What is copay in Health Insurance

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Everything you need to know about copay in health insurance

What is Copay (Copayment) in Health Insurance?

With more and more flexibility being incorporated into health insurance policies by insurers, the focus remains on promoting awareness regarding the concept of health insurance. This can help policyholders remain financially secure in the event of an untoward incident regarding their health. Ultimately, it is easier to pay for any such eventuality in the form of small amounts as compared to a significant amount all at once. One concept now being included in various health insurance policies to make it easier for the insured persons to avail excellent medical care and facilities at hospitals is copay in health insurance.

What are the different types of cost-sharing options provided by health insurance providers?

There are essentially three cost-sharing options that health insurance providers, including copayment, provide –

1) Copayment

2) Coinsurance

3) Annual deductibles

Copayment – an understanding of what it is

In the simplest of terms, copayment in health insurance is the amount the insured person must pay along with the insurance coverage to settle the hospital bill. Now, the copay is essentially a cost-sharing arrangement between an insured and the insurer. Herein the insured is given an option when signing the insurance agreement regarding the amount to be paid out of pocket for settling a given medical bill for an event that is covered under the insurance plan.

Insurance providers allow insured persons a choice between 10% to 30% of copay in health insurance. Herein the insured person can only expect the remainder percentage as insurance coverage while paying the decided percentage out of pocket. For example, Mr. X has opted for 20% of copayment on his health insurance. Due to a medical emergency covered under his health insurance plan, he is admitted to a hospital. At the time of discharge, Mr. X is informed that the total amount is Rs. 1 lakh. In this situation, Mr. X will have to pay 20% of Rs. 1 lakh out of pocket, by himself and then the remaining 80% will be covered under his insurance coverage.

What is the difference between copay and deductibles?

While a standalone copay seems like a simple concept to understand, in the real world, when you integrate it into the entire ecosystem of health insurance, things get a little trickier. Ultimately, the copay is an added expense bundled with other expenses related to health insurance, for example, deductibles.

The prime difference between copay and deductibles is that deductible is a specific amount that is fixed in each insurance agreement and is paid to the insurance provider by the insured person before the tenure of the insurance plan commences. At the same time, the copay is a fixed percentage of the total medical expense incurred by an insured person in an event covered in the insurance agreement. Another difference between the two is that while deductibles are calculated annually, the copay’s terms and percentages are generally included in the insurance agreement. They remain constant throughout the term of the policy.

Usually, health insurance policies also have an option for maximum out of pocket spending. Herein, if the insured person spends a decided maximum amount as copay on health insurance coverage, from thereon, any other expenses will be paid for, in full, by the insurer.

Why are copay clauses included by health insurance providers in insurance agreements?

Following are a few reasons why health insurance providers often find it necessary and beneficial to include copay clauses in their health insurance plans and policies.

1) Owing to the fact that insured persons have to undertake a percentage of the cost, they are rightfully reluctant to make insurance coverage claims for common health problems such as a generic fever or other normal conditions

2) Insured persons are more likely to avail treatments at lesser expensive hospitals as compared to extremely costly ones.

3) Ultimately, it allows the company to save large amounts of money on every insurance agreement, thereby reducing their own risk and ensuring their financial stability.

Checklist for health insurance for newborn baby

In order to select the best health insurance for a new-born baby, there are some important factors that you need to consider. This will enable you to make an informed decision and provide the most suitable health insurance cover for the baby: -

  • Premium: - The premium charged by the company for the inclusion of the name of your new-born baby in the health insurance policy is an extremely important factor. Most insurance companies offer this facility for free, while some charge a nominal premium for extending this facility. So, you must opt for health insurance for new-born baby whose premium is within your budget.
  • Coverage: - Coverage of a health insurance policy differs across different insurance companies. Some policies might not cover serious health conditions and, as such, expose your child to an increased risk. Therefore, you need to identify the health insurance for new-born baby which offers coverage against maximum health conditions.
  • Eligibility: - Usually, most insurance companies have basic eligibility criteria to add the name of a new-born baby to an existing family health insurance plan. This pertains to the age at the time of entry which can vary between 90-180 days. It is suggested to opt for a plan which starts the coverage as soon as possible.
  • Existing policy: - In many cases, maternity health insurance plans provide health insurance coverage for a new-born baby up to a certain period. If you have already subscribed to a maternity health insurance plan that provides health insurance coverage to your baby till a certain age, you have some time at hand to make a decision.
  • Customization: - Many online health insurance companies allow you to customize your health insurance cover as per your requirements. This lends you a significant degree of flexibility while deciding on a health insurance plan for your family after the birth of your baby.
  • Exclusions: - In addition to the inclusions, you must also pay attention to the exclusions of the health insurance for new-born baby. Many insurance companies have different terms related to waiting periods and exclusions, so make sure you pay close attention to this aspect.

