Scope of Copayments in Health Insurance

Advances in medicine means the existence of more specialised treatments in the market today than there previously were. Inflation, however, has caused the cost of medical care to rise considerably. While each of us may wish to avail of superior medical services, not all of us have the deep pockets needed to foot the bills. Comprehensive health insurance plans allow you to avail of such services without overextending yourself. By purchasing the appropriate health insurance plan, you can gain access to superior medical services at affordable prices at hospitals listed in your insurer’s network. Purchasing such plans can cost you a pretty penny in the form of a hefty premium. It is possible to bring down the cost of these premiums by taking advantage of the copayment facility offered under health insurance plans.

Defining Copayments

Copayment refers to the percentage of the total medical expense borne by you, the policyholder. The remainder of the amount is covered by the insurer. While some health insurance plans provide policyholders with the option to select a copay percentage that aligns with their needs, others have a mandatory copay clause tethered to them.

To better understand the copay concept, consider the following example - Let us assume that your health insurance policy has a copay clause of 10 percent. Your medical bill at the hospital amounts to INR 60,000. This means that you will need to pay INR 6,000 with your own money while your insurer will pay the remainder i.e., INR 54,000.

While you may think opting for a higher copayment is disadvantageous, the benefit of doing so is paying a lower premium. On the flip side, by opting for a low copayment plan, the out of pocket expense will be lower, but the premium for your plan will be higher.

Types of Copay Clauses in Health Insurance

To understand the different types of co-pay available under health insurance plans, consider the table mentioned below. Different health insurance providers apply the copay clause in any one of these ways.

It is important to be aware of the terms and conditions of your health insurance policy so that avail of the copay clause in the aforementioned scenarios.

Features of Health Insurance Copay with Bajaj MARKETS

The Bajaj MARKETS website is a great place to purchase a health insurance plan for yourself. To better understand copayment and its features, consider the points mentioned below -

• When you purchase a health insurance plan that includes copayment, the copayment percentage is pre-determined at the time of purchase.

• Next, you are required to pay a fraction of the healthcare expenditure and the remainder will be covered by your insurer.

• While the term “copay” might be used interchangeably with “co-insurance”, the two terms do not mean the same thing in India.

• While larger copay percentages favour insurers, insured individuals can use them to take advantage of lower premiums.

• A large number of senior citizen health insurance policies available in India feature a copayment clause.

Why do Insurers Use the Copay Clause?

Listed below are some of the many reasons why the copay clause is popular among insurers who frequently include them in health insurance plans.

1. Fraudulent Claims are Kept at Bay

Policyholders are less likely to make fraudulent health insurance claims when copayment clauses are included in their health insurance plans. This is because they too must shoulder the burden of payment with their health insurance provider.

2. Deters Unnecessary Claims

Unnecessary or minor claims pertaining to illnesses like coughs and colds aren’t likely to be made by a policyholder due to the copayment clause. If such a clause didn’t exist, the insurer would need to finance the entire expense associated with treating a common or minor ailment.

3. Helps Encourage Discretionary Insurance Usage

Since policyholders must pay a portion of their claim, they will use their health insurance plan with caution. This clause dissuades policyholders from availing of expensive healthcare services that can rack up the bill unnecessarily.

4. Creates a Sense of Responsibility in the Policyholder

With an active copayment clause, health insurance policyholders are more responsible with their health and are wary of the risks associated with being unhealthy.

5. Helps Mitigate Financial Risks

Insurers often use the copayment clause to mitigate the financial burden by sharing the responsibility of paying insurance claims.

Advantages & Disadvantages of Copayments

Examine the table below to understand the advantages and disadvantages associated with the copayment clause.

Additional disadvantages associated with copayments are as follows.

1. People Prefer Health Insurance Plans Without Co-payments

Health insurance policies featuring copayment clauses tend to be bought with far less frequency than those without. This happens because buyers who comprehend what this clause entails prefer availing of health insurance policies that aren’t tethered to it. This means that health insurers who are willing to cover healthcare treatments in their entirety are likely to have greater sales.

2. Co-payments Drain your Savings

While it is true that by paying a higher percentage of copayment you have a lower premium to pay, this only benefits you, as long as you don’t need to cash in your insurance plan. In the event that you put in a claim on a significant medical expense, you may have to direct the money you saved on your premiums toward the copayment. This means that as a policyholder you will need to part with your money in one way or another.

3. Amount Saved vs. Amount Spent

While higher copayments imply lower premiums, in the event that you avail of medical treatment and file a claim, your treatment expenses may be more than the amount you saved while paying a lower premium.

Difference Between Copay, Deductible and Co-Insurance

While the terms “copayment”, “deductible” and “co-insurance” are used interchangeably, there exist stark differences between them. Take a look at their definitions to understand exactly what each term means.

• Copayment

This clause states that you will bear a portion of your medical expenditure each time you avail of any medical service and claim for it. This amount may either be fixed or can be a fixed percentage of the treatment costs.

• Deductible

This term refers to the fixed amount that is paid for different healthcare services.

• Co-insurance

Here, the health insurance provider and the policyholder agree to pay a percentage of the total cost of a medical expense. The co-insurance percentage is denoted in the form of two numbers separated by a dash such as 70-30, 85-15 and so on wherein the contribution made by the insurance provider is mentioned before the dash while the policyholder’s contribution is mentioned after the dash. In contrast to copayments, the co-insurance clause requires you to pay the percentage after you have paid the deductible applicable to your policy.

What Should You Consider While Opting for a Health Insurance Plan with Copay?

While a medical insurance plan featuring a copayment clause might sound appealing, you must first take into account what your insurance requirements are. While higher copayment may seem more cost-efficient in terms of premium charged, it is a sum that must be paid prior to your insurer covering the remainder of your healthcare expenses. Owing to this very fact it is vital that you understand whether or not you can afford to pay the portion of the claim over the long run.

More importantly, it is worth understanding that in the event of a medical emergency, copayment mentioned under a health insurance plan does not bring down the financial burden that is associated with healthcare costs. Because of this, it is important to think twice before availing of a health insurance plan that features a copayment clause.

Conclusion

Before purchasing a health insurance plan, you must always take into account what your coverage requirements are. You must then offset these requirements against the amount your health insurance plan will amount to with a copayment clause in place and decide if it is worth availing of. Oftentimes, while health insurance premiums might be expensive and you may be tempted to bring them down by availing of a plan that includes a copayment claim, you must remember that plans without this clause are actually more affordable to pay in the long run If you are in the market for a viable health insurance plan, visit the Bajaj MARKETS website to understand more. 

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