What is Co-payment in Health Insurance?

It’s been 6 months since you last met your best friend. One day, you both meet for a short reunion at your favourite restaurant. After a rejuvenating few hours of laughter and stories, you wrap up the party.

The bill arrives - it’s ₹4k, and you decide to GO DUTCH and split the bill 2 ways - ₹2k each. Then, you hug, promise to meet each other soon, and part ways.

Well, co-payment in health insurance is similar - GOING DUTCH ON YOUR MEDICAL BILL. The only difference is it’s between the insurer and you (the insured), and the split isn’t 50-50. Depending on your insurance provider and their co-payment clauses, it may be 90-10, 80-20, or 70-30.

But why are policyholders even considering co-payment clauses? When should you avail of policies that come with such a feature? Read on to learn more about this!

What is co-payment in health insurance?

Let’s put it this way: Co-payment is a feature in health insurance wherein the policyholder agrees to pay a percentage of the hospital bill with the insurer. If you agree to a 20% co-payment clause, you need to pay 20% of the hospital bill when you eventually make a claim.

You’re probably wondering now – If I can avail myself of a reimbursement of 100% of the hospital bill, why would I opt for a co-payment?

Well, here’s the thing — if you opt for co-payment, your insurance premium will also be reduced by a similar proportion. This is one of the main reasons people are tempted to opt for copayment.

However, co-payment is mandatory in some situations, such as for people with pre-existing diseases or senior citizens. Most likely, if you belong to one of these groups, you would not be eligible for a health insurance policy at all. However, with co-payment, you may be eligible to purchase certain policies. Apart from this, co-payment might be imposed by insurers for two other reasons:

1. Location-related Co-payment: Insurers may impose co-payment clauses based on the 'Zone' where you avail treatment. Healthcare costs can vary significantly from one zone (location) to another. Suppose you purchase the policy in lower-tier cities (Zone 2 or Zone 3) but frequently avail hospitalisation in cities like Mumbai or Delhi, usually in Zone 1. In that case, the insurer may inform you to co-pay from the next time or cancel your policy.
2. Hospital-related Co-payment: Sometimes, co-payment is tied to the type of hospital where you avail treatment. Insurers may impose a co-payment if the policyholder opts for treatment in hospitals not listed in the insurer's network. To encourage the use of network hospitals where the insurer has negotiated rates, the insurer may apply a co-payment clause for non-network hospitals.

How does co-payment affect health insurance premiums and payouts?

The insurer discounts your premium, but you must pay a portion of the bill when you eventually make a claim. The higher the co-payment %, the lower the premium.

Let’s understand this with an example:

There is a pair of twins named Thyrabeth and Lizbeth. They have always had very similar preferences right from a young age. Now that they’re older, they decide to purchase a health insurance policy.

As usual, they agree upon the same policy offered by a top health insurer in India.

But there’s one key difference here —Thyrabeth opts for the policy without copayment, but Lizbeth purchases the policy with a 20% copayment. How does this affect their premiums?

Thyrabeth pays a premium of ₹10k per annum, and Lizbeth pays a premium of ₹8k per annum. But, while making a claim, here’s how it will pan out:

As you can see, Lizbeth saved ₹2k by opting for co-payment, but while making a claim, she lost ₹40k. In the long run, not opting for co-payment is the better choice.

However, not everyone has this choice. If you fall into specific categories, co-payment will become mandatory (depending on the policy).

Why is co-payment imposed in health insurance plans?

Co-payment is a way for insurance companies to share medical expenses with you, the policyholder. It is optional in most cases. But, if you fall into one of these buckets, there’s a good chance co-payment would be mandatory –

1. Have Pre-Existing Diseases (PEDs): People with multiple PEDs usually require continuous treatment and frequent hospitalisations. If you have pre-existing diseases, insurers often impose a co-payment clause to mitigate this risk.
2. Senior Citizens: Older people are more likely to have health issues that need constant medical attention. This only increases the probability of hospital visits, treatments, and medical procedures. To manage this increased risk, insurers often add a co-payment clause to senior citizens’ policies or if you are purchasing a policy after a certain age.

Should you purchase a health insurance policy with a co-payment?

Suppose you fall into one of the above categories. In that case, co-payment allows you to access necessary medical treatments and hospitalisations while sharing the costs with the insurer, which can be more beneficial than not having a health insurance policy at all.

But if you don’t fall into one of the above categories, it would be best to avoid co-payment. Think about it – While you may save money in the short term, you lose out over a more extended period when making a claim.

What are the best health insurance policies with co-payment?

1. HDFC ERGO Energy (Optional Co-Payment): Although others can purchase it, HDFC ERGO Energy is a policy specifically designed for people with diabetes and hypertension. You can choose a sum insured from ₹2 lahks to ₹50 lakhs, with an optional co-payment clause (if you would like to reduce your premiums).
2. Care Advantage (Optional/Mandatory Co-Payment): Care Advantage is one of the few policies you can enroll in until you’re 100 years old. However, there is a mandatory 20% co-payment if you’re over 61.  You can choose a cover amount starting at ₹25 lakhs all the way up to ₹6 crores (one of the highest in the industry!) at an affordable premium. Care also offers various riders and add-ons that you can take advantage of and customise the policy as per your needs.
3. Aditya Birla Activ Health Platinum (Zonal & Optional Co-Payment): Activ Health Platinum has two variants, Essential and Enhanced, and both have copayments that depend on the sum insured and the zone in which you’re buying the policy. It has a 10%-25% copayment if you purchase the policy in a lower zone and avail of treatment in a higher zone. The Essential variant has a 10% co-payment for non-network hospitals. However, the Enhanced Variant does not have this additional clause. If you have the Enhanced variant, the insurer also does not impose the co-payment in case of accidents.
4. Niva Bupa ReAssure 2.0 (Optional Co-Payment): As one of Niva Bupa's top policies, this one has all the bells and whistles you need. It has no room rent restriction and disease-wise sub-limits but has an optional co-payment clause. You can choose the co-payment percentage as per your needs. However, there’s a benefit: co-payment will not be applicable for annual health checkups, second opinion, Personal Accident Rider, etc.
5. Bajaj Allianz Health Guard Gold (Zonal Co-Payment): While Bajaj Allianz offers a discount of up to 30% if you’re purchasing the policy in Zone 2 and 3, they also impose a co-payment if you’re availing of treatment in a higher zone, which ranges from 5% to 20%.

Conclusion

While co-payment can help reduce your insurance premium, it also means you must pay a portion of the medical expenses during a claim. Co-payment is not recommended in most cases, but it is often unavoidable for people with PEDs or of an advanced age to purchase a health insurance policy without this feature. Either way, always consult an IRDAI-Certified Insurance Advisor to make an informed decision about purchasing a health insurance policy.