The General Insurance Council is reportedly considering a proposal to introduce a mandatory 10% co-payment in retail policies, with the policyholder’s contribution potentially capped at ₹5 lakh per claim.
The proposal aims to address rising healthcare costs and potential distortions in hospital billing. However, if implemented, it could increase the out-of-pocket burden for health insurance policyholders, particularly those facing large hospitalisation expenses.
The proposed co-pay is reportedly being considered for retail indemnity health insurance products, irrespective of whether a claim is settled through cashless treatment or reimbursement.
What is a co-payment in health insurance?
A co-payment is a cost-sharing arrangement in which the policyholder pays a specified percentage of an eligible medical claim, while the insurer covers the remaining amount.
Under a voluntary co-pay arrangement, the percentage is generally selected when the policy is purchased or renewed. For instance, with a 10% co-pay, if the admissible hospitalisation claim is ₹5 lakh, the policyholder would pay ₹50,000 and the insurer would pay the remaining ₹4.5 lakh.
A higher co-pay can result in a lower premium, making it attractive to policyholders with adequate savings who expect relatively low claim frequency.
However, a lower premium does not necessarily mean a policy is cheaper overall. In the event of a major hospitalisation, the policyholder could incur substantial out-of-pocket expenses.
Why is mandatory co-pay being considered?
The proposed mandatory co-payment is reportedly intended to address rising healthcare costs and concerns about unnecessary or additional procedures being recommended to patients with comprehensive insurance coverage.
Under the reported proposal, the co-pay would apply to all retail indemnity products and could not be removed or reduced through riders or add-on covers. The policyholder’s share could also not be recovered under another policy.
While insurers may view cost-sharing as a way to discourage unnecessary healthcare expenditure, the proposal could increase the financial burden on people who have already paid higher premiums for comprehensive health coverage.
The impact could be particularly significant in cases involving large hospitalisation bills, including claims arising from accidents.
Senior citizens could face a higher financial burden
Mandatory co-payment could have a greater impact on senior citizens because health insurance premiums generally increase with age.
Some health insurance policies designed for senior citizens already have an in-built co-pay, particularly for policies purchased after age 60 or for those with pre-existing medical conditions.
Such policies can also come with other restrictions, including treatment-specific exclusions, claim limits and higher co-payments for certain pre-existing conditions.
Room-rent limits can further increase the policyholder’s expenses. If a policy restricts the amount payable towards room rent and the insured chooses a room above the permitted limit, the additional expense may have to be borne by the policyholder.
Similarly, co-pay generally applies to covered medical expenses. Non-medical expenses, such as certain consumables and administrative charges, may remain outside the scope of the policy.
If a mandatory co-pay is introduced, senior citizens, people with chronic illnesses and those who require frequent medical treatment may have to plan for an additional payment with every claim.
Zone-wise co-pay is different from voluntary co-pay
Health insurance policies can also have zone-based co-payment clauses.
Insurers may classify cities and regions into different zones based on healthcare costs and price their policies accordingly. Treatment in a higher-cost zone than the one used to calculate the premium can trigger an additional co-payment under certain policies.
This is different from voluntary co-pay, which is chosen by the policyholder to reduce the premium.
Co-pay and deductible are not the same
A deductible is another form of cost-sharing, but it works differently from co-payment.
Under a deductible, the policyholder agrees to pay a fixed amount of a claim before the insurer’s coverage begins.
Deductibles can help reduce premiums and discourage small claims.