Co-pay in Health Insurance

Buying health insurance is absolutely essential. Health care costs are on the rise, and with changing lifestyle choices, one has become more prone to falling ill. In such cases, any major hospitalisation can severely deplete your savings and has rendered treatments unaffordable for low-income individuals. Fortunately, health insurance policies are present to help you in your hour of need.
A health insurance policy will cover your medical expenses and ensure that your treatments are not affected because of financial issues.
While there are hundreds of health insurance policies available on the market, buying a health insurance policy requires careful analysis and understanding of certain jargon on your part so that you can make an informed decision and find the policy most suited for you.
One such term is "copay" in health insurance.

What is co-pay?

How Copay impacts your Health Insurance Premium? 

Co-pay has a direct impact on your health insurance premium. Higher the copay, the lower will be the premium amount. Since, you are bearing a higher percentage of your claim, the insurance provider will pay a lower amount as result they will charge a lower premium.
But one should be careful while going for an extremely higher or lower copay amount.
Higher copay amount: A higher copay will help you reduce your premium amount but it will increase your expenses at the time of hospitalization. So it is not advisable to go for higher percentage of copays just to lower the premium.
Lower copay amount: A lower copay amount will increase your premium amount but it will reduce the expenses borne by you at the time of claim.

Features of Copay in Health Insurance

Here are some of the salient features of Copay:

1. Size of incidence: Generally copay percentage ranges between 5 to 20% and the majority of the bill will always be paid by the insurance company.

2. Premium: Copay is inversely related to premium amount. Higher the copay, the lower is the premium amount.

3. Where is it applicable: Copay are levied in areas where occurrence of medical expenses is higher. For example: In case of senior citizen health insurance, since probability of medical expenses are higher therefore copay may be present there.

4. Percentages may differ from policy to policy and also from company to company.

1. Age-based: Some policies might apply copays based on age. As we grow older, our bodies become weaker and we are more likely to fall ill. In such cases, there are higher chances of making a claim. So, to reduce their risk, insurance companies might levy a copay on senior citizens.

2. Location-Based: Metropolitan cities are more expensive in comparison to tier II cities or towns, and this is especially true when it comes to medical expenses. So, the claim amount is higher in such cities. Therefore, there may be a copay based on the residence of the insured.

3. Hospital-Based: Some policies levy copays based on the type of hospital where you have got yourself treated. If it is one of the insurance provider's network hospitals, you may be able to make cashless claims and there may be no copay. However, in the case of non-network hospitals, the claims are paid on a reimbursement basis and there may be a copay clause under such circumstances.

4. Treatment Based: Some policies may have a copay based on the illness or condition for which you are receiving treatment. Some illnesses require huge medical expenditures, so there might be a copay to reduce the pressure on the insurance provider.

Why is there a copay clause in a health insurance policy?

• To ensure that health insurance policies are used properly: It is possible that policyholders will file claims for minor treatments that do not necessitate large sums of money. This not only hurts the insurance company but the policy holder as well, since they lose out on their no claim bonus. So a copay clause has been put in place to discourage this activity, since every time one raises a claim, they have to bear a part of that claim as well.

• Cut down on unnecessary treatments: Many people opt for expensive medical facilities or luxury rooms in hospitals simply because they have a health insurance policy. This increases the costs that the insurance provider will have to bear in such cases. Having a copay in place will ensure that people will not go for extravagant facilities and services because they will have to bear a portion of the cost as well.

Factors to consider before buying a policy with a copay

1. Coverage: A health insurance policy with a higher copay will be less expensive to purchase. However, this will increase the amount you have to bear as part of the claim. So, buying a policy with a higher copay just to reduce your premium amount may not be a wise decision. It is best that you compare the size of cover offered in different policies and then decide which to buy.

2. Your health status: If you are fit and healthy, you may not get sick as easily, so having a higher percentage of copay may not be a bad thing. However, if you are someone who falls sick easily or is suffering from a critical illness, a higher copay can mean a significant amount during claims. So, always look for policies with a copay, keeping in mind your health condition.

3. Your financial condition: A higher copay will make you pay a higher amount during times of claims. For that, you need to have sufficient financial backing to cover such costs. If you have sufficient savings to cover your expenses, you can opt for a higher copay.

What are the disadvantages of copay?

While copay helps you reduce your premium amount, it has its own set of disadvantages:

1. The biggest one is that copay makes you pay a portion of medical bills. This increases you’re out of pocket expenses.
2. If the copay percentage is too high then that may defeat the purpose of having a health insurance policy in the first place. A higher copay percentage means you have to bear higher medical costs which may prevent you from getting quality medical assistance thereby leaving your policy useless.

Co-pay vs Deductible

A deductible is a fixed amount of your claim that you need to pay before the insurer starts paying your claims. It is a fixed amount which has to be paid every year before your claims are paid by the insurer. Any claims made over and above the deductible amount will covered by your insurance provider.
Seems similar to copay right?

Well it isn’t. Let’s see how?