina had to pay Rs. 28,000 (1,40,000 x 20%) out of her own pocket. The remaining 80 percent (Rs. 1,12,000) was paid by the employer.
Just like the above example, in some health policies (both individual and group) co-payment is applied to the total claim amount. While in a few, it may be applied to certain medical expenses like OPD or daycare procedures. It is to be noted that the co-payment clause applies to every claim filed under the policy.
Advantages of Group Health Insurance Plan with the Co-payment Clause
From an employer’s point of view, group health insurance with co-payment can be quite beneficial. Let us look at its advantages to the employer and insurance company.
- For the employer, it attracts reduced premiums on the group health policy
- For the insurance company, it helps keep a check against inflated bills and other insurance-related fraud
- It reduces unnecessary claims for small amounts
-
Critical Job Factor
According to a report by Society for Human Resource Management (SHRM), 60% of employees consider health insurance essential when choosing a job.
-
Boost Productivity
According to World Health organisation (WHO), poor health can cause a 20-25% drop in productivity.
-
Tax Benefits
Employer-paid health insurance premiums are tax-deductible under Section 80D .Not offering this can mean missing out on tax savings.
-
Regulatory Compliance
The Indian government has introduced regulations like Social Security Code, 2020 the which mandates health insurance for certain sectors. Non-compliance can lead to penalties.
Ensure you're covering all bases with group health insurance to attract top talent, improve productivity, and stay compliant!
Conclusion
As mentioned above, the prime benefit of this clause for the employer is the reduction of premium amounts. It is thus very useful for start-ups or other SMEs. However, a higher percentage of co-payment means the employee will have to pay more from his pocket. This can burden the employee and somewhat reduce the overall essence of offering the group insurance scheme. Hence, opting for a policy without a co-payment clause is recommended.
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