Taking Cover. Health insurance doesn’t cover it all

Many individual health insurance policies today have a co-payment clause. Where the policy has a co-payment clause, the insurance company will not foot the entire bill for a claim. A portion of it will have to be paid from your pocket. To avoid trouble later on, you need to be fully aware of what this clause entails and when you have to chip in.

Co-payment is the portion of the medical claim that the policyholder agrees to pay. The terms of co-payment (the percentage and other conditions) have to be agreed upon at the time of issue of the policy itself and are put down in the contract. The insurance company can’t insert the co-payment clause mid-way during the term of the policy.

While some insurance companies have co-payments only for treatments that are highly expensive, others have an age criteria for imposing co-payment.

For instance, in most senior citizens’ health policies (examples are policies of Star Health and Religare Health) where the insured is above 60-61 years of age, there is a co-payment clause. The other situation when insurers introduce co-payment is when treatment is taken in a non-network hospital.

Bajaj Allianz’s health plan for instance has a co-payment (of 20 per cent) clause for treatment in hospitals outside its network. Since non-network hospitals may charge you rates that are not negotiated for treatments, insurers try to reduce their outgo in such cases by having a co-payment clause.

In situations where a policy holder from a smaller city gets treatment from a hospital in a metro city, again insurance companies may require the customer to share a part of the claim. New India Assurance has a co-payment clause for change in zones. The main positive for an insurance company from a co-payment clause is that this keeps a check on the policyholder’s claims and discourages excessive claims.

The percentage of co-payment is applied on the ‘admissible’ claims, says Sudhir Sarnobat, Director, Medimange — a large insurance broker.

The admissible claim is the total claim less any expenses on excluded items, such as registration charges, telephone bill or attendant’s food, that may be incurred on the treatment.

Assume the policy is for a sum insured of ₹5 lakh and you have agreed to co-pay 10 per cent. On hospitalisation for a medical treatment later, you spend a total of ₹10,000. Expenses on surgical gloves, cotton, and bandages come to ₹1,000. The admissible claim amount here will be ₹9,000. You will have to pay ₹900 (10 per cent of ₹9,000) from your pocket and the insurance company will pay ₹8,100. You will also have to foot the bill for excluded items.

If you are under a reimbursement scheme for expenses, the insurance company will pay only its portion of the admissible claim. If it is a cashless plan, the company will intimate to the hospital that there is a co-pay clause in the policy and that it has to collect one portion of the bill from you.

So, if you have a co-payment agreement with your insurer, setting aside cash for medical emergencies is a must.

Many insurance companies today offer an option for voluntary co-payment in individual health plans. A comparison of costs, however, shows that the saving in premiums because of the co-payment clause may not exactly be equal to the agreed co-pay. Take, for instance, the policy from Cigna TTK. For a 35-year-old man, a health plan of sum insured ₹5.5 lakh with 10 per cent co-pay is available for a premium of ₹7,940. The same plan without co-pay will cost ₹8,584.

Now, what if the claim amount is more than the sum insured?

Assume the admissible claim on a policy of ₹3 lakh, where there is a co-pay of 10 per cent, is ₹5 lakh. How much will the insurance company pay and how much will the policyholder have to pay?

Amit Bhandari, VP for Underwriting & Claims, ICICI Lombard General Insurance, says, “In this case, we will pay the full ₹3 lakh, as the policyholder has to anyway pay more than ₹30,000 (10 per cent of the sum insured) from his pocket.”

IRDA’s health insurance regulations of 2013 have made it very clear that a co-payment will not reduce the sum insured, adds M Ravichandran, President, TATA AIG General Insurance. “We determine the admissible amount of claim first and then apply co-pay. If the amount so arrived is higher than the sum insured, we will pay the full sum insured,” he says.