This article explains how the co-payment (co-pay) clause works for health insurance policies. It originates from an email exchange with a reader about base policy co-pay limits and super top-up applicability.
This article would not have been possible but for the expert guidance of Ajay Pruthi, a fee-only SEBI registered investment advisor. He can be contacted via his website plnr.in.
This is the technical definition of co-payment: “Co-payment is a cost-sharing requirement under a health insurance policy that provides that the policyholder/ insured will bear a specified percentage of the admissible claim amount. A co-payment does not reduce the Sum Insured”.
The admissible claim amount is the maximum amount payable under the policy as per the terms and conditions, not exceeding the Sum Insured. If the policy has a deductible, the admissible claim amount will be higher than the deductible.
Consider a base policy of Rs. 5 lakhs with a co-pay of 20%. Suppose the admissible claim amount from the hospital bill is Rs. 1,00,000. We must pay Rs. 20,000 of this amount, and the insurer will pay Rs. 80,000
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If the admissible claim amount is Rs. 5 lakhs (the maximum amount possible for this policy), we must pay Rs. 1 lakh, and the insurer will pay Rs. 4 lakh.
Now consider a hospital bill of Rs. 7 lakhs (excluding non-medical expenses, which no policy would pay). Also, assume we have a Super Top-Up (STU) policy for Rs. 10 lakhs with a deductible of Rs. 5 lakhs.
The base policy’s admissible claim amount here is Rs. 5 lakhs. So, as above, we must pay Rs. 1 lakh, and the insurer will pay Rs. 4 lakh. In this case, the STU’s admissible claim amount is Rs. 2 lakhs (7 lakhs minus 5 lakhs deductible). So, the STU will pay Rs. 2 lakhs (regardless of how the first five lakhs are paid or if there is a base policy).
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