Co-payment is also called as Co-pay or Co-insurance. It is basically the percentage of hospitalization expenses which you will share with the insurance company in case of hospitalization.

Let me explain it with an example- Suppose you have purchased a health insurance policy of sum insured 5 Lakhs. While purchasing the policy, you opted for a co-payment of 20%. If you get admitted to the hospital and total bill is 3 Lakhs, the company will pay only 80% of 3 Lakhs i.e. 2.40 Lakhs. The remaining 60,000 need to be paid by you as you had opted for 20% co-payments.

You should be very careful about the co-payment while purchasing the health insurance policy (even with private insurers).

Now a days, many of the health insurance companies offer zone wise cover. For example- Let us say, the insurance company has divided the coverage under 2 zones 1. All India coverage 2. All India coverage except Delhi NCR. The premium of policy would be high if you opt for all India coverage and the premium would be less if you opt for all India coverage except Delhi-NCR hospitals.

What happens when you opt for entire India coverage except Delhi-NCR hospitals and get treatment in any of the Delhi-NCR hospitals. You will have to co-pay in this case- may be 10%/20% as per the company policy.

Most of the senior citizen policies also have co-pay clause. Let me take an example of Star India Red Carpet policy for Senior Citizen where the co-pay is as high as 50% based on the amount of sum insured you have chosen.

Deductible

A deductible is the amount that the policyholder is required to pay out of their pocket before the insurance company begins to cover the remaining medical expenses. It is a way to share the risk between the insurer and the insured.

How Deductibles Work

When you have a deductible in your health insurance plan, any medical expenses incurred will first need to be paid by you until you reach that deductible amount. Once the deductible is met, the insurance policy will cover the costs according to the terms specified in the policy.

Example

Let’s consider the case of Ravi, who has a health insurance policy that includes a deductible of ₹50,000.

Medical Expenses Incurred:

Ravi had to undergo surgery and incurred a total medical bill of ₹1,00,000.

Paying the Deductible:

Since Ravi’s deductible is ₹50,000, he must pay this amount first.

Insurance Coverage:

After Ravi has paid the deductible amount, the remaining medical expenses would be covered by his health insurance provider.

Remaining medical expenses = Total bill – Deductible

Remaining medical expenses = ₹1,00,000 – ₹50,000 = ₹50,000.

Ravi’s Total Out-of-Pocket Costs:

Now, if Ravi’s health insurance policy covers 100% of the costs after the deductible, the insurance will cover ₹50,000

How deductibles and co-payment work together

• Now, if Ravi’s health insurance policy covers 80% of the costs after the deductible, the insurance will cover:
• Insurance coverage = 80% of ₹50,000 = ₹40,000.

Ravi’s Total Out-of-Pocket Costs:

In total, Ravi pays: ₹50,000 (deductible) + ₹10,000 (20% of the remaining ₹50,000) = ₹60,000.

Summary

In this example:

• Total Medical Bill: ₹1,00,000
• Deductible: ₹50,000
• Insurance Pays: ₹50,000 (after the deductible is met) (in case of no co-payment)
• Insurance Pays: ₹40,000 (after the deductible is met) (in case of co-payment)
• Ravi’s Total Out-of-Pocket Cost: ₹50,000 /₹60,000 (in case of no-copayment and co-payment)

Understanding deductibles is important when choosing a health insurance policy, as it impacts how much you will pay during a health-related incident. It can help you choose a policy that best suits your financial situation and healthcare needs.

Should you opt for co-payment and deductible in base policy?

Deciding whether to opt for co-payment and deductible clauses in your health insurance base policy requires careful consideration of your individual situation and financial goals.

Pros and Cons of Co-Payment and Deductibles

Pros

1. Lower Premiums
2. Shared Responsibility

Cons

1. Higher Out-of-Pocket Cost
2. May Not Be Suitable for Everyone

Conclusion: Choosing What Works for You

In conclusion, whether you should opt for co-payment and deductibles in your base policy depends on your financial situation, health status, and comfort level with out-of-pocket expenses.

• If you have a stable, healthy lifestyle and want to save on premiums: A policy with deductibles and co-payment might suit you.
• If you expect high medical costs or have chronic conditions: It may be wiser to avoid these options ensuring comprehensive coverage without financial barriers at critical times.

Ultimately, analyzing your healthcare needs, financial situation, and preferences can help you make an informed decision that balances cost-effectiveness with the assurance of adequate coverage. Ideally, you should not opt for co-payment and deductible in base policy.