Health Insurance is an instrument by which a health insurance provider covers the expenses incurred by the insured person on medical treatment in a hospital instead of a premium amount paid periodically by the insured. There are many features of health insurance policies designed to reduce the premium amounts while maintaining good coverage.
Copay is one such feature that can be opted for by the customers. However, it is imperative to have a clear understanding of the Copay clause in health insurance policies to decide whether or not to opt for it.
What is copay in insurance?
The basic question is what is copay in health insurance? Copay is a cost-sharing arrangement with the insurance company. This means the policyholder is liable to pay a certain fixed percentage of the claim amount while the insurance company bears the balance. For instance, if the policyholder has opted for a 20% copayment, the health insurance policy would cover 80% of the claim amount while 20% of the expenses would have to be paid from their own pockets.
Copay in insurance means the insurance company meets most of the covered expenses while the insured individual pays a smaller percentage.
Features of Copay in Health Insurance
Copay in insurance can be mandatory or voluntary. In case of a mandatory copayment clause in the health insurance policy document, the policyholder needs to pay a fixed percentage of the claim amount irrespective of the figure of the claim. Senior citizens’ health insurance plans usually have mandatory copay clauses because the treatment expenses of senior citizens are much higher.
A health insurance provider can apply a copay clause only on reimbursement claims for treatments in non-network hospitals. The copay clause can also apply only to treatments in hospitals located in metro cities.
Copay in insurance acts as the catalyst for the health insurance policy. The health insurance company is not liable to pay the balance claim amount until the amount to be borne by the policyholder as fixed by the copayment clause has been paid. This means the copay clause is activated as soon as the policyholder raises a claim.
The percentage of the claim amount to be paid by the policyholder under the copayment clause depends on the type of medical services for which the Copayment is active.
Comparison of Copay with Deductible
Deductible in insurance is the flat fixed fee that the policyholder needs to pay for covered medical services in a year. Deductible needs to be paid for activating the health insurance coverage. The bills of medical services availed by the policyholder need to be paid by the policyholder from his/her own pockets if the amount is below the Deductible. If the costs exceed the Deductible, the insurance company pays the balance amount.
Certain features illustrate deductible vs copay comparison. Some have been listed here.
- Copayment is a certain percentage of the claim amount that the policyholder is required to pay. A deductible is a fixed amount to be paid by the policyholder before the health insurance policy starts covering the medical expenses.
- Copayment is applicable only on certain medical services such as critical illnesses with high treatment costs or treatment in hospitals outside the insurer’s network of hospitals. On the other hand, deductible is applicable to the overall medical coverage.
- Copayment is a fixed percentage as specified by the clause on the policy document. Deductible, on the other hand, is calculated on an annual basis.
Comparison of Copay with Coinsurance
Copay and Coinsurance in insurance are usually used interchangeably. However, there are some minor differences between the two terms.
Coinsurance is to be paid by the policyholder after reaching the annual deductible. Copay in insurance takes effect before or after the deductible amount has been reached. The insurer may choose to waive off the deductible and immediately implement copayment.
Copayment is a fixed fee or percentage of the claim amount raised by the policyholder. On the other hand, coinsurance is a percentage amount that varies as per the nature of the medical services such as doctor visits, prescription drugs, lab tests, and more.
What are the purposes of copay in health insurance?
Copay in insurance reduces the premium amount. Since the policyholder shares the liability with the insurance company, the latter can charge less premium. The higher the copayment amount, the lesser is the premium to be paid by the insured. Even though copayment causes the policyholder to pay a certain percentage of the claim amount from their own resources, the periodic expenses are lowered due to lesser premiums.
Many people file unnecessary claims for treatments of minor diseases that do not require hospitalization. The copayment clause prevents such claims because the insurance company does not pay 100% of the claim amount. Copay in Insurance prevents the misuse of the policies.
There are instances when people seek very expensive hospitals to get the same medical services at double or even triple the same services at less expensive hospitals. Copayment discourages such people from unnecessarily opting for expensive hospitals. For example, a policyholder with a 10% copayment clause will pay only Rs. 2000 for a treatment costing Rs. 20,000 in a normal hospital but end up paying Rs. 5000 for the same treatment in a hospital charging Rs. 50,000.
The risk to the insurance provider is reduced by copay in insurance because the entire claim amount is not borne by it.
Should you opt for copayment?
Whether you need copay in insurance or not depends upon your specific condition.
People who are healthy and not likely to raise claims can opt for copayment because a lower premium benefits their finances. Moreover, people with enough cash on hand at all times can opt for copayment.
People of advanced age, leading a sedentary lifestyle, or with a history of serious medical issues should not opt for copayment because they are at a higher risk of hospitalization and can face problems paying a percentage of the claim amount.
The right decision about whether to accept a co-payment clause in your health insurance policy or look for plans with no copayment can be made only after assessing its pros and cons concerning your requirements.