The basic objective behind health insurance is that you don’t need to pay high medical bills if there is an illness as the policy will pay them. However, if you have savings set aside for contingencies and want health insurance to supplement the savings, you can choose the co-pay option provided by your insurer. This will help you get health cover for less money. Here are the details you need.
What is co-pay in health insurance?
When yoau share the cost of your medical bills with your insurance provider, it is called co-payment. The percentage that needs to be paid by you will be decided by the provider and is a co-payment deduction. This varies between insurance companies. Most companies ask 10%-30% to be paid by you under co-payment.
How does co-pay work?
Let’s say Mr. R has a health insurance plan for Rs. 5 lakhs with a 30 per cent co-payment clause. He avails medical treatment. His total hospitalization costs come to nearly Rs. 2.5 lakhs. In this case, R will need to pay Rs. 75,000 (30 percent of his bill) out of his own pocket, while the rest Rs 1.75 lakh will be paid by the insurance provider.
Why do insurance companies provide co-pay?
Co-pay helps insurance providers save money and reduces risks of higher payments for them because a part of the payment is made by the policyholder. Another advantage for insurance providers is that there will be no unnecessary or false claims. Generally, people who have a health plan opt for luxury facilities and expensive hospitals even when they don’t really need them. When the customer has to pay some money for the costs, they will only opt for services that are necessary. So, insurers are providing the co-pay clause to lower the misuse of health insurance and also to encourage customers to make only necessary claims.
How does co-pay impact the premium?
The higher the percentage of the co-pay element, the lesser will be your health insurance premium. It is because the risk gets distributed between both the parties – insured and insurer.
When will co-pay be applicable?
Most of the insurance companies apply co-pay in different ways. Here are types of co-pay or the common ways where co-pay might be needed.
Non-network hospital
Most health insurance providers insist on the co-pay feature in case of medical treatment outside network hospitals. This is because the costs might be higher for the insurer.
Hospitalisation in different city
Most health plan companies insist on the co-pay clause if the customer is hospitalised in metro cities as the hospitalisation costs in metro cities will be much higher than that in smaller cities. So, if a policy was purchased in a tier II city and a claim is made in tier I city, then a co-pay clause might be applicable. However, claims from policies issued in metros may not have any co-pay element.
Pre-existing disease
Generally, insurance companies cover pre-existing diseases after the waiting period. However, many insurers offer to cover these costs only after applying the co-payment feature as these might be recurring expenses.
Treatment in expensive hospital
Even if a customer is taking medical treatment at a network hospital, insurance companies categorise some hospitals as highly expensive. This is because of the expensive treatment costs and higher room rents. So, treatments in all such hospitals will have higher co-pay.
Age-related co-pay
Since senior citizens might incur higher medical costs, most of the insurance companies apply the co-pay clause to senior citizens. There is a chance of more frequent claims by elderly policyholders. To mitigate this risk, insurance providers apply the co-pay clause after a certain age limit.
Should you choose the co-pay feature?
If you are young, physically fit with no history of serious illnesses in the family, you can save quite a bit of money by opting for the co-pay element. Senior citizens are advised to choose the co-pay feature in their health insurance policy because most insurance companies might not provide them with a health plan as their age goes up.
However, note that co-pay is not only one criterion for choosing a health plan. The ease of the claim settlement, settlement ratio, features of the plan, exclusions etc. will need to be considered before you buy a plan of your need.
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