
About Copay in Health Insurance: Meaning and Definition
Suppose you go on a trip with your best friend to the dream place you planned to visit years ago. When you are back, you split the bill into 50-50, sharing the burden between both of you. This is what the Copay in health insurance feature does for you. Split the hospital bill between you (the insured) and the health insurance company. But not in 50-50. The split percentage depends upon the Copay clause set by your insurer, which may be 90-10, 80-20, or 70-30.
But is it beneficial to opt for a Copay in health insurance? How does it work? Is it mandatory, or can you opt out of the Copay? Keep reading to understand the concept, working, and benefits of paying Co-payment charges.
Also Read: Health Insurance Claim Settlement Ratio
What is Copay in Health Insurance?
Co-payment is the percentage of the incurred claim amount you agree to pay out of your pocket. In normal circumstances, the Copay varies from 10% to 30%. While it is voluntary to opt for a Copay in health insurance, some policies have made it mandatory, especially those issued for senior citizens and people with pre-existing diseases.
If you opt for Co-payment, your insurance premium will also be reduced by the same proportion as the percentage opted for.
What is the Need for a Copay Clause for Policyholders?
You may think that a Copay will increase your liabilities at the time of claim, while you can get a 100% reimbursement at the time of claim (if not opted for). However, every share that you will pay under Copay will count you certain benefits, mentioned as:
- Cost Sharing: When you opt for a Co-payment in health insurance, you may reduce the financial burden on both parties (insurer and insured) as it helps share the cost between them.
- Lowers Policy Premium: Health insurance with a Copay clause is available at a comparatively lower premium. The higher the Copay percentage you choose, the lower the premium will be. This benefit is provided to you as you share the insurance company’s liability at the time of claim.
- Prevents from Raising Minor Claims: Next time, when you suffer from a minor illness, such as common fever, cough, etc., you file a claim. The insurer will charge for it, requiring you to review the documentation and paperwork. Hence, this will discourage you from filing for minor claims.
- Restricts Unnecessary Expenses: Having a Copayment amount to pay out of pocket saves you from conducting unnecessary medical treatments and tests.
How Does Copay in Health Insurance Work?
Here’s how the Copay in health insurance policy works:
For Cashless Claim Settlement
If you undergo treatment at any network hospital to gain a cashless facility, the insurer will settle the bills directly with the hospital. When you opt for the Copay clause, you need to pay a fixed portion of the approved claim amount to the hospital while the insurer settles the remaining amount.
For Reimbursement Claim
When you undergo treatment at a non-network hospital, you must pay the amount out of pocket. Then, you can file a claim for reimbursement. The health insurer then pays the eligible claim amount after deducting the Co-payment and non-payable costs or deductibles.
Types of Copay Clauses in Health Insurance
The Co-payment clause is not mandatory for all insurance policies, and different insurers may apply it differently in various circumstances. Here are the various types of Co-payments applicable:
Type of Copayment | Applicability |
Age-Related | When buying a health plan for senior citizens, a Copay clause is mandatory, as the medical expenses are higher at that age |
Hospital-Related | Sometimes, a Copay is applicable only if the treatment is done at a non-network hospital |
Location-Related | For the hospitals located in metropolitan cities, as the medical costs in such cities are higher |
Illness-Related | Levied for specific illnesses and critical disease policies |
How is Copay in Health Insurance Calculated?
The exact Copay amount can vary depending on the health insurance policy terms, ranging between 10% to 30% of the total medical expenses.
Let’s understand working with an example:
- Scenario: Mr. Sudeep purchases a health insurance policy with Rs. 5 Lakhs sum insured, including a 20% Co-payment clause on all claims.
- Claim Amount: He underwent major surgery at a multi-speciality hospital, and the total cost of treatment was Rs. 3 Lakhs.
To calculate Mr. Sudeep’s out-of-pocket expenses:
Co-payment Amount:
Co-payment Amount = Total Treatment Cost X Co-payment Percentage
Co-payment Amount = Rs. 3,00,000 X 0.20 = Rs. 60,000
Insurance Coverage:
Insurance Payout = Total Treatment Cost – Co-payment Amount
Insurance Payout = Rs. 3,00,000 – Rs. 60,000 = Rs. 2,40,000
Summary:
Mr. Sudeep’s Out-of-Pocket Expenses: Rs. 60,000
Insurance Company Pays: Rs. 2,40,000
Note: The above representation is for reference only. The payable amount may vary depending on the terms applicable.
