July 22, 2021

Innovation and co-operation are at the center of the human evolution story. New ideas are designed to cut out the profitable paths, and the insurance industry is no stranger to it. Co-Payment in Health Insurance plans is yet another step in the same direction to increase profits, reduce costs and present a win-win situation for both the insurers and the insured. A health policy with a co-pay clause, under the right circumstances, can be of great benefit to all parties involved.

Co-payment is simply an agreement between an insured and the insurer wherein the insured undertakes to pay a specified  percentage of hospitalization expenses out of his pocket while the remaining amount will be given by the insurer as per the terms of the health plan. This percentage could vary between 10-30% of the sum assured.

Working of the Co-payment Clause

Consider a situation where you get hospitalized, and the total bill comes up to Rs. 1,00,000/-. Now, with a 10% co-pay clause, you will have to pay Rs. 10,000/- on your own while the balance Rs. 90,000/- will be paid by the insurer.

Advantages of Co-payment:

  • A higher co-payment percentage means lower premium for the insured. Since the insurers’ risk goes down, they don’t mind, offering discounts on the health insurance plans to seek more customers.
  • The insurance provider’s profitability increases as a 10% co-payment would straightaway mean saving of 10% for them.
  • This clause also helps by discouraging customers from going for luxurious hospital care or boutique hospitals for every little ailment. Since the insured would know that he has to bear a part of the cost, he would only opt for necessary treatments and that too at reasonable hospitals as per the policy conditions.
  • Unnecessary claims go down, again because the insured would not like to file a claim for every little medical treatment they undertake. For example, treatment for regular colds or gastric problems may not earn enough of claims compare to the effort one has to put in to submit claims and do the paperwork and the fact that he has to pay the specified percentage of expenses as a co-payment.

Disadvantages of Co-payment

  • If you are old, then the chances of you getting hospitalized and availing health policy benefits are higher. In such a case, if you involve a co-payment clause to reduce premium, you might end up paying higher hospital bills from your own pocket rather than saving any money.
  • Also, if the co-payment amount is way too high, the insured might decide to totally avoid adequate medical care. This would negate the whole purpose of  buying health insurance plans.
  • Co-payment in Health Insurance works well if you don’t have to file for claims so that you can enjoy low premiums. But if you do have to file for claims due to your ill health, there are chances that your out-of-pocket expenses might be substantial enough to counter any advantage you had with small premiums.

Co-payment works best if you are young, hale and hearty and the probability of you getting hospitalized is extremely low. This would mean lower premiums for you. However, if you are a senior citizen or suffer from some critical illnesses or other diseases, co-payment might prove very costly for you.

A health insurance policy is designed to help you save on massive health care expenses in today’s elevating medical inflation. With co-payment, you agree to share the risks of the insurance provider in return for low premiums. Take the decision only if you are sure that the benefits outweigh the risks associated with this clause.

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