What is Copay in Health Insurance in India
Copay in health insurance refers to the fixed amount you pay for a specific medical service or medication. It's a cost-sharing mechanism between you and your insurer.
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Over the past few years, the health care costs have been on an upward trajectory. This makes access to good treatment at affordable costs challenging, especially for the mid-income and lower-income groups. But thanks to unique health insurance plans, things are getting simpler. There’s no denying that owning a health insurance policy is pivotal. However, before jumping on the idea of health insurance, you should also understand the jargons involved to read the policy document in a better fashion. And one such fundamental terminology is copay in health insurance.
Copay Meaning & Definition
There are many complicated definitions out there! But, in simple language, copay, also referred to as coinsurance in health insurance means the percentage of the admissible claim amount that you need to bear during claim settlement. Hence, you need to check the copay clause to understand how much you need to contribute during claim settlement and avoid unpleasant surprises.
What is Copay in Health Insurance?
Consider this scenario - You buy a health insurance policy, with the most common belief that the insurance company will cover 100% of the bill amount - all fine till here. Unfortunately, you get hospitalised, and the bill comes to Rs. 10 lakhs. You raise a claim to inform your insurer about the bill. But then something unexpected happens. Your insurer tells you that they will pay only 95% of the bill amount, and you need to pay the remaining 5%. That comes to Rs. 50,000. Not a small amount, right? You get astonished and question the insurer. They tell you - it’s a copay clause as mentioned in the policy document. You wonder when did you sign up for this. Well, such cases are not rare, and to avoid such uncomfortable scenarios, it’s important to learn the concept of copay in health insurance.
Is Copay Compulsory?
While a few health insurance plans come with mandatory co-payment, a few plans allow you to opt for the voluntary deductible, which reduces the premium amount. To answer this question, copay depends on the plan that you are considering buying.
Copay Percentage
The copay percentage can vary between 5-20% and depends on the insurance company and the health insurance policy that you are opting for.
Voluntary Deductible vs. Copay - Not the Same!
Both voluntary deductible and copay are different terms. You pay all the deductibles when you file a claim. After this, the insurance company settles the remaining amount. If the policy comes with a copay, this amount will be divided between you and your insurer as per the agreed percentage. The policy document mentions the copay percentage.
Copay Example
For example: If the policy comes with a clause of 10% copay, you will pay 10% of the claim amount while your insurer (say ACKO) will pay the remaining 90%. Meaning if the claim amount is Rs. 50,000, you will pay Rs. 5,000, and ACKO will pay the remaining Rs. 45,000.
Impact of Copay on the Health Premium Amount
The percentage amount that you share with your insurer has a direct impact on the premium amount. How? When the copay is higher, you pay a higher amount, and the insurer will have to pay a lesser amount. Hence, insurers incentivise you by decreasing the premium amount.
High Copay Amount
When the copay is higher, it will lead to a lower premium amount but higher out-of-pocket expenses during a claim. The logic is simple - high copay means the risk is divided between you and the insurer.
Less Copay Amount
In case of a lesser copay amount, you will have to pay a higher premium amount each year but decrease out-of-pocket expenses during a claim.
Types of Copay Clauses in Health Insurance
Insurers apply copay clauses based on different scenarios as mentioned below.
Medical Conditions Related Clause
In case of pre-existing diseases, critical illnesses, etc., the insurer will always levy a copay clause since treatments for such health conditions are expensive. In this case, you need to bear a part of the bill.
Hospital-Related Clause
Insurers may levy a copay clause only on reimbursement claims. That is, when you get treated at a non-network hospital, that your insurer is not associated with. Under such cases, there are no copay clauses for cashless claims. Cashless claims are allowed only in a network hospital.
Age-Related Clause
The higher the age, the higher the probability of medical conditions and complications. Right? The treatment expenses will also increase with age. Hence, to mitigate the risk, insurers will apply the copay condition for senior citizens. This is logical as many health insurance plans have an age limit that makes it difficult for senior citizens to buy a policy.
