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Co-Payment and Deductibles in Health Insurance - Clause, Types, Comparative Study

25 June 2022, 8:18 PM

Robin bought a health insurance plan from a top-rated health insurance company in India. He was in a hurry when buying the plan, so he did not read the terms and conditions very clearly. A few months later, he required medical attention due to a broken leg. The hospital bill came to INR 4500, but his insurance provider told him he could not make a claim because his deductible was INR 5000. He was confused, but after a few days when he again had to be admitted in the hospital for an emergency appendectomy, he was told he would only get a percentage of the health insurance claim, as the deductible needed to be adjusted and he had to pay the copay amount as well. Had Robin read the terms and conditions more closely, he could have avoided all such confusion.

Deductible and copay are two very important components of health insurance. You need to understand what they are and how they work before you buy a health plan to avoid being in a situation similar to that of Robin. Take a look at this article to know more about the two.

What is the Deductible Clause in Health Insurance? 

Deductible in a health insurance plan is the initial amount that needs to be borne by the policyholder. So, when you buy health insurance, you agree to make the initial payment towards your overall health costs before the health insurance coverage kicks in. The initial amount can be paid by a base plan (without any deductible) and the additional amount (after the deductible) can be paid by this health insurance plan.
So, a deductible is basically a fixed amount and is typically paid only on the first claim made (later too, if not exhausted in one go) on the yearly health cover. 
The concept of deductible is applicable in top up and super top up health insurance plans.
Let’s see the  explanation with an example:
If you buy a top up health insurance plan that has a coverage of INR 12 lakhs and the deductible is INR 5 lakhs. You also have a base health insurance plan of INR 5 lakhs without any deductible.
Then you have a single claim of INR 8 lakhs.
The initial INR 5 lakhs need to be claimed from the base plan and the subsequent INR 3 lakhs can be claimed from the Top Up health insurance plan (after the deductible of INR 5 lakhs).
The health insurance provider will pay all the subsequent amounts, but the initial deductible needs to be paid by you.

What is the Co-pay Clause in Health Insurance? 

Next, we come to the copay clause in health insurance. Copay, which is short for copayment, is a type of payment that the policyholder needs to make from his own pocket every time there is a claim. The copay percentage is pre-decided and fixed at the time of purchasing the health insurance policy. The co-pay is fixed at a rate of about 5% to 30% of the total claim amount. The co-pay is not related to the total volume of health insurance cover you have. 

Let’s see the explanation with an example:
If you have a 10% copay clause, and your hospital bill amount is INR 1 lakh, you have to pay INR 10,000 and the insurance provider will pay INR 90,000. This will come into force each time you make a claim.

Types of Co-pay in Health Insurance

  1. Senior Citizen Co-pay
    Copayment is levied on senior citizen health insurance plans as the claims are highest in that category. This is because the treatment cost for the senior citizen is usually higher.
  2. Zonal Co-pay
    Copayment is also applicable by some insurers for zonal hospitalisation. 
    This means, if you have applied for the health insurance plan from say Bhubaneswar (which is in Zone B) and you choose to get your treatment done from Mumbai (which is in Zone A), then you will have to bear 10% of the entire claim as a co-payment. This is because a hospitalisation bill would typically be more in a Zone A than in Zone B. 
  3. Hospital Related Co-pay
    Some policies have co-payment for reimbursement claims in non-network hospitals. This is done to discourage treatment in non-network hospitals where there is no control on the cost.
  4. Pre-existing Ailment Co-pay
    Some plans have a co-payment for any treatment for pre-existing diseases.

Why Co-pay in Health Insurance?

The component of Co-pay in health insurance had been introduced to discourage people from making small and regular claims. Health insurance should be used judiciously and only when the treatment is expensive. The co-pay component allows people to keep their claim practices in check and also allows them to aim for bonuses such as the no claim bonus, which turns out to be very profitable in the long run. So, an honest usage of the health insurance plan is promoted by way of introducing a co-pay facility.

The copay can be flexible and the insurance provider will give you some options when choosing the perfect copay percentage. However, the co-pay you choose will have a bearing on your health insurance premium. If you have a higher copay, your premium will be lower and vice-versa. Co-pay also helps to mitigate the risks for the insurers by fraudulent claims.

Co-pay and Deductible - Comparative Study

Now let us compare the copay and deductible side-by-side to understand their similarities and differences.

NatureThe copay amount is always paid by the policyholder.The deductible amount is also always paid by the policyholder.
However, the initial deductible amount can be claimed from another policy.
Frequency of paymentThe co-pay is paid every time there is a health insurance claim. This is irrespective of what you paid as a copay amount on your previous claim.The deductible is only paid once (or till it is exhausted). You need not pay the deductible every time there is a health insurance claim.
Amount of paymentThe co-pay is a percentage of the claim and hence it differs from claim to claim. If the claim amount is higher, the copay amount is also higher and vice-versa.The deductible is fixed and does not depend on the specific claim amount you have. Once the deductible is cleared, you do not have to worry about it any longer.
Bearing on premium The co-pay and the health insurance premium are related. A higher copay results in a lower premium and a lower copay results in a higher premium.Higher the deductible, lower is the premium. Thus, top up and super top-up health insurance plans are cheaper than base plans.

The Bottom Line

As you can clearly see from the points mentioned above, there are some very basic and clear differences between the copay clause and the deductible clause in health insurance. You need to read the policy wordings very carefully and then agree up; on each clause. If you are not satisfied by what is being offered to you, speak to your insurance provider and renegotiate the clauses related to copay and deductible. Ultimately, you should have a comprehensive cover that is financially suitable for you as well.

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