In India, co-pay feature in health insurance was introduced on cost-benefit logic. Basic idea
was to save the cost and come up with more efficient policies by discouraging unnecessary claims.
What does Co-pay mean?
When both you and your insurer share cost of your medical expenses, it’s called co-payment.
Understanding this concept of co-pay will help you know how much you have to pay and when you
have to chip in.
For example: Mr. Ramesh has a health insurance plan for Rs. 5 lakh with 20% co-payment clause.
He was suddenly rushed to hospital due to cardiac arrest. His total hospitalization cost was
nearly Rs. 3 lakh when he was discharged after a surgery. In this case, He needs to pay
Rs.60000 (20% of his bill) out of his own pocket. While the rest Rs. 2.4 lakh will be taken
care by his insurer.
Insurers apply co-pay condition in different ways based on various scenarios. Here are some of
the scenarios in which insurer may apply co-pay clause:
Age-related co-pay: In India, most of the insurers apply
co-pay clause to senior citizens. General belief is that health deteriorates with the
increasing age. There is chance of more frequent claims specifically by older age group.
To mitigate this risk, insurers apply co-pay clause to policyholders after certain age
Co-pay based on type of hospitals:Some of the insurers apply
co-pay when policyholder chooses a hospital other than the network hospitals that they are
tied up with.
Zone-related co-pay: Some of the insurers offer different
premium based on policyholders region. Person living in small town is offered coverage
at lesser rate of premium than the one living in metro cities. In this case, insurer may
apply co-pay condition when someone who has taken policy in small city getting a
treatment in metro city where healthcare facilities are expensive
Illness related co-pay: Insurers may put a co-pay clause when
a person with pre-existing disease or critical illness is seeking to avail a health plan.
This is obviously because such diseases need expensive treatment.
Apart from savings and reducing risk to insurer, there are other logical reasons behind
introducing the co-pay feature in health insurance. Generally, people who have health cover
opt for luxuries facilities and expensive hospital even when they may not really need it.
Hence, insurers have started levying co-pay clause in some cases to avoid such unnecessary
claims. Companies believe that policyholder will make a practical decision when they have to
bear a portion of claim. Basically, insurers are levying Copay clause to discourage the misuse
of health insurance and also to encourage policyholders to make only necessary claims.
For example, Mr. Suresh has a health plan for Rs.3 lac with 10% co-pay. He needed to undergo a
surgery. Let’s say, he gets the surgery done from an average hospital with good facilities in his
area for around Rs.40000, he paid Rs.4000 and the rest were settled by his insurer. In this case,
an expensive hospital would have charged him around Rs. 1 lakh for the same treatment and he
would have paid Rs.6000 more. Hence, we can say co-pay encourages policyholder to make a
How Does it Impact Premium?
Higher the co-pay percentage lesser will be your premium. It’s because the risk is divided
among both the parties insured and insurer. Your part of the percentage is generally 10-20%
which varies from insurer to insurer. It’s quite logical and relevant for senior citizens
and people with pre-existing illness as it is difficult for them to get a health plan under
regular criteria. They can avail adequate coverage at a lower rate of premium with a co-pay
Is it Ideal to opt for Policy with Co-pay Clause?
Well, if you are physically fit with no history of serious illness, choosing a policy
with co-pay could save you some amount on premium. However, god forbid, if something
unfortunate happens and you tend to make a claim; it’s needless to say that you will have
to spend on the treatment expenses.
However, co-pay is not the single criteria for choosing a health plan. Claim efficiency,
unique features, inclusions and exclusions of the policy are to be considered before you
buy a plan of your need.