Co-payment: Insurers help those who help themselves

If your policy comes with a co-payment clause, you will have to pay a portion of your health insurance bill our of your own pocket.

IF you are shopping for an insurance policy or have bought one, chances are you may have come across the term ‘co-payment clause’ at some point. Most health insurance companies have introduced this clause to keep a check on the claim outgo. To avoid trouble while making a claim, it is important to be aware of what this clause entails.

If your policy comes with a co-payment clause, you will have to pay a portion of your health insurance bill our of your own pocket.

Co-payment clause makes both you and your insurer responsible for the costs of your medical expenses. You will be liable for contributing a fixed percentage towards your medical expenses, consultation fee and hospitalisation charges. Your contribution could be anywhere between 5% and 20% depending on the cover.

The simple rule of ‘the greater the co-pay percentage, the lower the premium amount’ applies. The terms of co-payment agreement must be agreed upon at the time of policy issuance.

Insurers have a co-pay clause for different scenarios. While some insurers have it for specific medical conditions or for treatments that are expensive, others impose it for treatment in metros or non-network hospitals. Certain insurers have co-payment clause for senior citizens’ health covers.

Co-payment extends benefits to the policyholder as well as the insurer as many people who would otherwise be denied a health cover manage to get it through the regular eligibility criteria. For example, if you are a chain smoker and also drink regularly or have a pre-existing medical condition, any insurance company will think twice before giving you a policy. In such a case, a co-pay clause can save the day. You get more coverage for a lower premium with a co-pay clause as the insurer trusts that you will not foot fraudulent claims.

Co-payment clause is relevant for high-risk customers like senior citizens or critical-illness patients. With it, they will be able to opt for a larger cover at an affordable premium, which, otherwise, would have been out of bounds.

Your health insurer provides a large cover for a comparatively smaller premium. Letting you contribute a part of the claim helps discourage people from making frequent claims unnecessarily. Also, it ensures that customers keep a check on the medical fee being charged by the hospital. The co-pay clause also avoids misuse of group health insurance. Usually company employees, under the garb of company-paid treatment, get themselves admitted for minor and avoidable ailments, leading to massive losses for the insurer.

Co-payment vs deductible
People often confuse co-payment with deductibles. While in both cases you have to share a part of the total claim amount with the insurance company, the difference comes in the way the insurer asks you to pay.

Deductible is the excess or uninsured part of the claim amount. You pay deductibles before your health insurance benefits kick in. Let us take an example. Tina has R25,000 as deductible amount for her health insurance plan. If she incurs minor medical costs that are below R25,000, she will pay the full amount. However, if she has a serious health condition that costs around R2 lakh, Tina will pay R25,000, which will be the deductible amount. The rest, R1.75 lakh, will borne by the insurer.

Under co-payment, you will have to pay a fixed percentage of the admissible claim. For example, Tina has a R3 lakh health insurance policy with 10% co-payment clause. If the bill is of R10,000, she will pay R1,000, while the insurer will foot the rest. Co-payment can cut your medical costs to a large extent. So, understand the concept from all angles, especially focusing on inclusion and exclusion, before opting for a health cover with a co-payment clause.

The writer is CEO & co-founder,

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