Understanding the complex jargon of health insurance can be quite intimidating. However, it is quite essential to do so as only after knowing several terms can we make a wise decision regarding the health insurance policy we need to buy. In this article, we look at three such terms that many people often get confused with – co-payment, deductible, and coinsurance. All of these terms come under the umbrella term of ‘cost-sharing’ and are applied at various points in health insurance. Let’s try to understand the difference between the three and how each affects your health insurance policy overall.

What is a co-payment? 

Co-payment occurs when the policyholder pays a certain amount for availing of a health service under their health insurance. It is either a fixed number or a fixed proportion of the total amount of the expenses for the treatment. The amount may vary according to the service the insured is availing of. Health insurance policies come with a co-pay clause which determines how much the insured is liable to pay when they avail that service.

Let’s say, you have a co-pay clause in your health insurance policy that states that you would have to pay 10% of the expenses. In the next few months, you get hospitalized for a health issue and the treatment expenses come up to Rs 50,000. You raise a claim on your health insurance policy for the same. Now, according to your co-pay clause, you will have to make the co-payment of 10% of that amount, which is Rs 5000, while your insurer will pay Rs 45,000.

If your co-payment amount is low, then you may have to shell out high premiums, and vice versa.

What is a deductible? 

The deductible refers to the amount a policyholder is required to pay before the policy benefits begin. It is only after the insured pays the deductible that the insurance policy will begin covering the treatment and other expenses. Paying the deductible is a yearly event. The deductible is not likely to be affected by the treatment expenses. No matter the cost of the treatment, the deductible amount stays fixed.

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Let’s try to understand this with the help of an example. Your health insurance policy has a deductible requirement of Rs 15,000. Now, when you raise a claim on your policy for Rs 50,000, you will first have to pay Rs 15,000. Post that, the insurance policy will kick in and pay off the remaining amount. If the policyholder has paid off the deductible amount for the year, then they do not have to pay any deductibles again the next time they raise a claim during that year. The insurer will make the full payment for the expenses as stated in the policy.

Similar to co-pay, the payment you make as deductible will affect your premium payments. The higher the deductible, the lower is the premium and vice versa.

What is co-insurance?

Co-insurance works similarly to co-payment. Under co-insurance, the insured agrees to pay a certain amount. So, if your co-insurance requires you to pay 15% of the treatment expenses, the rest 85% will be borne by the insurer according to the terms and conditions of the health insurance policy.

In case you have all the three – co-pay, deductible, and coinsurance – in your policy, the first payment you may have to make will be according to the co-pay clause. Post that, the deductible is to be paid and then, the coinsurance. In some cases, the co-pay will be a part of the deductible.

Health insurance companies have these cost-sharing facilities to instil a sense of partnership with the insured. To a certain extent, these facilities teach the policyholders to make responsible claims only as they too will be paying a certain portion of the claim.

We hope this article has helped you understand the concepts of co-payment, deductible, and coinsurance in health insurance.