Co-Pay in Health Insurance

The several benefits of health insurance can hold different meanings for policyholders with diverse profiles. It is favorable to be aware of them while purchasing to avoid any misunderstandings later.

The benefits of health insurance have quickly become even more relevant than before. We are seeing an increase in lifestyle-related health issues among people. While it is essential to make other efforts to maintain a healthy lifestyle, protecting yourself financially should be prioritized.

You can also get a variety of health insurance benefits like along with the benefit of investment by opting for the Axis Max Life SEWA Plan.

Here are a few key advantages of health insurance to put it in perspective.

Co-pay in health insurance is a clause that fixes a ratio between the insurer and the insured on medical bills. In layman's terms, you have to pay a certain percentage of the total medical bill out of your pocket while filing a claim. The remaining portion of your medical bill will be covered by your insurance.

But why would you pay even a portion of your bills if you’re already covered under a health insurance? Here is the catch – lower premium coupled with higher sum insured. When you opt for a co-pay feature, your insurance premium is lowered while keeping your sum insured the same had they opted for the same health insurance plan without co-pay option.

Mr A has an insurance policy with a sum insured of Rs 50 lakhs with 10% co-pay feature. Now, he gets hospitalised and the bills totals of Rs 1 lakh. Mr A, in this case, will pay 10% of Rs 1 lakh, i.e. Rs 10,000 from his pocket while the balance of Rs 90,000 will be paid by the insurer to the hospital.

This option is especially good for those who maintain a healthy lifestyle with minimal health issues. In such cases, the chances of hospitalisation are reduced greatly and a reduced premium works to their benefit.

Here are some distinctive benefits of co-payment in health insurance:

• Co-payment lowers the burden of premiums on the insured by lowering the cost of premium
• It is specifically beneficial for senior citizens as they get sufficient coverage for pre-existing illnesses at low premiums through this clause
• It lessens the chances of misuse of health insurance policies
• It also helps the insurance company by discouraging the insured from unnecessary use of hospitals, nursing homes and their luxury facilities and saving it for those who actually need it

If you want the premium of your health insurance policy to be affordable, you can look for policies offering a co-payment feature. After all, it is better to be partially insured rather than being uninsured or underinsured.

Co-payment is also a great option for elderlies. Senior citizens usually have to pay expensive premiums for health coverage. If they opt for health insurance with this co-pay facility, they will be able to get enough coverage at lower costs.

People diagnosed with critical illness may also find this a useful option. The insurance premium is very high for such cases. In fact, some insurance companies do not include critical illness under regular policies and you need to add a rider which is an added expense. Hence, opting for co-payment is a great idea in such scenarios.

By now you know how co-payment works. To understand the difference between co-pay and deductibles feature in a health insurance, let’s see what are deductibles first.

A deductible is a fixed amount of sum that the insured needs to pay to his/her insurer at the beginning of a year before insurance policy kicks in. Whereas, in a co-pay option, there is no fixed amount but a fixed percentage that is to be paid by the policyholder.

Just like co-pay, deductibles help to bring down the premium. However, the fixed amount in a deductible and the percentage feature in the co-pay option makes all the difference.

Let’s understand this with the help of an example.

Suppose you have an insurance policy of ₹10 lakhs. The deductible is 10% of the sum insured which is ₹1 lakh. If your medical bill doesn't cross over ₹1 lakh you won't be able to file any claim. The insurer will settle any bill that crosses ₹1 lakh.

Now, let’s say you have a health insurance policy with a 10% co-payment option with the same clause. You will be able to claim ₹45,000 on a medical bill of ₹50,000, where you have to pay only 10% which is ₹5000 from your own pocket.

Here are the different types of co-payment clauses in health insurance:

•  Location-related Co-payment: Insurers apply a co-pay clause on medical bills in certain cities. This is usually due to the higher cost of treatment in that city (especially a metropolitan city).
•  Age-related Co-payment: Insurers apply a co-pay clause on individuals under a certain age bracket. This is mostly applicable to senior citizens.
•  Hospital-related Co-payment: Insurers may apply a co-payment clause if they approach a non-partner hospital for treatment.
•  Illness-related Co-payment: Insurers many times levy this clause on individuals with a pre-existing diseases and/or critical illness. This is primarily because they require expensive treatments for a longer duration.