What is Co-Payment in a Health Insurance?

By Pratima Singh
  | Published: 21 April 2021 | Last Updated On: 30 July 2021

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What is a Copay?

Co-Payment in health insurance is a system where the policyholder needs to pay a part of the total medical expenses and the rest of the amount needs to be paid by the insurance service provider. The co-payment amount gets calculated on the basis of the terms and conditions of the policy that’s opted for. 

In a regular insurance policy, when it’s time to file a claim, you go to the hospital, get your medical bills and your insurance company takes care of it. However, with a co-pay clause, you agree to pay a part of your medical bills along with your insurance provider. There are various health insurance companies in the UAE that offer a co-pay clause in insurance policies. The co-pay amount is usually fixed based on the services, drugs, and nature of medication required.

For example, if you have a co-pay clause of 10% in your insurance policy and your medical bills are for AED 10000, you need to pay AED 1000 out of your own pocket and get the rest of the amount which is AED 9000, paid by your health insurance company.

How Copay Works in a Health Insurance Policy?

Here is how you can get the co-pay clause applied to your policy.

  • Cashless Basis: When you opt for a hospital that falls in the network of your health insurance company, they provide you cashless hospitalization and settle all the medical expenses directly with the hospital.
  • Reimbursement Basis: On the flip side, if you opt for a reimbursement treatment, you’ll be required to pay initially and claim for the expenses later.

So based on these two types of claims, there are two options that can be chosen with a co-pay.

  • High Co-pay and Lower Premium: If you choose to add a higher co-pay percentage, you’ll be required to shell out a higher amount. The remaining share will be paid by your health insurance provider.
  • Less Co-pay and Higher Premium: On the other hand, if you choose a lower co-pay percentage, you will have to pay comparatively lower at the time of paying off bills. This kind of co-payment option often attracts higher premiums. 

What are the Types of Copay Clauses Offered by Insurers?

Now that you know what co-pay is in a health insurance policy, let us check out the types of co-pay clauses that can be applied to different types of insurance policies.

Before we go ahead, let us keep in mind that not all insurance providers come with mandatory co-pay clauses in their policies. However, if they have this clause, this is how you need to settle your payments.

  1. Co-Pay Clause on Medical Bills: When it comes down to paying your medical bills, co-pay applies to the whole amount that the claims have been reported for. This can be both, voluntary or mandatory. You need to pay the co-pay amount as stated in your policy and as agreed by you.
  2. Co-Pay Clause on Reimbursement Claims: Most health insurance providers add co-pay clause to reimbursement claims and not to the cashless ones. This makes policyholders opt for cashless claims and get their treatment done in one of the network hospitals.
  3. Co-Pay Clause on Senior Citizens Policies: Under this category, co-pay clauses are mostly mandatory. This is because senior citizens are more prone to getting sick and the treatment costs are usually higher for them.

Features of Copay Insurance Policy

Let us now go through the features of the co-payment clause in a health insurance policy to know more about how it works.

  • The percentage of co-pay amount depends upon the type of medical service and the nature of treatment you avail
  • The good portion of your claim gets covered by your health insurance provider. However, you need to pay a certain percentage based on your policy agreement.
  • Co-Pay clauses are more popular in developed cities where the cost of treatment is comparatively higher.
  • The policies for senior citizens mostly have a mandatory co-payment clause.   
  • The lower percentage of co-payment in the policy will have you pay a higher premium against your insurance policy
  • Co-payment clauses help save costs and reduce unnecessary claims.

Advantages of the Copay Clause in Your Insurance Policy

Here are some advantages of adding a co-pay clause to an insurance policy:

  • A co-pay clause added to an insurance policy discourages people from reporting unnecessary medical claims. The treatment for the common cold or mild fever could get charged back to the insurer technically. Adding a co-pay clause can help avoid such expenses and save a lot of paperwork for both parties. The clause also discourages any misuse of insurance policies
  • A co-pay clause added to your insurance policy helps you opt for the hospital with an average cost of treatment. This saves you from spending extra money at more expensive hospitals
  • The clause also brings in a sense of ownership. When you know that you need to pay a certain amount of your medical bills, you will see those bills as an expense and ensure that you use that money right.

Disadvantages of Copay Clause in Your Insurance Policy

Here are the disadvantages of adding a co-pay clause to health insurance policies.

