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Understanding the nuances of insurance can be overwhelming. Certain insurance terms often feel like trying to decode a foreign language. Yet, understanding this jargon is vital to making informed decisions while purchasing health insurance. Such terms in health insurance are deductibles, copayments, and coinsurance. These popular terms in insurance divide the risk between the insurer and the policyholder. This article will help you understand them in a simplified manner. Let’s begin!
Difference between Deductibles, Copayment and Coinsurance
Copayment, coinsurance, and deductibles are primarily policy terms that state the percentage or amount of claim that an insured has to bear. On the other hand, it also reduces the burden of health insurance premiums. Before going into details about deductibles vs copay, the table below will help you quickly grasp an idea about them:
| Deductibles | Copayment | Coinsurance |
|---|---|---|
| Deductibles are the fixed amount of a claim that the insured/policyholder has to pay. After the deductible is paid by the policyholder, the insurer starts paying for the rest of the claim amount | Copayment is the fixed amount of a claim borne by the policyholder | Coinsurance is the fixed percentage of a claim that is to be paid by the policyholder |
| First, the deductibles have to be paid. Only then the insurance company start paying | Copayment is a part of the medical bills paid by the insured | Coinsurance is mostly applied after the deductibles are paid. Hence, it only becomes active when the deductible is fully paid |
| Deductible is a one-time payment | Copayment applies to each claim | Coinsurance applies to each claim |
| Deductibles clause is common in most of the health plans | A copay clause is more common in senior citizen health plans and critical illness health insurance | Coinsurance is more common to health insurance plans offering higher sum insured and premium or applicable in metropolitan cities |
What is Deductible in insurance?
Deductibles are the fixed amount, as stated in the policy wording that the insured has to pay out of his own pocket when a claim is raised. Once the deductibles are paid, the insurance company starts paying for the rest of the claim amount. You must note that the deductible is a one-time payment amount. It acts as a threshold that needs to be met each year. Hence, unlike copay and coinsurance, it does not imply all the claims raised in a policy year. Here is an illustration for a better explanation:
Sugandha is a 32-year-old woman working as a banker in Lucknow. She purchased a health insurance plan from Care Health Insurance. As per the agreement, Sugandha agreed to pay ₹5000 as a deductible. After a while, Sugandha suffers an illness for which she needs to raise a claim of ₹50,000. As per the terms, Sugandha paid ₹5000 deductible amount. Once the deductible was cleared, the rest of ₹45,000 was paid by Sugandha’s insurer.
Next time when she raises a claim in the same policy year, there shall be no deductibles.
What is Copayment in insurance?
Co-pay in medical billing is also the financial contribution made by the insured when a health insurance claim is raised. It may be a fixed amount or a fixed percentage. Here is an illustration to better understand what is copay in health insurance?
Rishi, a 40-year-old, purchased health insurance with a copayment clause of 10%. Being curious about the term when he asked about what is copay in Care Health Insurance, the insurance expert explained that it is a percentage of a total claim amount to be shared by the insured. After a while, Rishi had to raise a claim of ₹1 lakh for the in-patient hospitalisation expenses. As per the copayment term, Rishi pays 10% of the claim amount, that is, ₹10,000 and the rest of ₹90,000 was paid by the health insurance provider.
Remember that copayment is applicable for each claim.
What is Coinsurance in insurance?
Coinsurance in healthcare is, again, the contribution made by the insured towards the health insurance claim. It is a fixed percentage that has to be paid by the insured/policyholder for each claim. Here is an illustration:
Trisha, a 30-year-old banker, recently invested in health insurance that has a coinsurance clause of 20%. Let's understand what 20% coinsurance means here.
After a few months, Trisha met with a minor accident that led to injuries, and she had to raise a claim of ₹50,000 for in-patient hospitalisation. As per the coinsurance clause, she had to pay 20% of the claim, that is, ₹10,000, and the rest of ₹40,000 was paid by the health insurance company.
Remember, coinsurance is paid only after the deductible is met.
Copay Vs Coinsurance
The table below explains in detail about coinsurance vs copay:
| Copay | Coinsurance |
|---|---|
| Copay is also referred to as copayment. It is the fixed amount of a claim that has to be paid by the insured | Coinsurance is the fixed percentage of a claim that the insured has to pay |
| A copayment clause can be applied before or after the insured has met deductibles | Coinsurance is only applied after the deductibles are paid |
| A copay is usually paid to the health care provider, such as a doctor, a pharmacist, etc. | Coinsurance is paid to the health insurance provider by splitting the admissible medical bills between the insured and the insurer |
| Copay may differ depending on the type of health care facility you are availing | Coinsurance usually remains the same and in between 20%-40% irrespective of the health care you are seeking |
Note: Copayment and coinsurance are usually not applied together in a health insurance plan. However, the conditions may differ depending on the health insurance provider and the type of plan you choose.
Benefit of Copay, Coinsurance, and Deductible in Medical Billing
Together, copayment, coinsurance, and Deductible balance the cost and access to healthcare. These cost-sharing components ensure that the medical claims are genuine as the policyholder has to pay their part of the medical cost from their own pockets, hence, limiting the claims. This also prevents insurer from fraudulently during claims. Also, by shouldering initial medical expenses, you can lower your monthly premiums. Moreover, it helps you manage your healthcare expenses effectively while ensuring that you receive the care you need.
Should You Opt for Deductibles, Coinsurance, or Copayment?
Deductibles, copay, and coinsurance are all financial commitments made by the insured toward health insurance claims. Hence, with higher deductibles and coinsurance, the health insurance premiums charged are low and vice-versa.
Choose wisely!
Sometimes, higher deductibles, copay, or coinsurance may sound like a good deal in order to lower your health insurance premium. However, be mindful when choosing these. In times of hefty medical bills, a higher share may lead you to pay more and, thus, impact your savings.
How to Choose the Right Health Insurance Plan?
When planning to choose a health insurance plan, consider your medical needs and financial situation and then opt for any cost-sharing components. Here are three factors that you must consider before buying a health plan:
Deductible Plans
You should opt for higher deductible plans only if you are healthy and require medical services rarely. So that you can lower your monthly premiums.
Copayment Plans
Choose a low copayment plan if you prefer predictable and affordable costs during regular healthcare visits. This will reduce the copayment amount each time you visit for routine check-ups, lab tests, or prescriptions.
Coinsurance Plans
Before opting for a coinsurance, check the percentage you will have to pay after meeting your deductible to understand your out-of-pocket expenses.
By understanding the roles of deductibles, copayments, and coinsurance, you can make informed decisions. Ensure, choosing a plan that best suits your needs.
Wrapping Up!
It is obvious that a considered amount is to be paid from your pocket during a claim if your plan has deductibles, copay, or coinsurance clause. However, insurance policies like Care Advantage come with a copayment waiver option, where if the insured person’s age is 61 years or above, by opting co-payment waiver add-on, one can get rid of from 20% copayment.
So, if you are looking to cover yourself or your family you may invest in Care Health Insurance plans and get great deals.
If you are looking to cover yourself or your family you may invest in health insurance plans and get great deals.
>> Also Read: What is Co-pay in Health Insurance?
Disclaimers: All plan features, benefits, coverage, and claims underwriting are subject to policy terms and conditions. Kindly refer to the brochure, sales prospectus, and policy documents carefully.