Does Opting for Health Policy with a Copay Clause Make Sense?
Here’s how purchasing a health insurance policy with a Co-payment clause can impact your decision:
Case 1: When Opted for Co-payment Clause | Case 2: When Not Opted for Co-payment Clause |
Higher the Copay , lower the premium | The overall cost of the policy increases but provides better coverage in return |
You may have to bear a portion of the claim amount out-of-pocket in case of a medical emergency | The insurer bears all the claim amounts based on the sum insured selected, relieving you of any out-of-pocket expenses related to Co-payment |
For good overall health, where you do not require extensive treatment, it may give you relief on your premium and out-of-pocket expenses | For those with ongoing medical conditions or who foresee needing regular treatments, it removes the burden of contributing to the cost of claims |
Things You Should Consider While Opting for Health Insurance with Copay
Here are the key factors you should consider while giving a thought to opt for Copay in health insurance at the time of purchase:
- Health Condition: When you think you are in good health and do not have any pre-existing conditions, a policy with a Copay clause makes sense because it lowers the premium. But, in the most unfortunate cases, you must bear a share of the treatment cost if a medical emergency arises. Hence, select wisely. On the other hand, choosing a health plan without the Copay clause will be beneficial if you are susceptible to illnesses.
- Financial Conditions: If you have adequate savings to help you pay the hospital bills, the Co-payment clause is the right option.
- Plan Coverage: Plans with lower coverage (such as no pre-existing coverage, maternity benefits, other medical treatments, etc.) come with an affordable premium option. If any such medical emergency arises, you must bear the complete amount. Hence, one-time affordability can lead to hefty expenses later. Completing coverage with a suitable Co-payment clause may provide a discount on premiums and financial relaxation in a medical emergency.
- Go with the Lower Copay: Opting for a lower Copay may mean paying higher premiums, but it will keep you stress-free when the claim amounts are huge.
How Does Copay Impact Health Premium?
The Copay percentage in medical insurance is inversely proportional to your health insurance premium during the policy year. How?
Well, opting for a Copay, you agree to pay a fixed percentage of the medical expenses out of your pocket. Ultimately, this reduces the burden and financial risk on the health insurance company. As a result, the company incentivizes you by lowering the premium.
Remember, the impact of Copay on medical bills varies based on the policy terms and conditions.
Over to You!
If you want more clarity on the Copay amount you will have to pay at the time of raising a claim, connect with our professional RenewBuy Partner. They will help you with any Copay or insurance-related queries as efficiently as possible.
FAQs of Copay in Health Insurance
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Is the Copay in health insurance refundable?
Answer: The Copay is the share amount you pay at the time of a claim, and it is entirely non-refundable.
What are the disadvantages of Co-payment in health insurance?
Answer: Here are the disadvantages of Copay in medical insurance:
- Increases out-of-pocket costs at the time of claim
- Limited coverage to certain services
- May discouraged from utilising healthcare services cause of the fear of financial loss
- Additional administrative burden on both insurer and insured
Is Copay compulsory?
Answer: While opting for a Co-payment clause in health insurance is not mandatory, it entirely depends on your purchase plan. Some insurance policies come with a mandatory Co-payment clause, and a few allow you to opt for it voluntarily.
How can I know the percentage of Copay in my health policy?
Answer: Every detail about the Copay clause, percentage, deductibles, etc., is mentioned in the policy documents. Carefully go through them before making a purchase.
Should I take a health policy with a Copay?
Answer: The answer may depend on your current financial and health status. You must ensure you have enough finances to pay the share at the time of claim. If you are healthy, opting for a Copay clause may help you save on premiums and not burden you at the time of claim. When you think there can be a critical medical condition, a zero Copay clause can save you from financial liabilities at the time of claim but lead you to pay higher premiums.
- Is Copay levied on cashless hospitalisation?
Answer: Yes, it also applies to cashless hospitalisation, based on the policy terms.
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