Co-payment in Health Insurance

In health insurance, co-payment is a fixed percentage of the claim amount that needs to be paid by the insured. This percentage is decided at the time of policy purchase, so you check the policy documents to know about any applicable co-payment before buying.

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    What is Co-payment?

    Co-payment is the percentage of the claim that the insured agrees to pay from his/her pocket irrespective of the claim amount. It usually varies from 10% to 30% and is insisted mostly under senior citizen health insurance policies. The insurer only pays the balance claim amount.

    For example, suppose Mr. Mahesh Lamba’s health insurance policy comes with a co-pay of 20% on all claims. He files a claim of Rs 2 lakh. Take a look at the following table to understand how co-payment will work for different sum insured:

    Policy Sum Insured

    Claim Amount

    Co-Payment

    Payable Amount

    Remaining Out of Pocket

    Rs 1 Lakh

    Rs 2 Lakh

    20% of Rs 2 Lakh= Rs 40,000

    Rs 1 Lakh

    Rs 60,000

    Rs 2 Lakh

    Rs 2 Lakh

    20% of Rs 2 Lakh= Rs 40,000

    Rs 1.6 Lakh

    NIL

    Rs 5 Lakh

    Rs 2 Lakh

    20% of Rs 2 Lakh = Rs 40,000

    Rs 1.6 Lakh

    NIL


    How is Co-payment Different from Deductibles?

    The major difference between co-payment and deductible is that the co-pay is a percentage of the claim amount whereas the deductible is a fixed amount to be paid by the insured for each claim. While the co-pay percentage is specified in the insurance policy, the deductible amount is calculated on a yearly basis. Both these costs must be paid before the insurance coverage kicks in during a claim.

    Another difference between co-pay and deductible is that the co-payment may be applicable to specific covers or services. For eg., co-pay may be applied to diseases with high treatment costs or going outside the insurer’s network of hospitals to avail treatment. On the other hand, deductibles apply to the overall cost of medical care.

    When Does Co-payment Come into Play?

    The co-payment under a health insurance policy gets activated as soon as you raise a claim. When a claim is raised, you are required to pay the co-payment amount and the remaining claim amount is paid by the insurance company. Unless you pay the co-payment, your insurance company will not pay the remaining claim amount.

    Why Should You Buy a Health Insurance Plan with a Co-pay Clause?

    The reason why you must opt for a health insurance policy with a co-pay clause is given below:

    • Lowers Policy Premium– A health insurance policy with a co-payment option is available for a lower premium price. This happens because the co-payment enables you to share the liability of the insurance company and hence, they charge a lower premium to you. The higher is co-payment, the lower will be the premium amount.
    • Prevents People from Raising Minor Claims - As co-pay requires people to pay a portion of their claim, it discourages a lot of people from filing unnecessary health claims. If you file a claim for minor illnesses that can be cured at home, like common fever/cold, diarrhoea, etc., then you know that the insurer will charge you for it. Furthermore, it will involve paperwork and documentation, which again discourages people from filing minor claims.
    • Discourages People from Getting Admitted to Expensive Hospitals – A health plan with co-pay discourages people from getting admitted to expensive hospitals. Assume that you have a health policy with a 10% of co-pay clause. If you take the treatment in a regular hospital, a minor treatment will come out to be roughly Rs 20,000. With a co-pay of 10%, you will only need to pay Rs 2000 from your own pocket. But if the same treatment is taken in a multi-speciality hospital, then its cost will turn out to be more than Rs 50,000. This is because the cost of treatment in high-end hospitals is 40-50% more compared to smaller hospitals. This means that you will have to pay around Rs 5,000 from your pocket.

    What Are the Drawbacks of Co-pay in Health Insurance?

    Not every health insurance company adds a co-pay clause to their health plans. This is because co-payment clauses come with a few disadvantages. Take a look at them below:

    High Co-pay Kills the Objective of Health Insurance

    If the co-pay amount is high, then it may prevent the policyholder from seeking medical care for life-threatening conditions. Thus, the health policy becomes of no use. If an individual needs to pay a substantial amount from his/her pocket as co-payment then the whole purpose of buying health insurance is crushed.

    The whole agenda of buying health insurance is to reduce out-of-pocket expenses. If the insured cannot get the required financial aid from the health insurance provider at the time of need, then the objective of buying a health plan with a co-payment is not served.

    Not Widely Preferred

    Health insurance plans with co-pay are usually not a preferable choice among people. Anyone who needs medical coverage would choose a policy without a co-pay clause. An insurance company that provides extensive health cover will be more beneficial for the customer and will witness more sales.

    Beneficial Until No Claim is Raised

    Choosing a policy with higher co-pay means a lesser premium. But it also means that the insured can only benefit from it until he/she files the claim under the health plan. In case of a medical emergency, the amount saved on the premium will get used towards the overall cost of the treatment anyway.

    Should You buy a Health Insurance Plan with Co-pay?

    The answer to this question depends on your health condition. So before you buy a health plan with a co-payment clause, you should consider your medical history and current medical state. Healthy individuals with major health issues who follow a healthy lifestyle, diet and exercise regularly have lower chances of raising a claim under their health insurance policy. Hence, buying a health plan with co-payment will be beneficial for them.

    On the other hand, if you have a sedentary lifestyle or are aged, then you are more susceptible to health-related issues. You might feel the need to file a claim under your health insurance policy at some point. Therefore, opting for a regular health insurance plan with no co-pay is the best for you.

    Over to You

    Co-payment is one of the most important things to consider at the time of buying a health insurance policy. Now that you have a basic understanding of co-pay and voluntary deductibles, you can decide if you want to opt for them or not. You will now be able to make an informed decision of buying a health insurance plan with co-pay.

    Disclaimer: *Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer

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    Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

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