What is Copay in Health Insurance in India

Over the past few years, the health care costs have been on an upward trajectory. This makes access to good treatment at affordable costs challenging, especially for the mid-income and lower-income groups. But thanks to unique health insurance plans, things are getting simpler. There’s no denying that owning a health insurance policy is pivotal. Before committing to health insurance, it’s crucial to familiarize yourself with the jargon to understand the policy documents better. One key term to grasp is "copay" in health insurance.

There are many complicated definitions out there! But, in simple language, copay, also referred to as coinsurance in health insurance, is the percentage of the admissible claim amount that you need to bear during claim settlement. Hence, you need to check the copay clause to understand how much you need to contribute during claim settlement and avoid unpleasant surprises.

Consider this scenario: You buy a health insurance policy, with the most common belief that the insurance company will cover 100% of the bill amount. It's all fine till now. Unfortunately, you get hospitalised, and the bill comes to Rs. 10 lakhs. You raise a claim to inform your insurer about the bill. But then something unexpected happens. Your insurer tells you that they will pay only 95% of the bill amount, and you need to pay the remaining 5%. That comes to Rs. 50,000. Not a small amount, right? You get astonished and question the insurer. They tell you - it’s a copay clause, as mentioned in the policy document. You wonder when you sign up for this. Well, such cases are not rare, and to avoid such uncomfortable scenarios, it’s important to learn the concept of copay in health insurance.

Co-pay is a term you'll often come across when dealing with health insurance policies.

It is a cost-sharing arrangement between insurance providers and policyholders to manage healthcare expenses. Here's a simple and conversational explanation to make it easier to understand. The purpose of co-pay is to encourage policyholders to be more involved in their healthcare decisions and to discourage unnecessary or frivolous medical expenses. It also helps to keep insurance premiums lower since the policyholder shares a portion of the cost.

It's important to note that co-payment in medical billing applies to specific services or treatments mentioned in your health insurance policy. It might vary for different types of medical services. For example, you might have a different co-pay percentage for hospitalisation, diagnostic tests, or specialist consultations.

Co-pay is generally indicated in terms of a percentage, but it can also be a fixed amount depending on your policy. It's crucial to thoroughly read your policy document to understand the co-pay terms and conditions, as they can vary from one insurance provider to another.

Co-pay differs from deductibles; deductibles are the initial amount paid before insurance coverage begins, while co-pay is a fixed amount or percentage contributed to each medical expense. Note that co-pay doesn’t apply to all policies—some offer a "no co-pay" feature, covering expenses fully based on the insurer’s terms and the policy selected.

So, imagine you have a health insurance policy with a co-pay in medical billing of 20%. This means that when you receive medical treatment or have a doctor's visit, you'll have to pay 20% of the expenses out of your own pocket, while the insurance company will cover the remaining 80%. Let's say your doctor's visit costs Rs. 1,000. With a 20% co-pay, you'll have to pay Rs. 200, and the insurance company will take care of the remaining Rs. 800.

Benefits and features differ by policy and provider, so always review terms, compare options, and choose a policy that fits your needs and budget.

While a few health insurance plans come with mandatory co-payment, a few plans allow you to opt for the voluntary deductible, which reduces the premium amount. To answer this question, copay depends on the plan that you are considering buying. 

Copay Percentage

The copay percentage can vary between 5-20% and depends on the insurance company and the health insurance policy that you are opting for.

Both voluntary deductible and copay are different terms. You pay all the deductibles when you file a claim. After this, the insurance company settles the remaining amount. If the policy comes with a copay, this amount will be divided between you and your insurer as per the agreed percentage. The policy document mentions the copay percentage.

The percentage amount that you share with your insurer has a direct impact on the premium amount. How? When the copay is higher, you pay a higher amount, and the insurer will have to pay a lesser amount. Hence, insurers incentivise you by decreasing the premium amount. 

A higher copay results in a lower premium but increases your out-of-pocket expenses during a claim. The reasoning is straightforward: a higher copay means the financial risk is shared between you and the insurer.

In case of a lesser copay amount, you will have to pay a higher premium amount each year but decrease out-of-pocket expenses during a claim. 

Advantages

A high copay lowers the recurring premium costs.

Disadvantages

With a copay clause, you may end up spending more on treatment costs. This may make the health insurance policy less efficient.

Sometimes, policyholders may raise claims even against the treatment of diseases that do not demand high treatment costs. The copay clause will prevent misuse of insurance policies. The reason is - if policyholders raise a claim, they will also have to bear a portion of the bill. This also ensures that the health insurance policy is judiciously used. 

Usually, people with a health insurance policy will opt for luxurious facilities/expensive hospitals, even when not required. Because of this, the claim amount turns out to be higher, and insurers may have to bear unnecessary costs. To eliminate this, insurers levy a copay clause to discourage policyholders from going to hospitals that can lead to higher expenses. For example, if you have a copay clause of 10%, you will think twice before opting for treatment in premium hospitals. 

A health plan with a co-payment feature may be suitable for individuals who meet the following criteria.