Understanding the Impact of Co-Payments: A Comparative Analysis
3 min read
・Jul 04, 2024
Rajesh, a 52-year-old accountant, has a cashless health insurance policy. One night, he experienced chest pain and was rushed to the hospital. The doctor performed an emergency bypass surgery, and he was hospitalised for a week.
When his medical bill of Rs. 4 lakh was handed over, he believed that his insurance would cover 100% of the bill. However, he was shocked that there was a 20% co-payment clause, and he was responsible for paying Rs. 80,000 himself. It was a hefty sum, which he had not budgeted for. His insurance will cover the remaining Rs. 3,20,000.
In this blog, let’s understand the impact of co-payment on your health insurance.
What is Co-Payment?
Co-payment in health insurance refers to the percentage of the claim amount the insured agrees to pay out-of-pocket and the remaining portion of the medical bill that can be claimed. Many insurers have a mandatory co-payment clause; sometimes, you can choose the co-payment percentage.
A co-payment impacts your insurance costs because you can lower your premium by opting for a higher co-payment. However, when the need arises to claim insurance, you must be ready to pay your portion of the medical cost, as here, the insurance doesn’t cover 100% of the bill.
Co-payment clauses are more common in senior citizen health insurance to lower the premium. Also, when you live in a metro city, the insurers expect you to co-pay for medical bills as medical costs are higher compared to smaller towns.
A deductible is another clause that requires the policyholder to cover medical expenses. However, the insurance coverage will kick in only after the deductible. Deductible is not the same as co-payment.
For example, if the deductible is Rs. 1 lakh on a 5 lakh policy, the insured can claim only for medical bills greater than Rs. 1 lakh. However, with a 20% co-payment, if the medical bill is Rs. 50,000, you can claim 80% and pay Rs. 10,000 out of your pocket.
Co-Payment Vs. No Co-Payment: A Comparison
You can opt for a higher premium and have no co-payment. In that case, the insurance provider will cover 100% of the medical bill for cashless and reimbursement plans, depending on the policy terms. The following table highlights the key impacts of co-payment and no co-payment:
| Feature | Co-payment | No Co-payment |
| Cost Sharing | Insured shares health expenses with the insurer | The insurer covers all medical expenses as per the policy |
| Premium | Lower | Higher |
| Out-of-pocket expenses | Higher as you must pay a portion of the medical bill, regardless of the amount | None when the insurance policy provides necessary coverage (Deductible will still be applicable) |
| Financial burden | As monthly premiums are lower, there is a lesser burden on the monthly budget. However, the insured must have emergency medical funds because they are responsible for paying medical expenses first. | Higher monthly premiums put pressure on a monthly budget, but there will be no worries about medical expenses when you need insurance coverage. |
| Peace of mind | Health insurance provides protection but must always be prepared to meet out-of-pocket expenses. | Enjoy peace of mind as you don’t have to worry about increasing health insurance costs. |
How Do You Choose a Plan With Or Without Co-Payment?
- Assess your budget: Insurers forecast a 15% to 20% increase in health insurance premiums due to higher reinsurance costs. To cope with a tight budget, you can choose a higher co-payment percentage if you prioritise affordability. When you are young and have a lower risk for any significant health disease, a co-payment makes more sense to reduce overall expenses. It will also motivate you to follow a healthy lifestyle.
- Plan for Elderly Citizens: Co-payment is crucial for senior citizen plans with higher premiums. In cases requiring extensive medical care, co-payment can result in out-of-pocket expenses. Please note that the accumulated corpus will cover these expenses only if you have invested in emergency medical funds. When you have preventive care with regular health checkups, co-payment will help you control insurance premiums.
- No stress for healthcare expenses: Without co-payment, you are free from the anxiety and stress of higher medical bills because your insurance policy with extensive coverage will kick in during medical emergencies. Knowing this, you can seek treatment immediately for any minor or major illness and make insurance claims. However, the insurer may increase your premium further at renewal based on your claiming history.
The right co-payment is a trade-off between your monthly budget and out-of-pocket expenses. The co-payment clause may apply to medical bills, hospitalisation expenses, non-network hospitals, reimbursement claims, metro city hospitals, etc. If you choose co-payment, invest in emergency medical funds that offer you peace of mind.
Key Takeaways
Choosing an affordable insurance plan with a co-payment is better than not having insurance. If you are healthy and confident that you don’t need frequent medical treatment, you can choose a higher co-payment percentage to reduce your health insurance premium. So, understand your coverage requirements before you decide on co-payment. Ensure that your premium savings make more sense in the long run if you choose a co-payment option.
So explore your options thoroughly on platforms such as PhonePe and make the right choice for you and your family!
Frequently Asked Questions
How do I know the percentage of co-payment in a plan while buying a health insurance policy ?
A policy with a lesser percentage of co-payment will cost less, why shouldn’t I buy that one ?
In the case of co-payment, is it like I have to pay the whole amount for treatment initially and the insurer will reimburse its share of the amount later on ?
Health insurance policies having zero copayment are expensive yet more popular, why
Does PhonePe help customers identify health insurance plans with lesser co-payment ?
