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Explained: What is Copayment in health insurance?

Key takeaways 

  • Copayment in health insurance is a situation where the insurer shares a percentage of the medical expense cost with you. 
  • The intent of copayment in insurance is to discourage people from making unnecessary claims and going through treatments in expensive hospitals. 
  • Higher copays generally come with a low premium.  

Rakesh, 52 years old school teacher took a health insurance plan of Rs. 5 lakh with a 20% co-payment clause. While getting ready for work, he suffered from cardiac arrest and was rushed to the hospital. His hospitalization cost came up to be Rs. 3 lakhs when he was discharged from the hospital. When raising the claim, he found out that he has to pay Rs. 60,000 from his own pocket, while the remaining Rs. 2.4 lakh would be paid by the insurance firm.  

This scenario is a classic case of a co-pay clause in the health insurance domain.  

What does copayment in health insurance mean?

In some health insurance policies, your insurance company will pay the full cost of your medical bills apart from the medically excluded items, a list for which you can find in your health insurance policy. If you have copayment in the health insurance clause, that is not the case. If there is a co-pay clause, you will have to pay a certain portion of the bills from your own pocket.   

Remember, this is only a part of the total insurance claimable bill, like 10% or 20%. Sometimes that cost is a percentage, and at other times it is a fixed amount. Your insurer will still pay most of the cost, but there is a small portion that you must pay. Let us assume, for example, your hospitalization costs Rs. 50,000, and your health insurance policy has a copay clause of Rs. 5,000. In that case, you will have to pay Rs. 5,000 from your pocket, the remaining Rs.45,000 will be paid by the insurer.   

If a policy has copay applicable, that will mean you would still have to pay out of your pocket for other related costs like medication, outpatient department expenses, and the like that are not covered by your health insurance policy.   

Types of copayments in health insurance 

  1. Age-related – Insurers generally tend to add co-pay for senior citizens, acting on the general belief that health would get deteriorated over age.   
  2. Based on type of hospitals – Some insurance companies can apply a co-pay facility when the policyholder chooses a hospital outside their network hospital.   
  3. Zone related – Insurers might sometime add the copay clause for people who live in a small city but are seeking treatment in a metro city.  
  4. Illness related – Insurers sometimes add a co-pay clause when you have a pre-existing disease or suffer from critical illness.   

Why does copayment in insurance exist? 

If you are already paying a huge amount as a premium for your insurance, you must be wondering why copays exist. There are three major reasons:  

  • Discourage unnecessary claims  
  • Discourage treatment at expensive hospitals  
  • Encourage honest use of policy  

In the end, it all comes down to finances. For insurance companies, even saving 10% per individual will add up to a lot over the year. It helps maintain their profitability while ensuring that the right people get paid for the right expenses.   

 A higher copayment in health insurance means your health insurance policy premium amount will be lower. This is great if you can afford it. For most people though, a copayment in the insurance clause may seem unfair. However, you must remember that it is added to protect you.   

The copay policy exists to stop people from claiming money for treatment that wasn’t necessary or could be done cheaper. It exists to deter people from misusing their health insurance policies so that people who really need the money will get it.   

That not only saves the insurance company money but also time and effort in checking the paperwork. That’s because, with a copay in the insurance clause, it is likely that only people who have a genuine claim will file the paperwork. Copayment in health insurance also exists to ensure people get the treatment they need and can afford. Without it, individuals will be likely to visit expensive private hospitals for treatment. Knowing that they would have to pay a portion of that cost will discourage this. 

We hope that you understood the context of co-pay in health insurance – at least enough to talk to your insurance provider. This article was our contribution to explaining to you what the popular term of the group health insurance space stands for. Hope it helped.