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

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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Written By: PolicyBazaar - Updated: 07 November 2022

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