What is Co-Payment in Health insurance?

What Do You Understand by Co-Payment in Health Insurance?

As stated, a co-pay is the fixed percentage of claim money that policyholders have to pay from their pocket during the time of a claim settlement. Co-payment is like an arrangement between the insurer and the insured wherein the insured pays a certain percentage of the medical expenses, whereas the remaining claim amount is paid by the insurance company as per the applicable terms and conditions of your policy. For instance, if your pre-determined co-pay is 10% on your health insurance policy and the claim amount is INR 2 lakh, your insurer will pay INR 1.8 lakh, while the remaining INR 20,000 will be paid from your pocket. It is important to note here that the co-pay amount is one of the determinants that decides the premium of your health insurance policy. Co-pay reduces your premium considerably. Voluntary and compulsory are the two forms of co-pay available in health insurance policies. In voluntary co-pay, the policyholder can decide to pay a portion of the amount, whereas mandatory or compulsory co-pay is levied by the insurer. Co-pay can vary from 10% to 30% depending on the policy and the insurer. Most senior citizen health insurance plans come with a co-pay.

Are Co-Payment and Deductibles the Same?

Co-payment and Deductibles are two different features of a health insurance plan. Co-pay, as discussed, is a fixed percentage of the claim amount, while deductible is the fixed sum of money that the insured has to pay at the time of every claim settlement. The percentage of the co-pay is mostly specified in the policy document of your insurance plan. On the other hand, the deductible to be paid is calculated yearly. However, the policyholder has to clear these charges in a claim settlement before availing insurance coverage. Further, co-payment, in most cases, is applied to specific diseases where the treatment cost is very high, or if the treatment requires the insured to go to non-network hospitals. On the contrary, deductibles apply to the overall medical costs.

When is Co-Payment used in Insurance? How Co-Pay Works?

As soon as a policyholder raises a claim, the co-pay gets activated. So, once you raise a claim, you must pay the co-pay amount before the insurer settles the rest of the claim. Unless the policyholder pays the copay amount, the remaining amount is not settled by the insurer. Is

It Beneficial to Buy Health Insurance with a Co-Payment Clause?

There are many benefits of buying health insurance policies with a Co-pay clause. Let us take a look at some of them:

• Copay lowers your premium
  By paying a co-pay amount, you can lower your policy premium. With a co-pay clause, you can avail of health insurance at a low premium. This is primarily because with co-pay you share a percentage of the claim amount thereby sharing the liability of the insurance company. The higher the co-pay percentage you choose, the lower the premium you pay for your policy.
   
• Policyholders Avoid Minor Claims
  The co-pay clause requires the policyholder to pay a portion of the claim amount every time they raise a claim. This discourages many people from raising minor claims or unnecessary health claims.
   
• Policyholders Might Avoid Expensive Hospitals
  Hospitalization in an expensive multi-specialty hospital charges 40-50 % more compared to regular hospitals. Hence, policyholders with a co-pay clause avoid hospitalization and treatment in expensive hospitals for diseases that can be easily cured in regular hospitals. This way, they save on the money that is required to pay from their pocket as a co-pay.

Shortcomings of Co-Payment in Insurance

Every health insurance provider may not include a co-pay clause in their policies. Moreover, co-pay has many shortcomings or drawbacks, which makes policyholders look for insurance policies without a co-pay clause. Below are some drawbacks of co-pay in insurance.

• High copay makes health insurance plans useless A very high co-pay percentage might make your health insurance policy useless and make the objective of buying a policy unworthy. It doesn’t make sense to pay an exceptional co-pay when you are already paying premiums for your health insurance coverage. People buy health plans to reduce their expenses and if you have to pay large sums from your pocket, the whole point of buying a health policy goes in vain. In such cases, co-pay simply kills the motive of availing a health insurance policy.
   
• Not many insurance policyholders prefer paying co-pay
  Most policyholders are not interested in buying health insurance policies with co-pays. People generally look for policies without a co-pay percentage levied on the insured. They buy policies that offer good coverage without a co-pay.
   
• Co-pay is beneficial until you raise a claim
  Co-pay may benefit individuals who are young and fit, and who think that they won’t need to raise a claim any sooner. This way, they can pay a low premium for their health policy. However, this implies that the insured can benefit from the policy unless they raise a claim. If they face any medical emergency, they would have to pay the pre-decided co-pay amount to share the cost of treatment.

Should you Buy Health Plans with Co-Pay?

Whether to buy a health insurance policy with or without a co-pay depends on the health condition of the insured. If you are willing to buy a health plan with a co-pay clause, you may consider the presence of any health issues or any medical history. If you are a young and healthy person following a healthy lifestyle, diet, and exercise, the chances of falling sick are likely less compared to others. In such cases, it may suit you to buy health insurance policies with a co-pay clause.

However, people with a sedentary lifestyle and who are aging might like to avoid a co-pay clause in their health plans. They may have to avail of medical treatment and raise claims. So, they may like to avoid co-pay and go for regular health policies.