Why, even with a health policy, you end up paying

Health insurance policies typically cover the entire hospital expenses of policyholders as per policy terms. But, at the time of claim, the settlement paid by the insurer could be lower than your medical bills, leaving you to bear the balance amount.

While the reasons could be plenty for the lower payout, co-payment or cost-sharing is a critical clause buried in the policy wordings that needs to be given special attention. Co-pay could be one of the reasons for lower claim settlement from your health insurer. Here is what you should know about it.

What is it?

Co-payment means a cost-sharing requirement under a health insurance policy that stipulates that the policyholder will bear a specified percentage of the admissible claims amount.

In some health insurance policies, there is a co-pay clause wherein, as a policyholder, you would have to pay a part of the expenses, while the rest would be covered by your insurer. For instance, insurance companies can have a co-pay of 10 per cent on doctor visits or prescription drugs. So, if your total doctor visit expenditure is around ₹2,000, you will have to pay ₹200; the rest will be borne by the insurance company. The co-payment clause is meant to discourage people from making ‘unnecessary’ claims.

Insurers including Bajaj Allianz General, Max Bupa Health, Manipal Cigna, Star Health, United India Insurance and Aditya Birla Health have co-pay clauses in some of their policies.

How does it work?

The co-payment amount varies with the type of coverage under a policy. Often, its applicability depends on certain conditions. Accordingly, there are a few common scenarios where co-pay is applicable.

Hospitalisation: Co-pay is applicable in case of hospitalisation in a metro (tier 1) city when you have purchased your health policy in non-metro (tier 2 or 3) city. However, claims from policies issued in tier 1 cities do not have any co-pay element. For instance, in Max Bupa’s Go Active health policy, an individual paying premium in Zone I (includes cities such as Mumbai and Delhi) can avail treatment all over India without any co-pay. But, for a person paying premium in Zone II cities (such as Bengaluru, Chennai, Hyderabad and Pune) 20 per cent co-pay is applicable for availing treatment in Zone I hospitals. However, there is no co-pay if he/she takes treatment in Zone II or Zone III cities. Note that zone-wise co-payment is not applicable normally on services including emergency ambulance and diagnostic tests.

Age: Another scenario when co-pay is applicable is based on the age. For instance, under the Manipal Cigna Pro Health policy, mandatory co-payment of 20 per cent is applicable on all admissible claims if the insured is aged 65 years and above, irrespective of age of entry into the policy. However, the same can be waived with payment of additional premium at the beginning of the policy. Star Health Insurer’s Comprehensive health policy, too, has co-pay based on age.

Room rent limit: Some of the insurers apply co-pay on claims on exceeding the room rent limit. Consider Bajaj Allianz’s Health Infinity policy. The sum insured is based on the room rent limit opted by you, ranging from ₹3,000 to ₹50,000 per day. Co-payment is applicable if you are admitted in a hospital with a higher room rent. It is also applicable when your claims exceed 100 times the room rent opted by you. Co-payment of 15, 20 or 25 per cent, as opted, will be applied before claim settlement.

Others: Co-payment is also applicable for OPD consultations, non-network hospitals, network hospitals (under certain circumstances) and for particular pre-existing diseases.

Example: Joe has a health insurance policy of ₹6 lakh with a room rent limit of ₹5,500 per day. On admission, the hospital offers him a room for ₹6,500 per day. Joe will get only ₹5,500 per day from his health insurer; the balance ₹1,000 per day has to be borne by him. Finally, if the total medical bill comes to ₹6 lakh, he would be paid only ₹5.07 lakh (in the ratio of room rent eligible-to-actual room rent) by the insurance company. About ₹92,280 should be paid by Joe.

Amit Chhabra, Head - Health Insurance, Policybazaar.com, says: “Co-payment is not just on the room rent limit but applied proportionately on the total expenses including medicines, surgery and other charges. This is because the insurance company assumes a proportionate increase in other charges as well.”

Further, if Joe is hospitalised in a Zone I hospital and his policy is from Zone II, co-payment of 10 or 20 per cent will also be applicable on the total claim amount.

Your health policy and co-pay

There are some policies in the market without co-pay, such as HDFC Ergo Health’s Optima Restore (previously Apollo Munich Health), ICICI Lombard’s Complete Health Policy and TATA AIG’s Medicare Premier.

Though co-payment is not a deciding factor in a health policy, it is still an important aspect to consider at the time of purchasing a policy. Keep in mind that the co-pay clause doesn’t reduce the sum insured of your health policy, but it results in reduced claim settlement.

However, you can stave off co-payment applicability in your policy by paying additional premium at the time of purchase. You can also voluntarily agree for a co-pay to reduce your premium outgo. But you will have to foot the bill partly in case of claim.

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