What is Co-Payment in Health Insurance

What is Co-Payment in Health Insurance?

Co-payment in a health insurance is the % of the claim amount which the policyholder agrees to pay in case of a claim.

Let us understand this with the help of an example:

Suppose Mr. Subhash Mehta has taken a health insurance plan with a cover amount of Rs. 3,00,000. The plan has a co-payment clause of 20%.

Now he gets admitted to the hospital for an illness and the hospital bill comes to Rs. 1,20,000. Of this claim amount, he would have to pay 20% and the balance would be paid by the insurance company.

Total claim amount = Rs. 1,20,000
Subhash will have to pay = Rs. 24,000 (20% of Rs. 1,20,000)
Insurance company will pay = Rs. 96,000 (80% of Rs. 1,20,000)

Which health insurance plans have this Co-payment Clause?

Almost all Senior Citizens health insurance plans have this clause
Some companies charge this in case you treated in a non-network hospital
Some normal health insurance plans have this for all ages

Why do health insurance plans have a co-payment clause?

For Senior citizens, insurance companies will be experiencing a higher rate of claim as elderly people are more susceptible to illnesses. The treatment costs for the same illness for an older person may often be higher than that of a younger person. So insurance companies do this to keep expenses under control.

In case of non-network hospitals, insurance companies often do this to discourage treatment in those hospitals. The insurers would have negotiated better rates also for their clients for various kinds of treatment in their network hospitals and want to encourage their clients to get treated there.

In normal policies, this clause is introduced to keep the premiums low. Since the insurance company is guaranteed 20% of the claim amount, it gives them a cost advantage against plans which don’t have this clause – some of this cost benefit is passed on to the customer in the form of lower premiums.

While the fairness of the co-payment clause is debatable, it is best that we are at least aware of these conditions so that we are not met with any surprises.

MIC Pro-Tip: Before buying a health insurance plan, refer to a document called the “Policy Wordings” of that plan. It will have all the details of that plan which may not be covered in the brochure or communicated by the seller.

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