Why is There a Co-Payment Clause in the Terms of Your Health Insurance Contract?

Over the past years, medical costs in India have considerably increased. Medical inflation currently stands at around 15 percent, which is much higher as compared to the overall inflation rate, which is nearly 6-7 percent. This sharp rise in medical inflation can be attributed to the increasing raw material costs and overall medicine expenses, in general. Also, other expenses like warehouse charges, freight charges etc. have considerably increased because the healthcare equipment mostly demands higher storage and transportation needs.

That is why opting for health insurance in India is not just an option but a need when it comes to availing competent medical payment assistance. Keeping a medical insurance plan for self and family health insurance for dependents in place allows you to ensure complete protection against financial liabilities, which may arise due to sudden medical emergencies.

What is health insurance? And how does the co-payment clause in health policy work?

Before understanding how does the co-payment clause works, let’s first understand that what is health insurance? Health insurance in India is a kind of policy that covers health care costs that arise owing to illness, accident, disease etc. Such expenses can be linked to hospitalization expenses, medicine costs or doctor consultation charges. While there are insurance plans that claim to cover up to 100% of the medical costs, many have a co-pay clause attached to their policy.

Co-pay in medical policy is the percentage of claim amount that you as a policyholder must bear under the health insurance. Note that medical policies may either have mandatory or voluntary co-payment clauses as per the insurer. Opting for voluntary co-payment can help you lower your premium payment towards health insurance. * Standard T&C Apply

Generally, with medical insurance policies, you get 2 kinds of co-payment claims:

  • Reimbursement for costs incurred
  • Cashless treatment option

If opted for the reimbursement claim, the insurer will reimburse you the costs incurred on the medical treatment. On the other hand, under cashless treatment, insurers directly settle the expenditures incurred, provided the overall bill is within the assured limit in a network hospital. The cashless treatment option is extremely advantageous if you lack the potential to arrange funds at the last moment for treatment.

There are 2 major situations that arise on co-payment:

  • Firstly, if you choose higher co-payment, it will assist to reduce your overall premium amount. But during the claim you will have to pay a higher amount.
  • Secondly, if you choose lower co-payment, it will lower your amount that you will require bearing during the claim. But the premium amount will be higher for the health policy.

* Standard T&C Apply

Reasons for medical insurance policies to have a co-payment clause

  • To avoid any unnecessary claim

In medical insurance, there is generally zero limit to the number of claims you can make annually. You can continue making the claims till your sum insured is completely exhausted. Adding a co-pay clause to medical policies allows the insurers to lower the chances of claims for minor treatments or hospitalizations. *

  • To meet the insurer’s risk

In the case of a co-pay clause in medical insurance, you are expected to pay a particular portion of the claim amount. Thus, in such cases, you as an insured will have to pay 100% of the claim first, which results in lower risk for the insurers. *

  • To encourage prudent use of medical plan

Including a co-payment component to medical insurance is one of the mediums for insurers to make sure that you judiciously use your policy. This even assists to prevent any fraudulent claims to a great extent. *

  • To reduce the premium component

Co-payment permits you to reduce your premium amount paid towards medical insurance. If you are one of those with minimal or no health concerns, you can opt for higher co-payment while purchasing a health plan. Doing so helps you lower your premium outgo. *

* Standard T&C Apply

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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