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

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Over the past few years, India has witnessed tremendous growth in medical technology that has cured diseases that were not curable. However, with advancements in healthcare facilities, the cost of healthcare has also skyrocketed. Medical inflation in India reached 14% in FY 2021 and healthcare inflation exceeded overall inflation. Therefore, it is all the more necessary to take out comprehensive health insurance to protect you and your family in the event of a health emergency.

A health insurance plan provides cover against the policyholder’s medical treatment in an emergency in exchange for a premium that is paid monthly or annually to the insurer. It offers many covers such as specialized procedures, OPD, health checks, pre and post hospitalization, home care, etc.

Nowadays, treating heart disease can cost around Rs 10 lakh to Rs 30 lakh in metropolitan cities. Imagine paying that amount out of your own pocket in times of crisis? For many middle-class families, this can use up all of their hard-earned savings. A health insurance plan comes to the rescue in these difficult circumstances.

What is co-payment?

Most of the time when buying an insurance policy, we tend not to read the terms and conditions properly. It is imperative to understand each clause of the policy in order to make an informed decision. One of these clauses in health insurance is the moderating ticket. The part of the medical expenses that an insured has to pay out of his own pocket is called a co-payment. The remaining part is the responsibility of the insurer. For example, Mr. Y has health insurance coverage of Rs 10 lakh with a 20% copayment. During a health emergency, Mr. Y files a medical claim of Rs 5 lakh with the insurance company. In this case, Mr. Y will have to pay Rs 1 lakh as copayment and the remaining Rs 4 lakh will be covered by the insurance company.

The amount of co-payment is pre-decided by the insurance company on a particular medical treatment, service or procedure. It must be paid each time you use the health care service. Most policies with a co-pay clause have a lower premium amount, while policies that have no co-pay have a higher premium amount.

Types of copayments

Insurers impose a copayment in various forms depending on the situation. A few scenarios in which co-payment is applicable are listed below:

Off-grid hospital: Some health insurance schemes provide for a co-payment in the event of hospitalization outside a hospital in the network. If you are unable to find a nearby hospital in the network for treatment, it is always advisable to contact your insurer before going to hospital.

Hospitalization in another city: Co-payment is applicable if the hospitalization takes place in a Tier I city with a health insurance policy taken out in a Tier II city. Indeed, the cost of hospitalization in a metropolitan city is higher than a non-metropolitan city.

Pre-existing disease: Some health insurance plans provide a co-payment on coverage for a pre-existing condition. So choose your plan carefully if you specifically want full coverage for a pre-existing condition after the waiting period ends, especially when purchasing a plan for seniors.

Treatment in posh hospitals: Some insurers charge user fees for treatment in expensive hospitals. These hospitals usually have higher room rent and surgery fees. The amount of the hospitalization request generally depends on the room rent, the type of room and the procedures. Typically, the rent for a room in a Tier I city hospital these days is Rs 6,000-10,000 per day. Therefore, before taking out a policy, it is suggested to check the copayment of room rent and surgery if you don’t want to end up paying out of pocket at the time of hospitalization.

Summary

User fees work well for young people who want a lower premium and are less likely to be hospitalized. However, older people are more prone to illnesses and hence they should opt for a non-copayment health insurance policy. This is because the chances of medical claims for older people are higher. If their policy has a copay, they will have to shell out money from their savings. Finally, health insurance policies are designed so that people avoid paying hefty hospital bills in the event of an emergency. Therefore, they should choose co-pay if they feel they can share the risk with the insurer during a medical requirement. If they are satisfied that the benefits of the policy outweigh the risk element, they can opt for co-payment.

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

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