If you are a healthy person, it makes sense to opt for a co-payment policy as your premium outgo would be much less
Faced with the challenge of trimming losses in their health portfolio, particularly in the group mediclaim segment, many non-life companies are exploring ways of keeping their costs in check. In line with the objective, several health insurers have introduced the co-payment clause, mainly in the group mediclaim policies offered by them, with a few companies having extended the same to individual policyholders as well. Going forward, the number of companies looking to bring individual health policies into this fold is likely to go up.
How Does It Work?
Co-payment refers to the portion of claim that a policyholder agrees to bear, while the insurance company undertakes to chip in with the rest. The co-payment ratio, though a function of pricing, is arrived based on market acceptance. Not many people would be interested in purchasing a health policy with a co-payment ratio of say, 50%. The ratio generally varies from 10% to 25. That is, if the co-payment ratio prescribed is 20%, 80% of the eligible amount — the approved claim — will be paid by the insurance company.
This feature is primarily used by insurance companies to discourage policyholders from availing of treatments in plush rooms at high-end hospitals. Also, it deters policyholders from going in for treatment that would have otherwise not been necessary. From an insurance company's perspective, the overall cost of claims comes down. The insured are likely to start using the benefits available under the policy more judiciously, as they have to bear a part of the expenses.
The clause could come into play only with respect to certain conditions or all the ailments covered by the policy. In case of some policies, the co-payment could be applicable only when the insured undergoes treatment in certain metropolitan cities — the logic being that the cost of healthcare in major cities is higher than the smaller towns. And then there are policies where the co-payment clause comes into the picture only if the insured undergoes treatment at hospitals that are not part of the designated network. In case of our individual health plan, there is a provision of waiving off the co-payment (applicable to treatment at non-network hospitals) by paying an additional premium, which can be made at the time of renewing the policy or buying a policy for the first time.
Policyholder's Perspective
While it helps health insurance companies curtail their losses, policyholders too stand to benefit. The main advantage for the policyholder who opts for a health cover with a co-payment feature is the lower premium payable.
The co-payment ratio has a direct bearing on the product pricing — the higher the ratio, the lower will be the premium and vice-versa. By the rule of thumb, for policyholders opting for a 20% co-payment ratio, the premium could come down by 15-20%.
Assess Your Risk
While the prospect of paying lower premiums may seem attractive, such policies may not be suitable for all categories of policyholders. For instance, an individual maintaining good health, who believes that his/her risk of being hospitalized is minimal, can consider buying a health insurance policy with a co-payment clause. However, the same cannot be said of senior citizens, whose chances of being hospitalized or undergoing other treatments entailing huge costs are quite high.
