Those unfamiliar with the terms co-payment and deductible in a health insurance policy may find it difficult to choose a suitable plan. In a co-payment option, the policyholder pays a percentage of the claim amount, typically 10 to 25 per cent. On the other hand, policies with a deductible clause require the insured to pay a deductible sum—a fixed amount pre-decided when buying the plan—when making a claim. Also, the bigger the deductible, the lesser the premium.

Co-Payment Option

The co-payment option in a health policy requires the insured to pay a fixed percentage of the claim amount out of their pocket while the insurer bears the rest. This percentage could range between 10 and 25 per cent and vary from place to place. For instance, for policyholders from Tier 2 cities (Zone B) availing treatment in Tier 1 cities (Zone A), the percentage could be up to 20 per cent. However, this coverage does not apply to hospitalisations arising due to accidents.

Let’s consider a scenario where you undergo a procedure costing Rs 2 lakh. Suppose you have a 10 per cent co-payment facility in the policy. In that case, you will need to pay Rs 20,000 out of your pocket while the insurer settles the remaining amount. This way, the burden of payment is shared between the insured and the insurer based on the predetermined co-payment percentage.

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Usually, the policy premiums with a co-payment facility are comparatively less than those without it. However, customers must consider that their co-payment share will also be big if the claim amount is large. In that case, the co-payment option can be a drawback.

Says Vivek Chaturvedi, chief marketing officer (CMO) and head of direct sales at Go Digit General Insurance, “It is advisable to take a health plan that does not come with a co-payment option. While the feature may not hurt the customer in case of a small claim; however, in case of a higher claim, the policyholder might have to pay a significant amount out of their own pocket.”

Deductible Option

Under this option, the insured party agrees to pay a deductible amount when making a claim. For example, if a policy specifies Rs 5,000 as deductible and the claim amount is Rs 1 lakh, the insured will pay Rs 5,000 and the insurer will pay Rs 95,000. The larger the deductible amount, the cheaper the premium. The rest of the policy terms generally remain the same.

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Deductible is a fixed amount rather than a percentage:

Says Chaturvedi, “A deductible is the upfront sum that the policyholder must pay out of pocket before your insurance provider steps in to cover the rest of your claim. This means you are responsible for meeting this initial cost up to a certain threshold, beyond which the insurer will start reimbursing you for the expenses incurred.”

He adds that a deductible is a better option for reducing the premium than a co-payment, as the deductible is usually a fixed amount instead of a fixed percentage. Based on one’s financial capacity, one can choose a deductible of Rs 5,000 or Rs 10,000 and reduce the premium by up to 10 per cent. Since health insurance premiums for senior citizens are usually expensive, they can use this option to reduce the premium and manage their healthcare expenses better.

For example, if the deductible part of your insurance policy is Rs 10,000, while the claim amount is Rs 50,000. In that case, the insurer will compensate Rs 40,000. Let’s consider another instance. Suppose the claim amount is just Rs 8,000. In that scenario, the insured will need to bear that entire amount as the deductible is up to Rs 10,000. In this case, the claim size did not exceed the deductible amount, so the policyholder will have to bear the entire claim amount.

Adds Chaturvedi, “The interesting aspect of deductibles is their inverse relationship with insurance premiums. The higher the deductible, the lower the premium will be. This trade-off is important to understand as opting for a higher deductible can help reduce your premium, but one must also be cautious about the out-of-pocket deductible they can pay.”

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Top-Up Plans

Besides co-payments and deductibles, policyholders could also consider a top-up plan. This plan offers coverage to individuals who already have a health insurance policy. It allows policyholders to cover expenses after they exhaust the limit of their initial policy. These plans are cost-effective and provide added coverage when the existing policy is inadequate.

Suppose your health insurance policy covers Rs 5 lakh, and you take a top-up plan of Rs 10 lakh. Now, assume your hospitalisation cost is Rs 7 lakh. In this situation, you can use the entire base plan to pay Rs 5 lakh and the remaining Rs 2 lakh from the top-up policy.

In conclusion, health insurance is indispensable for managing unexpected medical expenses. Given the increasing costs, comprehensive coverage may seem perfect, but it is costly. Therefore, one could explore options like a deductible, co-payment, or a top-up plan to reduce the premium burden based on the customer’s financial capacity and requirements.