Location-Related Clause
It’s no secret that the medical costs are higher in metro cities as compared to smaller towns. However, due to a higher possibility of medical expenses, insurers may put a copay clause for bigger cities to reduce the risk.
Advantages and Disadvantages of a Copay Clause
Advantages
High copay reduces periodic expenditure on the premium amount.
Disadvantages
With a copay clause, you may end up spending more on treatment costs. This may make the health insurance policy less efficient.
Why Do Insurers Include Copay Clause in the Policy?
Insurer's levy copay clause to help them save during claim settlement. Here are other reasons why insurers apply copay in health insurance plans.
Prevent Misuse of Policies
Sometimes, policyholders may raise claims even against the treatment of diseases that do not demand high treatment costs. The copay clause will prevent misuse of insurance policies. The reason is - if policyholders raise a claim, they will also have to bear a portion of the bill. This also ensures that the health insurance policy is judiciously used.
Rethink Expensive Treatments When Not Required
Usually, people with a health insurance policy will opt for luxurious facilities/expensive hospitals, even when not required. Because of this, the claim amount turns out to be higher, and insurers may have to bear unnecessary costs. To eliminate this, insurers levy a copay clause to discourage policyholders from going to hospitals that can lead to higher expenses. For example, if you have a copay clause of 10%, you will think twice before opting for treatment in premium hospitals.
Things You Should Consider Before Opting for Health Insurance with Copay Clause
Health Conditions
You may think you are fit and don’t have any pre-existing diseases, and hence, choosing a policy with a high copay may make perfect sense to you to save premium. But God forbid, if some unforeseen medical expenses arise, you may end up spending more on treatment costs. Hence, consider this factor before buying the policy with a high copay clause.
Coverage Requirements
As mentioned above, plans with high copay are comparatively cheaper. However, this also means you have to bear a specified portion during the claim settlement. Therefore, just because the plan is more affordable, you should not buy it without assessing your coverage requirement. The pandemic is a reminder of the unforeseen medical expenses that can bring a lot of emotional and financial stress in one’s life.
Savings
If you want to buy a copay health insurance plan, make sure you have adequate savings to pay for the hopitalisation bills, in case they arise.
Other Factors
Along with copay, other factors such as claim settlement process, claim settlement ratio, value-added services, inclusions, and exclusions, need to be considered while buying a health insurance plan in India.
Note: You may have to spend a comparatively higher each year on the premium but will stay stress-free even if the claim amount turns out to be huge. Hence, we recommend you buying a zero or low copay plan to save on treatment costs.
Frequently asked questions
Below are few of the questions about copay in health insurance:
How can I know the copay percentage in my policy?
When you buy a policy, you will get the policy document where all details are mentioned - inclusions, exclusions, copay clause, copay percentage, etc.
Should I buy a policy with or without copay?
As mentioned above, you need to consider your lifestyle, previous and current health condition, savings, probability of raising a claim, etc., before deciding. For example, if you follow a disciplinary and healthy lifestyle, you may consider buying a plan with a copay clause. This will also help you save on the premium amount. However, if you have financial resources, we recommend purchasing a plan without copay to avoid financial stress in the future.
Why policies with copay clause are cheaper?
Copay means you bear a certain portion of the admissible claim amount with your insurer. In case there is a copay clause, you are sharing this risk with your insurer. Hence, the premium is lower than compared to policies without a copay clause.
Why policies without copay are more popular even if they are expensive?
Healthcare costs are rising and even at a faster pace in metro cities. To avoid these unforeseen costs, which can make any robust financial plan go for a toss, many people prefer paying a higher premium to stay stress-free.
How does copay or copayment works?
Copay or copayment is usually an amount you need to pay at the time of claim settlement, while the insurer will pay the remaining amount. You need to pay this amount as the percentage of the sum insured amount in the policy document. The copayment clause depends on the plan that you are selecting. For example, plans for senior citizens come with a higher copayment clause. Also, some insurers may levy higher copayment in case treatment is done at non-network hospital.
