Fraudulent claims cost lots of money to the health insurance sector each year. According to the study conducted by EY (consultancy firm) on financial crime in India, there is a rise of 30% in insurance fraud since 2018 which is alarming. It’s not only affecting the insurance sector but also impacting innocent customers. Thus, to curtail claims fraud, copayment came into existence. Most health insurance providers offer health insurance with a copay clause. So, if you are a new entrant in health insurance don’t let copayment confuse you.
What is Copay in Medical Billing?
In simple words, the copay in health insurance is the percentage of the claim amount that is borne by an insured person under a health insurance policy. However, the rest of the amount will be paid by the insurer. Therefore, you can say that it is an admissible claim amount that both the insurer and insured pay on a sharing basis according to the respective percentages. The copay clause, along with the percentage, is always mentioned in the insurance policy and applies to medical services.
Example:
Nidima bought a best health insurance policies and agreed to a copayment of 10%. She has the approved claim of Rs.1.5 lakh. In this case, she has to bear 10% of 1.5 lakh i.e. Rs.15000 as a copayment and the rest 90% will be paid by the insurer.
Thus, a copay in health insurance is an arrangement made with the health insurance company, in which the insured will need to pay a part of the medical expenses on their own. The remainder of the amount will be paid by the insurance company.
Why is Copay in Insurance?
Putting in copay clauses in policies not only helps health insurance companies save a portion of expenses but also gives the company certain advantages as outlined below.
- Policyholders have to pay a portion of the fee; they are naturally discouraged to make claims for treatments over a common issues such as cough and cold, gastric distress, etc. which could technically be charged from the insurer.
- Paying a portion of the treatment means that users will be aware of the expenses they will also incur, thus bringing about a sense of ownership.
- Discourages people from seeking treatment from more expensive hospitals as they will also have to be a bearer of the expensive hospital bill.
- Mitigates the risk for insurance companies, as these companies operate on huge profits and losses. A 10% copay clause means that the company is directly saving 10% of all payments.
How to Select a Health Policy with Copay Insurance?
Here are some of the factors that you must consider when you go for a policy with copay:
- Copay percentage: This will be the percentage of the cost that the policyholder will have to bear. For example, if the insured individual incurs a medical bill of INR 50,000 and the co-payment clause is 10%, then the insured is expected to pay INR 5,000 while the insurance company will pay the remaining balance of INR 45,000.
- Premiums: Most policies with a co-pay clause will have lower premiums. Ensure that you compare a policy with a co-pay with other general health insurance policies and see how the premiums vary.
What is Co-Insurance in Medical Billing?
In India, the terms copay insurance and co-insurance are used interchangeably. In a co-insurance contract, both the insurer and insured enter into an agreement where each party agrees to pay a fixed percentage of the medical bill. The percentages are usually represented as 90-10, 80-20, or 30-70 and so on, depending upon the clause. Copay health insurance, however, is the fixed amount to be paid for the availed medical services.
Features of Copayment in Insurance
Understanding the concept of copay will help you to know the reason behind this clause and how much you have to contribute to your medical bills. Let’s talk about its basic features:
- Only a partial amount has to bear by the insured, the major part will be paid by the insurance company.
- It applies to medical services, including hospitalization expenses, doctor’s fees, medicines, and lab tests.
- Plans with higher monthly premiums generally have a lower copayment percentage.
- Applicable mostly on senior citizen health insurance plans.
- The basic objective of the copay is to save costs and discourage unnecessary claims.
Importance of Copaymant in Health Insurance
Health insurance jargon can puzzle you, so it’s good to know about different terminologies to make the most out of your insurance policy. Now you have read about copayment, and its features now let’s understand its importance.
- It divides the risk between the insurer and the insured. Though, the insured has to bear a minimum amount of the claim.
- It reduces the burden of large premium payments.
- Senior citizens with pre-existing diseases get adequate coverage at a lower premium with a co-payment clause.
- It also discourages the unnecessary use of luxury facilities and hospitals and encourages policyholders to make only necessary claims under health insurance.
- It also lessens the misuse of health insurance policies.
Does Copay Impact Health Insurance Premium?
If you happen to have a co-pay clause, it can directly impact the premium that you are paying. If you have a high co-pay with a deductible amount, naturally your insurance premium will be lesser. This is due to the fact that with a high co-pay, the risk of payment is divided almost equally between the insured and the insurer.
Suppose A selects an individual health insurance plan with the Smart Select Benefit. His premium for the first policy year is Rs 15,000.
Now, if A opts without the Smart Select Benefit and chooses to get treatment from a hospital other than those listed in the Smart Select hospitals, a 20% co-payment will apply. Accordingly, the premium for the first policy year is Rs 12,750, which is 15% less than the regular premium.
>> Check: Health insurance premium calculator
How to calculate copayment in health insurance?
A copay or co-payment is a cost-sharing arrangement between the insured and the insurer, where the insured pays a fixed percentage of the medical expenses incurred in the treatment of a particular condition or illness.
The exact copay amount and percentage can vary depending on the terms and conditions of the health insurance policy. Generally, health insurance policies in India have a copay clause that ranges between 10% to 30% of the total medical expenses, with the remaining amount being paid by the insurer.
For example, if the total medical expenses incurred during the treatment of a particular illness amount to Rs. 1 lakh and the copay clause in the policy is 20%, then the insured will have to pay Rs. 20,000 (20% of Rs. 1 lakh) and the insurer will pay the remaining Rs. 80,000.
It is important to note that copay is not applicable for all medical expenses. Some policies may have a copay clause only for specific treatments or medical procedures. It is important to carefully read the terms and conditions of the policy to understand the copay clause and its applicability.
Why do you need a Health Insurance Plan?
We cannot predict medical emergencies. They can happen to anyone, at any time. With hectic work schedules, unhealthy food habits, and variable sleep patterns, the modern lifestyle has gradually begun to take a toll on our health. Young adults are increasingly becoming prone to various lifestyle diseases, and it is high time we take steps to safeguard our health and that of our loved ones. Medical treatments are getting expensive due to medical inflation. Thus, a health insurance plan is what you need that will cover your medical bills and protect your finances from any potential impact. Besides, you can look for tax benefits under Section 80D of the Income Tax Act.