What is Co-pay in Health Insurance and Why its Important?

So you’ve taken a health insurance policy and unfortunately, the time has come to claim it. You go to the hospital, get checked up, treated and are presented with a bill. Typically, the health insurance company will take care of the entire expense as per the terms of your policy, and you will walk out healthier, and just as rich as you were when you were admitted to the hospital. But this isn’t the case with co-pay in health insurance.

What is a Health Insurance Copay?

If your health insurance policy has a co-pay clause, you will agree to pay a part of the medical expense out of your pocket, and the insurer will cover the rest. There are many health insurance companies today (like United India Insurance Company, New India Insurance Company, SBI General Insurance, etc.) that have co-pay clauses in their policies. The co-pay amount is usually a fixed amount for different services and drugs, varying depending on the nature of treatment or medication required.

For example: If your insurance policy has a co-pay (or co-insurance) clause of 10% and your medical expenditure has amounted to Rs.50,000, you will have to pay Rs.5,000 out of your pocket and the insurer will cover the remaining Rs.45,000.

Features of Co-Pay Health Insurance

• It is an amount paid (or a percentage of the total) for certain medical treatments and medication, while under the
• A part of the expense is taken care of by the insured, and the majority is paid for by the insurer.
• By definition, it’s a different fixed amount that’s charged depending on the medical service rendered.
• The terminology is used interchangeably with “co-insurance”. But it means the same thing here in India.
• Larger coinsurance and copay ratios in favour of the insurer mean lower premiums for the insured.
• Mostly applicable to senior citizens in health insurance policies in India.
  Co-pay policies are more prominent in major established cities.

Why Do Health Insurance Companies Have Co-pay Clauses?

Apart from the obvious reason that the health insurance company will be able to save a portion of its expense during claims, insurance companies also have co-pay clauses for the following reasons:

• Discourages people from making unnecessary claims, as they will have to pay a portion of the expense. Claims for medication and treatment sought to get over the common cold, or for some kind of regular gastric distress, could technically be charged back to the insurer. This results in a lot of unnecessary paperwork for both parties and a minimal claim amount. Co-pay discourages the misuse of health insurance policies.
• Discourages people from undergoing treatment in expensive hospitals and healthcare centres. Assume you have an insurance policy with a co-pay (or co-insurance) clause of 10%. Treatment for a health condition at a regular hospital may come up to Rs.10,000, the insurer will pay Rs.9,000 and you will only have to pay the remaining Rs.1,000. But if the medical treatment has been sought at an expensive hospital/institution, the total expense for the same treatment could be as high as Rs.40,000 (recent polls suggest that boutique hospitals, high-class medical centres and speciality centres charge up to 40% more for the same services and treatments). This means that you will end up paying Rs.4,000 out of your pocket. This will discourage the average insurance holder from wasteful expenditure at more expensive hospitals.
• Encourages honest and judicious use of health insurance policies. The fact that co-payment means you will have to pay an amount out of your pocket, means that you will see your hospitalization or medical treatment as an expense that you must incur as well. This will ensure that you use it right, as it brings with it a sense of ownership.
• Mitigates the risk and liability for the insurer. Insurance companies are huge businesses with huge profit and loss statements. What increases the balance in the loss column are payments made due to claims. A co-pay (or co-insurance) clause of 10% in all its policies means a direct 10% saving for the insurance company.

Conclusion

If you are a person in the prime of health and in good physical condition, without a history of past diseases, pre-existing illnesses, or any susceptibility to falling critically ill in the future, a co-pay policy could enable savings for you. You will not need to cash in the entire policy and can make use of the many benefits that come with it.

Also Read: Which Health Insurance Rebranded Itself As A Care Health Insurance