The insurance sector loses crores of rupees every year to fraudulent claims. While swindlers con insurance companies, bonafide policyholders suffer. In order to address this recurring problem, the insurance sector introduced a new feature–co-payment or co-pay.

What is copay in medical insurance?

Copay in health insurance means the insured and insurer will share the medical expenses (claim amount) in a certain ratio. The percentage of the claim amount that each will pay is predefined in the insurance agreement. The insured person pays that certain percentage of the claimed amount and the remaining is borne by the insurer/health insurance company.

Suppose, you bought a health insurance cover worth INR 5,00,000. The co-payment percentage you agreed upon is 20%. Now, you got hospitalised and then claimed INR 2,00,000 for the hospitalisation expenses. According to the co-pay health insurance agreement, you will pay 20% of INR 2,00,000 that is INR 40,000. The remaining INR 1,60,000 will be paid by your health insurance company. Now that you know what is copay in health insurance, let us learn its importance.

Importance of Copayment

The following reasons illustrate why co-pay feature is important:

1. The risk involved in the insurance claim is divided between both, the insurer and the insured person. However, the insured person has to bear the lesser amount of the claim.

2. The most important benefit of co-payment to the insured person is that he or she has to pay a lower premium amount compared to the premium of regular policy. If you compare the premiums of normal health insurance and co-pay health insurance, then you can see the difference in the premium.

3. It is beneficial for senior members in your family. In case of pre-existing diseases in senior citizens, the premium amount is higher. With the co-pay feature, you can buy insurance covering pre-existing diseases at a lower premium.

4. It reduces the chances of fraudulent claims.

5. It ensures that the insured person is not misusing the insurance by availing of unnecessary luxury facilities at the hospital

Features of Co-pay in health insurance:

As per the health insurance copay definition, it is a type of health insurance agreement where both the parties pay the amount claimed. There other features of this agreement include:

• A pre-defined percentage is there in the agreement. This percentage of the claimed amount has to be borne by the insured person, and the remaining by the insurer.

• It is a fixed percentage that will be levied on the amount you claimed.

• In India, co-insurance and co-payment are the same thing.

• The higher the ratio/percentage of the amount for the insured, the lesser will be the premium amount. For instance, the amount of premium you would pay for a policy with 10% co-payment will be higher than the premium amount for a policy 20% co-payment clause.

• In the developed cities, it is common while in rural India, sub-urban areas, it is still a very new concept.

• The percentage of co-payment also depends on the type of health insurance.

• It is mainly suitable for the insurance policies for senior citizens.

• The co-pay feature is applicable on hospitalisation expenses, medicines, fees of the doctors, medical services, pathology tests, and others.

Clauses of Co-payment in health insurance:

It is very important for both the parties involved to understand the clauses of a copay health insurance policy. The clauses pertain to:

• Medical bills: Both the parties have to share, as per the co-payment agreement of the health insurance, the amount claimed on medical bills. Whether the medical bill is for mandatory facility or services or not, is not important here.

• Treatment at hospitals not on the insurer’s network/reimbursement: If you go for treatment in any hospital that is not on the radar of the insurer, then they may apply copayment clauses on you. They may provide you cashless facility but in that case, you to pay a certain percentage of the claimed amount.

• For senior citizens: For senior members in your family, you will find the insurance policies are mostly coming with the copay clauses. This is because the cost of treatment and the chances of claiming the insurance is higher in the case of seniors.

• Metropolitan cities: Similarly, in metropolitan cities, the cost of treatment is higher. Thus many insurers levy copayment clauses in the health insurance agreement.

Why do health insurance companies levy these copay clauses?

According to a report, around 15% of the claims in the health insurance sector in India are false every year. Around INR 500-600 crores are lost due to fraudulent claims from the insurance sector. To reduce the occurrence of these fraudulent activities, a copayment feature was introduced. It helps in reducing the misuse of the policy by the insured person or their family members. It cuts down the unnecessary claims. Often insured people opt for expensive healthcare services unnecessarily. This can be checked when they are also bound to pay a certain percentage of the claim they make. It also helps in reducing the risk of the insurance companies.

What are deductibles? Are they different from the copay feature?

Deductible means the amount you agree to pay when the claim is processed as per the terms and conditions of the health insurance agreement. It is a fixed amount which you need to pay irrespective of the amount of claim. For instance, if the deductible clause is of INR 10,000, then whether you claim INR 1 lakh from the insurer or INR 50,000 only, you need to pay INR 10,000. This helps in discouraging the insured people from claiming multiple small amounts or repeatedly claiming from the insurer without actual use.

Deductible and copayment are not the same. While under the deductible clause, you have to pay a fixed amount, under the co-payment clause, it is a percentage of the claim. The percentage in copayment is fixed but the amount differs with the amount of claim. These two are completely different clauses.

Are co-insurance and copayment the same or different?

Co-insurance and copayment are the same. While in the copayment clause, a fixed percentage is mentioned in the agreement, in the co-insurance clause, a ratio like 90-10 or 80-20 is mentioned. This means, 90% of the claim or 80% of the claim will be borne by the insurance company and 10% or 20% will be borne by the insured person respectively.

Conclusion:

Health insurance is a must in everyone’s financial planning, but its misuse cannot be appreciated. Health insurance copay not only helps in reducing the misuse of the insurance policies but also helps the insured person to pay lower premiums.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.