Concept of Co-Payment in Health Insurance

Innovation and co-operation are at the center of the human evolution story. New ideas are designed to cut out the profitable paths, and the insurance industry is no stranger to it. Co-Payment in Health Insurance plans is yet another step in the same direction to increase profits, reduce costs and present a win-win situation for both the insurers and the insured. A health policy with a co-pay clause, under the right circumstances, can be of great benefit to all parties involved.

Co-payment is simply an agreement between an insured and the insurer wherein the insured undertakes to pay a specified  percentage of hospitalization expenses out of his pocket while the remaining amount will be given by the insurer as per the terms of the health plan. This percentage could vary between 10-30% of the sum assured.

Working of the Co-payment Clause

Consider a situation where you get hospitalized, and the total bill comes up to Rs. 1,00,000/-. Now, with a 10% co-pay clause, you will have to pay Rs. 10,000/- on your own while the balance Rs. 90,000/- will be paid by the insurer.

Advantages of Co-payment:

  • A higher co-payment percentage means lower premium for the insured. Since the insurers’ risk goes down, they don’t mind, offering discounts on the health insurance plans to seek more customers.
  • The insurance provider’s profitability increases as a 10% co-payment would straightaway mean saving of 10% for them.
  • This clause also helps by discouraging customers from going for luxurious hospital care or boutique hospitals for every little ailment. Since the insured would know that he has to bear a part of the cost, he would only opt for necessary treatments and that too at reasonable hospitals as per the policy conditions.
  • Unnecessary claims go down, again because the insured would not like to file a claim for every little medical treatment they undertake. For example, treatment for regular colds or gastric problems may not earn enough of claims compare to the effort one has to put in to submit claims and do the paperwork and the fact that he has to pay the specified percentage of expenses as a co-payment.

Disadvantages of Co-payment

  • If you are old, then the chances of you getting hospitalized and availing health policy benefits are higher. In such a case, if you involve a co-payment clause to reduce premium, you might end up paying higher hospital bills from your own pocket rather than saving any money.
  • Also, if the co-payment amount is way too high, the insured might decide to totally avoid adequate medical care. This would negate the whole purpose of  buying health insurance plans.
  • Co-payment works well if you don’t have to file for claims so that you can enjoy low premiums. But if you do have to file for claims due to your ill health, there are chances that your out-of-pocket expenses might be substantial enough to counter any advantage you had with small premiums.

Co-payment works best if you are young, hale and hearty and the probability of you getting hospitalized is extremely low. This would mean lower premiums for you. However, if you are a senior citizen or suffer from some critical illnesses or other diseases, co-payment might prove very costly for you.

Check out this Articles: Hospitalization Cover in Your Health Policy

A health insurance policy is designed to help you save on massive health care expenses in today’s elevating medical inflation. With co-payment, you agree to share the risks of the insurance provider in return for low premiums. Take the decision only if you are sure that the benefits outweigh the risks associated with this clause.

Harjot Singh Narula

Harjot Narula is founder and CEO of, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

2 thoughts on “Concept of Co-Payment in Health Insurance

  • March 29, 2017 at 5:54 PM

    If suppose expense in 150,000 with 10% copay and 100,000 sum assured,

    How will will be covered?

    • March 30, 2017 at 12:02 PM

      Thank you Saif for reading the blog on Copayment on, We appreciate your time and effort.

      Regarding your query, the maximum liability for an insurance company is subject to sum insured under the health plan.Ideally pay apply the co-pay on the admissible expense (expense which is covered as per policy terms and conditions subject to sum insured limits). In your cited example company, Rs 50,000 (which over and above 1,00,000 Sum insured is payable by the insured). Also , assuming the remaining 1,00,000 is the admissible payable amount along with 10% co-pay, which means 10% of 1 Lac (Rs 10,000) has to be borne by the insured and the remaining amount will be paid by the company.

      So, in a nutshell out of 1,50,000 total expense, the customer has to bear Rs 60,000 (50,000 + 10,000) and remaining amount of Rs 90,000 is payable by the insurance company.


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