Conditions: - Do not make the mistake of overlooking the fine print of the policy documents as it contains all the important terms and conditions pertaining to the health insurance for new-born baby. Only after you are satisfied with the conditions laid therein should you make a final decision.

Why is copay important?

Well, put simply, copay in health insurance policies has quite a few reasons to be important. It ensures that the insured person remains insured and allows him/her to be more conscientious of the health since there is a certain amount of liability resting on the insured person even if the majority of the medical expenses are to be covered by the insurance policy. Moreover, copay options allow the insured person to choose between paying either large amounts of premiums for larger insurance coverage when required or lower insurance premium amounts that also impose some amount of financial liability on you at the time of necessity.

Copay options, while offering a certain percentage of flexibility to the insured person, also ensure that their health policies are not misused by imposing the fixed percentage of liability on the insured person. Having said that, copay also ensures that if the insured person has made a provision for a maximum out of pocket expenses cut off, beyond that threshold, the insurance provider will handle the remainder of the expenses as provided for by the insurance agreement.

FAQs

  1. What is copay in healthcare?

Copay in health insurance and healthcare refers to the concept wherein the insured person is bound to pay, according to the insurance agreement, a percentage (10% to 30%, which varies from provider to provider) of the total expenses incurred in the happening of an insured event. In contrast, the remainder of the expenses is covered as part of the insurance relief provided for by the insurance agreement with the respective insurance provider. The amount to be paid by the insured person is referred to as ‘out of pocket expense’.

2. How does an insurance copay work?

In an insurance copay, when creating the insurance agreement, the insurance provider will offer you a choice between the percentage of copay you wish to opt for, which will also directly affect the amount of insurance premium you pay. The higher the percentage of copayment you opt for, the lower the insurance premium. However, this also affixes a larger financial liability on you at the time of occurrence of any covered event. This copayment percentage will remain constant throughout your insurance tenure regardless of the total amount of medical expenses. At the time of payment of these expenses, you will be required to pay the percentage that you have opted for at the start of your insurance agreement,. In contrast, the remaining percentage will be paid off under the insurance coverage provided for under your agreement.

3. What is a copay example?

For example, a person buys a health insurance policy with the option of a copayment of 10% of the total bill amount throughout the tenure of the insurance policy. Now, if he gets into a car accident and his total medical expense amounts to Rs. 10 lakh, he will be expected to pay Rs at the time of payment of the bill. 1 lakh as out of pocket expenses, and the insurance provider will offer insurance coverage for the remainder Rs. 9 lakh. Having said that, the person will also have to pay a lower amount of insurance premium if he opts for a higher copayment percentage, with the understanding that a larger financial liability is imposed on his at the time of making a valid insurance claim wherein the insurance provider will pay a lower insurance claim amount.

4. How much is a copay with insurance?

A copay is the fixed out of the pocket amount that is expected from the insured person at the time of making an insurance claim generally ranges from anywhere between 10% to 30% and varies for every insurance provider. While opting for a higher percentage of a copay reduces the amount of insurance premium you pay, a higher financial liability is imposed on you at the time of making a claim.

Copay on health insurance policies is an excellent choice if you feel like you would be able to bear the financial liability to the fixed percentage of the terms of the agreement at the time of making a claim. However, this is a decision that must be taken after grave consideration of your present health and the health of your financials, both in the short term and in the long run and the likelihood of your requirement in the future. Do bear in mind that ultimately, the copay is not a fixed amount, rather a fixed percentage of the final bill for medical expenses in an insured event.


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