How does co-pay work in health insurance? Here’s everything you need to know

In the last few years, India has seen a tremendous growth in medical technology which has made it possible to treat diseases that were once incurable. However, with the advancement of hospitals, the cost of treatment has also increased significantly. Inflation in healthcare costs in India was as high as 14% in FY 2021 and rising healthcare costs have outpaced inflation. Therefore, it is very important to buy comprehensive health insurance to protect yourself and your family in the event of an accident.

A health insurance plan provides medical care to the insured in an emergency in exchange for a monthly or annual premium to the insured. They provide a wide range of services such as special procedures, OPD, health check-up, pre- and post-hospitalization, home care etc.

Today, treatment for heart disease can cost around Rs 10 lakh to Rs 30 lakh in big cities. Do you think you are paying this money out of your own pocket in times of crisis? For many middle-class families, it can use up their hard-earned money. A health insurance plan helps with these problems.

What is a co-payment?

Most of the time, when buying insurance, we tend to miss reading the fine print. It is important to understand each paragraph in the process in order to take the sentence wisely. One such clause in health insurance is co-payment. The portion of the medical expenses that the insured must pay out of pocket is called co-payment. The remaining portion is covered by the insurance. For example, Y has a health insurance policy of Rs 10 lakh with 20% co-payment. At the time of a health emergency, Y. Y writes a medical bill of Rs 5 lakh to the insurance company. In this case, Y will have to pay Rs 1 lakh as co-pay and the remaining Rs 4 lakh will be paid by the insurance company.

Co-pays are determined by the insurance company for a particular treatment, service or procedure. It must be paid each time you receive medical care. Most policies with a single co-pay have a low co-pay, while policies with no co-pay have a high co-pay.

Types of co-pay

Insurers impose co-payments in different ways depending on the situation. A few scenarios where co-pay applies are listed below:

Online clinic: Some health insurance plans have co-payments for hospitalizations outside of an in-network hospital. If you can’t find a nearby hospital for treatment, it’s best to talk to your insurance company before going to the hospital.

Hospitalization in another city: Co-payment is applicable if the hospitalization takes place in a Tier-I city for health insurance purchased in a tier-II city. This is because the cost of hospitalization in a metro city is higher than in a non-metro city.

Pre-existing conditions: Some health insurance plans have coverage for pre-existing conditions. So, choose your policy carefully if you want to get full coverage for pre-existing conditions after the waiting period, especially when buying a senior citizen policy.

Treatment in non-profit hospitals: Few insurers are forced to co-pay for treatment in expensive hospitals. These hospitals usually have high room rents and surgical fees. The cost of hospitalization usually depends on the rent of the room, the type of room and the route. Generally, the room rent in a tier-I hospital these days is Rs 6000-10,000 per day. Therefore, before buying a policy, it is better to check the co-pay section in room rent and surgery if you do not want to be able to pay out of your pocket during hospitalization.

Brief explanation

Co-payment works best for young people who need less money and are less likely to be hospitalized. However, older people tend to get sick more often, so they should choose a health insurance policy that has no co-payments. This is because the likelihood of medical claims for the elderly is high. If their policy has a co-payment, they will have to withdraw their savings. Finally, health insurance is designed to save people from paying emergency medical bills. Therefore, they should choose the premium if they feel that they can share the risk along with the insurance during the medical treatment. If they decide that the benefit of the policy is worth the risk, they can choose to pay a co-pay.

(By Sanjiv Bajaj, Jt. Chairman & MD, Bajaj Capital Ltd)