Do you know that Out-of-Pocket Expenditure (OOPE) in total Health Expenditure (THE) in India is 47.1% for 2019-20? It means that we’re still relying on spending our savings on medical expenses rather than getting health cover to support our finances. Even for those armed with health insurance, due to some cost saving features added in their health insurance policy, the insurer does not cover the costs completely. And a part of payment is made out-of-pocket when a health insurance claim is raised. Deductibles and copayments are two such features in health insurance. In this blog, we’ll uncover the hidden facts behind the deductibles and copayment in health insurance, which will help you to make an informed decision.
What is Copayment?
Copayment (copay) is a fixed percentage of your hospital bill that you pay each time from your own pocket when you raise a claim under your health insurance policy. This copay clause is a part of your policy document, which is typically a percentage of the total cost of treatment.
What is Deductible?
A deductible is the amount of money that an insured person must pay out-of-pocket, every year for eligible healthcare services before the insurance plan begins to cover the costs. The size of the deductible can vary depending on the health insurance plan and deductible clause, if any, is a part of the policy document.
Difference between Deductible vs Copay in Health Insurance
| Features | Deductible | Copayment |
| Definition | Deductible is a fixed amount that the policyholder must pay before the insurer starts covering expenses in a policy year. | Copayment is a fixed percentage of the total bill amount that the policyholder must pay and the rest amount is covered by the insurer. |
| Payment type | Aggregate annual payment (before insurance coverage kicks in) | The policyholder needs to pay for each claim as a percentage of the total medical bill. |
| Applicability | The policyholder needs to pay the deductible before the insurance provider starts paying. | It is applied after the insurer has covered the major percentage of the bill. |
| Amount type | Fixed amount (e.g., ₹20,000 per year). | Percentage-based (e.g. 10% of the hospital bill). |
| Impact on premium | When a policyholder chooses for higher deductibles, it results in lower premiums. Note: It is not desirable to take higher deductibles as the policyholder needs to pay upfront while making a claim to get the benefits of health insurance |
Higher percentage of copay leads to lower premiums.
Note: It is not desirable to take higher copay as the policyholder needs to pay more from their own pocket. |
| Example | If a policy has a ₹25,000 deductible, the policyholder must pay ₹25,000 out of pocket before the insurance starts covering expenses in a policy year. | If a policy has a 10% copay and a hospital bill is ₹1 lakh, the policyholder must pay ₹10,000, and the insurer covers ₹90,000. |
Key takeaways
- Deductibles are fixed amounts paid annually before the insurer starts covering expenses.
- Copay is a percentage of each claim that policyholders must pay.
- Plans with higher deductibles or copayments usually have lower premiums.
- Don’t opt for a higher deductible as you need to pay upfront to get the benefits of health insurance.
- Don’t opt for a higher copay as you need to pay more from their own pocket.
- Some policies, especially for senior citizens, may have a mandatory copay or deductible clause to manage the insurer’s risk.
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