  • If the policyholder has a high percentage of co-payment amount in the insurance policy, it may discourage the policyholder from getting the proper medical treatment. People who can’t even afford the basic medical expenses would be at a huge disadvantage
  • People usually do not opt for the insurances that have a co-pay clause added to them and they prefer the policies where the insurer pays the whole amount of medical bills. This leads the insurer who offers full-payment benefits to the higher sales
  • If you opt for a higher co-pay percentage, your premium will be less. This benefits the policyholders in ways that you won’t have to pay extra premiums when there isn’t a need in foreseeable future.

Now that you know almost everything about the co-payment clause in health insurance policies, let us go ahead and check how is it different from co-insurance.

How is Copay Health Insurance Different from Co-insurance?

People usually confuse co-payment with co-insurance. These two are completely different things and the major difference is that under co-insurance clause both the insurer and the insured person enter into an agreement where they decide the percentage each party needs to pay to settle the total bill. 

On the other hand, in co-pay, the contribution percentage is fixed based on different healthcare services and the nature of treatment the policyholder avails.

How is Copay Different from Deductible?

In some policies when the policyholder needs to report a claim to get their medical expenses paid by their health insurance company, they need to pay a fixed amount first. This fixed amount is called the deductible. In simple words, the insurance company will pay the remaining amount of medical bills only when the deductible amount has been paid by the insured person.

On the other hand, co-pay is an amount based on the percentage the insured person agrees to when buying the policy. The policyholder pays the said percentage of while the remaining bill is settled by the insurer.

What is the Importance of co-pay in Health Insurance?

Here are a few pointers to understand the importance of co-pay in a health insurance policy:

  • Co-pay in a health insurance policy divides the risk between the policyholder and the insurance company.
  • When it comes to senior citizens’ policies, the co-payment clause helps get lower premium without compromising on an adequate coverage.
  • Co-payment clause helps policyholders reduce the burden of high premium payments.
  • With a co-pay clause in the health insurance policy, the insured has to bear lower share of the claim.
  • co-pay in a health insurance policy discourages the excessive use of luxury medical facilities in expensive hospitals and inspires insured persons to report only necessary claims

Frequently Asked Questions

Q1. What is Copay in health insurance?
Ans: Co-pay in health insurance is a percentage that is borne by the insured person when the time comes to paying medical bills. Let’s say you have a co-pay clause in your insurance policy and you have an agreement for making 10% co-payment out of your own pocket. In case of a medical emergency, your hospital bill amounts to AED 45000. In this case, you need to pay only 10% of the total amount, i.e., AED 4500. Rest is paid by the insurer.

Q2. How does co-payment in a Health insurance policy work?
Ans: Co-pay is a fixed percentage of the claim amount that the policyholder needs to bear from the total amount. The bigger share of your expenses is paid by the insurance provider. You can get more information about co-pay percentage and payments from the TPA team of the hospital. 

Q3. Who gets the co-pay money?
Ans: The insured person needs to pay the co-pay amount to the hospital.

Q4. Does co-pay Impact Health Insurance Premium?
Ans: Yes, if the co-pay percentage is higher the amount of your insurance premium will be lower. However, if the co-pay percentage in the policy is lower, you need to pay a higher premium amount.

Q5. Why do insurance companies offer co-pay clauses in their policies?
Ans: There are various reasons why insurance companies offer co-pay clauses in the policies.

  • It helps reduce the unnecessary medical bills.
  • They get to pay the reduced amount while paying the medical bills for the insured person.
  • It reduces the amount of risk and liability.

Q6. Why are health insurance policies with co-pay cheaper?
Ans: The health insurance policy with the co-pay clause is cheaper as you need to pay only the premium for the sum assured remaining after the deduction of the fixed co-payment percentage. This way the risk and liability get divided between the insured person and the insurer so the policy becomes cheaper.

Q7. Should I take a policy with co-pay?
Ans: The decision of whether to add or not the co-pay clause in your health insurance policy depends upon your present physical state and medical condition. If you are physically fit and maintain a healthy lifestyle with regular exercise, you may not need to use your insurance policy anytime soon. Then you must take the insurance plan with a co-pay clause. This will help you lower your premium amount.

On the other hand, if you find yourself unfit and have a vulnerability to medical conditions, it is advisable to take a regular health insurance policy.

Pratima Singh
Pratima Singh10 Posts

Editor | This is me saying HEY! from behind the screen you're staring into. I am a pop culture junkie who derives pleasure in writing fresh, informative, and fun content.