Understanding Co-Payment in Health Insurance

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

Understanding Co-Payment in Health Insurance

Health expenses can be unpredictable, and even a single hospital visit can disrupt your monthly budget. That is why understanding how different health insurance features affect what you pay really matters. Co-payment is one such feature that can change how much you spend both on premiums and during a claim. Knowing how it works helps you choose a plan that fits your financial comfort, gives you control over your medical costs and keeps you prepared for emergencies.

Read on to understand the meaning of copay in health insurance and how it works.

What is Co-Payment in Health Insurance?

If you’re wondering what is co-payment in health insurance, 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.

Let’s look at an example to better understand the copay meaning in health insurance or what is co pay in health insurance:

Suppose 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.

Benefits of Co-Pay in Health Insurance

The following are the benefits of co-pay in health insurance:

1. Lower Premiums:

If you choose health insurance with a co-payment, it will cost less than a regular health plan. Since you agree to pay a part of the claim, the insurance company charges a lower premium. The more you agree to co-pay, the lower your premium will be.

2. Fewer Small Claims:

Co-payment requires policyholders to pay a portion of the claim. It discourages claims for small problems like mild fever, cold and cough, stomach upset or minor injuries, which they usually handle at home.

3. Avoids Expensive Hospital Choices:

If your plan has a mandatory co-pay, choosing an expensive hospital means you will have to pay more from your pocket. This encourages people to choose hospitals more wisely.

4. Better Healthcare Access:

Co-pay reduces the financial burden on insurance companies during claims. This helps them manage costs better and offer quality services to policyholders.

5. Helps with Financial Planning:

When you know in advance how much you might need to pay for a claim, you can plan your finances better and stay prepared for medical expenses.

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.

What is the Difference Between Co-Pay and Deductible?

Both co-pay and deductible let you share costs with your insurance and can help lower your premiums. However, they work differently. Let’s take a look at the copayment meaning in health insurance and the key differences between copayment and deductible:

Parameter	Co-pay	Deductible
Definition	Co-pay is a fixed amount you pay out of pocket when you use a specific healthcare service, like visiting a doctor or getting hospitalised.	A deductible is the amount you pay first before your insurer starts covering your healthcare costs.
When it applies	It applies every time you claim a doctor visit or hospitalisation.	It applies once a year, before your policy starts paying for your medical expenses.
Effect on premium	Having a co-pay usually lowers your health insurance premium.	Choosing a higher deductible also helps reduce your premium.
Example	If your policy has an INR 2,000 co-pay for doctor visits, you pay INR 2,000 each time you see the doctor, and your insurer pays the rest.	If your policy has an INR 20,000 deductible, you must pay medical bills up to INR 20,000 first. After that, your insurer starts covering the remaining costs.

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. However, before you make a decision, understand what is copay in health insurance to avoid surprises later.

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 healthcare.

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

By knowing the co-pay in health insurance meaning, you can make informed decisions, manage your healthcare costs better and avoid unexpected expenses. In simple terms, co-pay divides financial responsibility between you and the insurer and can benefit both sides. The policyholder benefits because they pay lower premiums, and the insurer benefits because it reduces their overall claim liability. So, when choosing to buy health insurance plan, check with the insurer about their co-pay clause and decide what suits you best.

FAQs

1. What is 20% co-payment in health insurance?

A 20% co-payment means you pay 20% of your medical bill when making a claim, and your insurance company covers the remaining 80%.

2. Is co-payment good or bad?

Co-payment can be a good option if you are generally healthy and don’t need to make frequent claims, as it helps lower your policy premiums. However, if you are a senior citizen or have a pre-existing condition, opting for a co-pay may not be ideal.

3. What is an example of a co-pay?

Here’s an example of co-pay: Suppose you have an INR 20 lakh health plan with a co-pay of 10%. If you make a claim for INR 5 lakh, you will need to pay 10% of the claim amount, which is INR 50,000, yourself. Your insurer will cover the remaining INR 4.5 lakh.

4. Who will pay the co-pay?

In health insurance, the policyholder pays the co-pay portion of the claim.

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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