What are Co-payments & Deductibles in Health Insurance Policy?

Owing to the development in healthcare technology, receiving superior treatment isn’t uncommon any longer. But this has also resulted in rising costs of healthcare in India. There’s a constant increase in India’s healthcare inflation, almost twice the retail inflation. A knee replacement may cost you around Rs 4 lakh. But there has also been a rise in the number of people availing of that treatment. This has led to a rise in demand for health insurance.

But your health insurance plan might not cover all the medical expenses. Features such as copayment and deductible in your insurance plan imply that some payments are to be made by the insured.

What’s Co-Payment?

Co-payment is a clause in your health insurance policy where the overall admissible claim amount is shared by both the insurer and the insured. A claim percentage is paid by the insured and the remaining is settled by the insurer. The higher the co-payment amount, the lower the policy premium and vice versa.

1. How it works

Suppose you have a health insurance policy of  Rs 10 lakh. Your share of co-payment is 20 per cent. Say you fracture your leg and the treatment costs only about Rs 1.5 lakh. Even when the claim amount is less than your total coverage, you would still have to pay 20 per cent of it, Rs 30,000. The insurer bears the remaining Rs 1,20,000.

2. Importance of co-payment

o Reduces fraudulent claims, as 10-20 per cent of the claim is borne by the insured himself

o Reduces frequent, small, and needless claims

o Helps insured take responsibility for their own health and health insurance claim.

3. Situations when co-payment feature is common:

o Managing frequent claims in old age

o Hospital is outside the insurance network and most claims are on a reimbursement basis

o Pre-existing health issues increase the claim instances

What’s Deductible?

The deductible is the amount you ought to pay every year on covered healthcare expenses before the insurer pays their share. The deductible amount depends on the insurer, coverage and your premium. If your deductible is high, your premium is low and vice versa. In the latter case, the insurance plan initiates quickly.

1. How it works

Suppose your plan of Rs 2 lakh incorporates a deductible amount of Rs 50,000. In March, you get admitted for a heart-related issue, which costs Rs 40,000. You will have to pay the entire amount. In July, you go for a thorough health check-up, costing Rs 30,000. Here, you pay the remaining Rs 10,000 of your deductible amount. The insurer pays the remaining Rs 20,000 of the bill. In September, you undergo a small surgery and the bill comes to Rs 50,000. The entire amount will be paid by the insurer this time.

2. Why do health policies have deductibles?

o To avoid fraud claims

o To guarantee the insurer’s financial stability by lessening the claim’s severity

Know Before You Invest

Adequate health coverage sees you through medical emergencies. Additionally, you receive better services at affordable prices. But knowledge about different clauses—especially copays and deductibles—of your health insurance is crucial. These clauses don’t imply that once you opt for health insurance, all your medical expenses are taken care of. Neither do they indicate that once you invest in an insurance plan, it will kick in right away. Knowledge of these clauses will help the insured take an informed decision.

This author is Co-Founder, Turtlemint

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.