All You Need to Know About Co-Pay Health Insurance

In the world of sky-high medical expenditures and sudden health problems, health insurance is undoubtedly necessary. A well-formulated health insurance cover gives you access to competent and quality healthcare facilities at all times. It helps you tide over medical expenses in a planned manner without creating a financial burden.

However, they entail a considerable premium amount that deters many individuals from taking an insurance cover, thereby isolating themselves from the host of benefits offered by the health insurance policies.

Insurance companies provide the health insurance co-pay feature as a part of their policy that you can use to reduce the premium payable amount. In this article, we shall discuss what is co-pay, its features, and benefits for insurance holders.

What is co-pay in health insurance?

The co-pay feature is an optional clause offered by health insurance companies in their policy. It is an arrangement between the policyholder and the insurance company wherein they share the medical expenses based on a mutually decided co-pay percentage. 

This co-pay percentage is the share of medical expenses that shall be borne by the policyholder in the event of a medical eventuality covered by the policy. For example, Ananya takes a health insurance cover with a co-pay feature of 15%. She incurs a medical bill amounting to Rs. 1 lakh. With the co-pay feature, Ananya will have to pay Rs.15,000 (1,00,000 x 15%), and the insurance company shall cover the balance. 

You may wonder, why would one take a policy where he/she has to pay out of their pockets? And why would the company offer such a feature?

Benefits to the Insured

• Reduced premium

The insured pays a specific portion of his/her medical expenses under the health insurance co-pay scheme. This feature provides the insured person with a direct benefit in the form of a reduced premium amount which is otherwise quite significant. Higher the co-pay percentage, lower the premium amount.

• Direct savings

Health insurance policies are of a pre-determined tenure, and you have to pay the same premium amount irrespective of whether you file a claim or not. With a co-pay health insurance cover, you pay a relatively lower premium amount. If you do not have any claim during the policy period, you have direct savings in the form of a lower premium amount.

Benefits to the insurer

• Promotes honest customer behaviour

Co-pay health insurance brings about a sense of ownership among the policyholders. It is common for policyholders to avail the services of expensive, luxury medical facilities unnecessarily and cover the expenses by filing claims with the insurance company.

In co-pay health insurance covers, policyholders realise that they will have to bear a portion of the medical expenditure, even if nominal. The clause encourages them to opt for services that are necessary and reasonable. 

• Reduction in misuse and fraudulent claims 

Insurance companies are often faced with inflated medical bills and fraudulent claims due to a nexus between healthcare facilities, insurance agents, and scammers disguised as policy holders. In such situations, insurance companies have no choice but to pay claims for medical services that were, in reality, not rendered to patients. It creates a dent in the insurance companies’ profitability and operations. 

With co-pay health insurance policies, patients know that they have to pay a certain sum of the expenses from their own pockets, which naturally keeps frauds at bay.  

Is co-pay mandatory?

Co-pay is an optional component in most health insurance policies. However, there are some cases where it is mandatory. Here are some scenarios where co-pay is necessarily applied:

• Treatment in a different city: Some health insurance policies apply the co-pay clause if an insurance policy taken in a Tier-II town is used to cover treatment expenses availed in a Tier-I town. This happens because the cost is higher in Tier-I cities and the same has not been accounted for in premiums for policies sold in Tier-II towns.
• Senior citizen policies: The co-pay clause is usually mandatory in the health insurance policies of senior citizens as the cost of treatment is higher in such cases. Without such co-pay, the premium would be very high making it unviable for customers.
• Treatment at non-network hospitals: Health insurance companies configure a panel of accredited hospitals for their policyholders. They process the entire claim amount if the insured gets treatment in these network hospitals. However, if the insured avails medical facilities of a non-network hospital, the insured generally has to pay a specific portion of the medical expenses themselves.

Disadvantages of co-pay

• For policyholders, co-pay is a good option as long as they do not have any claims. Otherwise, they need to pay anywhere between 10-30% of their medical expenses under the co-pay scheme, which can amount to a significant sum of money. It is often difficult to arrange for such large amounts, especially during a medical emergency. In such instances, the allure of low premiums might fade away compared to paying the co-pay percentage.

For insurance companies, adding this feature makes their policies less attractive. Health insurance policies without co-pay sell more than these policies due to the ease which they provide in the form of full claim payment.

What’s best for you?

Co-pay health insurance has its merits and demerits. Now that you have understood the meaning of co-pay in health insurance, you can ascertain what is best for you. The important thing to remember is that the health cover you select should encourage you to avail the appropriate medical facilities without being financially burdened when medical treatment is required.

If you are looking for a health insurance with no co-pay clause, look no further than ICICI Lombard’s Family Health Insurance. We also provide health insurance plans like Personal Accident Insurance, Health Booster, Arogya Sanjeevani Policy, Corona Kavach Policy which offers people with the much needed financial backup during any medical emergencies.