Health insurance is a crucial financial tool, but it’s essential to understand the terms that can impact your out-of-pocket expenses: 

1. Co-payments 
2. Deductibles

While these terms might seem complex, understanding them can help you make informed decisions when choosing a health insurance plan.

What is a Co-Payment?

Co-payment insured is responsible for a predetermined percentage of the medical expenses, regardless of the total cost of the claim. Eg . If an insured has a policy with 10% co-pay , at the time of claim , if his bill is of 2 lakh , then the insured would have to pay mandatory Rs 20,000/- from his pocket and the rest of the bill would be paid by insurance.If after few months the insured makes another claim of Rs 1lakh, he will pay Rs 10,000 from his pocket. For every claim made by the insured, if copay is opted the insured have to pay the percentage taken as copay 

Benefits of Co pay : 

• It helps to reduce your insurance premium burden 
• Sometimes insurers make it mandatory to offer a coverage., for eg in senior citizen plans.

Here are some things to know about copays:

• Percentage: The copay is usually a percentage of the total medical bill, typically between 10% and 30%. 
• When to pay: Copays are paid at the time of service. 
• Where to find: The copay amount or percentage  is on the policyholder’s health policy wording. 
• When to apply: Copays are not applicable to all medical expenses, and some plans may only require copays for certain treatments. 
• Copay and premiums: Some plans offer a voluntary copay option, which can result in a lower premium. However, the policyholder will eventually pay more toward the cost of treatment. 
• Copay and waivers: Some policies include a waiver of the copay clause, which means the policyholder doesn’t need to pay a copay. However, these policies usually have higher premiums. 

What is a Deductible?

A deductible is a fixed amount you must pay out-of-pocket before your health insurance coverage begins. Once you’ve met your deductible, your insurance will start covering a portion of your medical expenses. For eg. If an insured has opted for deductible for Rs 50,000/ – and insured files for claim of Rs 1,00,000/- he will have to pay Rs 50,000/- from his pocket before making a claim. Now if he raises another claim in the same year, let’s say of Rs 1 L , the company will pay the full amount of Rs 1L. 

Types of deductibles

Compulsory deductibles are mandatory and are set by the insurer.

Voluntary deductibles are optional and are chosen by the insured to lower their premium. 

Cumulative deductible applies to family floater plans, where all family members contribute to total deductible after which the policy will make claim payments.

Comprehensive deductible is a single deductible amount that you keep adding till you have made the total payment of deductible amount agreed with the insurer and after this the insurer will make payments.

Non- comprehensive deductibles may be applicable to only specific covers and not entire policy, the insured have to pay specific medical costs before raising the claim.

How it works

You pay the deductible, and then your insurance company pays the remaining bill directly to the healthcare provider. 

When to pay

Health insurance companies can choose to charge deductibles annually or per treatment. 

How it affects your premium

Generally, higher deductibles lead to lower premiums. This can make health insurance more affordable for people who don’t frequently need medical care. 

How it affects your out-of-pocket maximum

Your deductible is part of your out-of-pocket maximum, which is the most you’ll pay during a policy period. Once you reach your out-of-pocket maximum, your insurance will pay all additional expenses at 100%. 

How it affects your medical care

Having a high deductible can lead to delayed care, which can be harmful if you have a serious or urgent medical condition.

Advantage : 

• They help in lowering the medical insurance premium. Furthermore, the insurance company may offer discounts if the insured opts for voluntary deductibles.

• It discourages the insured from raising claims with small amounts, which helps the insured earn a No Claim Bonus (NCB) that can be leveraged to increase the coverage of the primary health policy.

• A salaried person who has a cover from his office as group health insurance can use this option to keep his insurance premium low as his office is also providing him with the benefit. 

Disadvantage : 

• Financial burden: You’ll have to pay for medical expenses before you can access benefits. This can be a financial burden, especially if you have multiple medical emergencies. 
• Delayed care: You might hesitate to seek medical care until you’ve met your deductible. 
• Non-preventive care: Non-preventive care won’t be covered until you’ve met your deductible

How Do Co-Payments and Deductibles Work Together?

Often, co-payments and deductibles work in tandem. You might have to pay a co-payment for a service, even after you’ve met your deductible.

Why Do Health Insurance Plans Have Co-Payments and Deductibles?

• Cost-Sharing: By sharing the cost of healthcare with policyholders, insurance companies can keep premiums lower.
• Reduced Claims: Co-payments and deductibles can discourage unnecessary healthcare utilization, helping to keep costs down for both the insurer and the insured.

Copay vs deductible:

A deductible is the amount paid out of pocket before insurance starts to pay, while a copay is a fixed fee for specific services. Copays don’t always count toward the deductible. 

Conclusion : 

By understanding these concepts, you can make informed decisions about your health insurance coverage.

Remember to read your policy carefully and consult with your insurance provider or a healthcare professional if you have any questions. 

Read more on how we can help you with best health insurance plans and should you chose a deductible or co pay clause