Co-payment in health insurance refers to the percentage of the claim amount which the policyholder is required to pay from their end and the rest is borne by the insurance company in case of a health insurance claim. There are many insurance companies offering health insurance plans with mandatory co-payment clauses, whereas others come with a voluntary co-payment option. The policy buyers can buy health insurance with voluntary co-pay and enjoy a reduced premium for that policy.
How Co-Pay in Health Insurance Works?
An insured individual can file a claim for health insurance either through cashless or reimbursement of the expenses. In case of availing cashless medical treatment and filing the claim, the health insurance company settles the expenses incurred directly with the hospital where the insured or family members are undergoing treatment. On the contrary, in case of a reimbursement claim, the health insurance company reimburses the insured for the expenses incurred while undergoing treatment.
Talking about co-payment in both situations, it can be found that:
- Insurers who opt for a higher co-pay will be able to lower their total premium payment but will have to pay a greater amount during a claim.
- On the other hand, if the insured opts for a lower co-pay, the amount to be paid during the claim gets reduced but also requires the insured to pay a higher premium against the health insurance.
What Are the Features of Co-Payment Clause?
To have a better understanding of the co-payment clause in health insurance, read along with its features that include:
- In the co-pay clause, a major portion of the claim is covered by the health insurance company while the insured has to take care of a specific percentage of the expense incurred.
- The percentage of co-payment depends on the medical service availed.
- If the insured opts for a lower co-payment amount, they need to pay a higher premium.
- co-pay clauses are implemented in the case of senior-citizen health insurance policies.
- Co-payment is mostly popular in metropolitan cities where the treatment costs are higher in comparison to smaller towns and cities.
Why Is co-pay Clause Included in Policies?
Many insurance companies offer health insurance plans with co-payment clauses as it helps them save a considerable amount at the time of claims. Other reasons for the inclusion of the co-payment clause in health insurance plans are listed below:
- People are discouraged from making unnecessary claims as they are required to pay a portion out of their own pockets, so they might refrain from making claims considering it will add to their expenses. This leads to a lesser number of claims, especially in the case of minor illnesses such as common cold, regular gastric distress, etc. people may avoid making claims. This reduces the paperwork from both parties. So, simply put, the co-payment clause discourages the insured from making unnecessary claims.
- The co-payment clause discourages people from availing themselves of treatments at expensive healthcare centres or hospitals as the insurers also need to pay a certain amount from their own pocket. For instance, if the treatment is availed at an expensive hospital, and the claim amount is Rs. 1 Lakh and the co-payment is 10%. Then the insurance company will pay Rs. 90,000 and the remaining Rs. 10,000 will be paid by the insured. But if the treatment is availed at a regular hospital and the claim amount is of let’s say Rs. 70,000, then the insured will be required to pay Rs. 7,000 only. As the insured is required to pay a higher amount from their own pocket if availing of treatment at an expensive hospital, hence, he/she will prefer availing treatment at a regular hospital or healthcare centre to save more, thereby benefiting the insurance company as well.
- By requiring the insured to pay a portion of the expenses incurred, the co-payment option promotes the judicious use of health insurance plans. This encourages the insured to use his/her health insurance policy the right way.
- As the insured bears a portion of the claim amount, it reduces the insurance company's risk and liability. For instance, if there is a co-payment clause of 10% in a health insurance policy, then this 10% will come as a profit for the insurance company as the insured will pay this from his/her own pocket.
What Are the Benefits of the Co-Payment Clause in Health Insurance?
One of the biggest benefits of the co-payment clause in health insurance is that it helps the policyholder reduce the premium amount paid towards their insurance policy.
Even if the policyholder has to pay a specific percentage of their claim, co-payment helps in reducing the periodic expenditures by reducing the health insurance premium payment.
