How does co-pay work in health insurance? Here’s all you need to know

In the last few years, India has witnessed considerable growth in medical technology which made it possible to cure diseases that weren’t curable. However, with the progress in healthcare facilities, the cost of healthcare has been sky-rocketing too. India’s medical inflation was as high as 14% in FY 2021 and healthcare inflation has surpassed overall inflation. Therefore, there is all the more need to buy a comprehensive health insurance plan to safeguard yourself and your family in case of a health emergency.

A health insurance plan provides coverage against medical treatment of the policyholder during an exigency in exchange of a premium that is paid monthly or annually to the insurer. It provides numerous coverage such as specialized procedures, OPD, health check-ups, pre and post hospitalization, domiciliary treatment etc.

Nowadays, treatment of a heart disease can cost around Rs 10 lakh to Rs 30 lakh in metropolitan cities. Imagine paying this amount from your own pocket at the time of a crisis? For many middle class families, it can use up all their hard-earned savings. A health insurance plan comes to the rescue in these difficult circumstances.

What is co-payment?

Most of the times, when buying an insurance policy, we tend to miss out reading the terms and conditions properly. It is imperative to understand each and every clause in the policy in order to take an informed decision. One such clause in health insurance is co-payment. The portion of the medical expense that a policyholder needs to pay from his own pocket is called a co-payment. The remaining portion is borne by the insurer. For instance, Mr. Y has a health insurance cover of Rs 10 lakh with a 20% co-payment. During a health emergency, Mr. Y files a medical claim of Rs 5 lakh with the insurance company. In this case, Mr. Y will have to pay Rs 1 lakh as co-pay and the remaining Rs 4 lakh will be covered by the insurance company.

The co-payment amount is pre decided by the insurance company on a particular medical treatment, service or procedure. It has to be paid every time you avail the health care service. Most policies with a co-payment clause have a lower premium amount, whereas policies that don’t have a co-pay, have a higher premium amount.

Types of co-pay

Insurers impose co-pay in various forms depending on situations. A few scenarios in which co-pay is applicable are listed below:

Non-network hospital:

Some health insurance plans have co-payment in case hospitalization happens outside a network hospital. If you are unable to find a network hospital nearby for treatment, it is always advisable to contact your insurer before getting hospitalized.

Hospitalization in a different city:

Co-pay is applicable if hospitalization happens in tier-I city on a health insurance policy purchased in a tier-II city. This is because the cost of hospitalization in a metropolitan city is higher than a non-metro city.

Pre-existing disease:

Some health insurance plans have co-payment on coverage for pre-existing disease. So, choose your plan carefully if you specifically want to avail entire coverage for pre-existing disease after the waiting period is over especially when buying a plan for the elderly.

Treatment in swanky hospitals:

A few insurers impose co-payment for treatment in expensive hospitals. These hospitals usually have a higher room rent and surgery charges. Claim amount for hospitalization usually depends on room rent, type of room and procedures. Typically, room rent in a tier-I city hospital these days is Rs 6000-10,000 per day. Therefore, before buying a policy, it is suggested to check the share of co-pay in room rent and surgery if you don’t want to end up paying from your own pocket at the time of hospitalization. Co-payment works well for youngsters who want a lower premium and have less chances of getting hospitalized. However, senior citizens are more prone to diseases and, therefore, they should opt a health insurance policy that doesn’t have a co-pay. This is because the chances of medical claims for the elderly are higher. If their policy has a co-payment, they will have to shell out money from their savings. Lastly, health insurance policies are designed for people to save themselves from paying heft hospital bills in an emergency situation. Therefore, they should choose co-pay if they feel that they can share the risk along with insurer during a medical exigency. If they are convinced that the benefits of the policy balance the risk element, they can opt for co-pay.