Difference Between Deductibles and Copay in Health Insurance

Health Insurance is a type of insurance that provides coverage against any medical emergencies arising out of an injury, illness, or accident. It extends the coverage to medical expenses such as hospital bills, medicines, consultation fees, etc.

People often buy a health insurance policy without understanding all its aspects or carefully reading the terms and conditions, which can create disputes in the future. Health Insurance Deductible and Copay are two such aspects that people often ignore while buying the policy.

What is Health Insurance Deductible?

Health Insurance Deductible is a claim amount that a policyholder has to pay before the insurance company pays for healthcare expenses. The deductible amount is always specified in the policy document, and the insurance company does not pay your claims unless you have paid the deductible.

You have to bear the deductible amount every year after renewing your health insurance policy. It might just take one treatment cost or several months to reach the deductible amount, depending on the amount of the deductible and how often you require medical services. You are required to pay the deductible amount to your healthcare provider and not the insurer.

How does it work in the case of a Cashless Claim Settlement?

Suppose you have a medical emergency due to which you go to the insurance company's network hospital to take advantage of a cashless claim settlement. Let's say you have a coverage of Rs 5,00,000, and the deductible mentioned in your policy is Rs 15,000. You can make a claim to the insurer for your hospital bill of Rs 50,000. Now, the insurer will ask you to pay the deductible amount of Rs 15,000 to the hospital. After receiving the payment confirmation, the insurance company will directly settle the remaining Rs 35,000 with the hospital.

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How does it work in the case of a Reimbursement?

Let's continue with the above example to understand the case of Reimbursement. Suppose, instead of going to the company's network hospital, you may decide to go to your preferred hospital, which is not included in the insurer's list of network hospitals. In this case, you will have to pay the entire amount of the claim, which is Rs 50,000, to the hospital. However, when you submit the claim along with the original hospital bill, the insurance company will deduct Rs 15,000 and reimburse the remaining amount, which is Rs 35,000, to you.

What will happen if my deductible amount is more than the claim amount?

Please note that your insurance company will not come into the picture unless you pay the deductible. Therefore, if your deductible amount is more than the claim amount, the insurance company is not liable to pay anything. So, if you file a claim of Rs 10,000, but the health insurance deductible is Rs 15,000, your insurer will not process the claim, and you will have to bear the entire healthcare expense.

How is it beneficial to the insurance company?

Since policyholders have to pay the deductible amount from their pocket, they are less likely to make claims for small amounts. In addition, it makes the policyholder responsible while filing a claim and ensures that only genuine claims are filed.

How is it beneficial to the policyholder?

If the policyholder opts for a higher deductible, he/she has to pay a lower health insurance premium. This calculation is quite simple, the higher the deductible, the lower the premium, and vice versa.

What are the types of Health Insurance Deductibles?

There are two types of Health Insurance Deductibles you get:

1. Compulsory Deductible:

The insurance company decides the amount of compulsory deductible you have to pay. The policyholder does not get to choose the amount of a deductible. There is no change in the premium as the compulsory deductible is the same for all the health insurance policies of the insurer.

For example, if your insurance company has set a compulsory deductible amount as Rs 5,000, all the policyholders holding the same policy will pay a Rs 5,000 deductible.

2. Voluntary Deductible:

In the case of a voluntary Deductible, the policyholder has a right to choose the deductible based on his/her premium paying capacity and likelihood to file a claim. For instance, if you think you are less likely to file a claim in the foreseeable future and can pay a certain amount of money in case of a medical emergency, you can opt for a higher deductible, which will reduce your premium considerably.

Although opting for a higher deductible saves money on the premium, remember that you will have to pay the higher deductible amount if a medical emergency occurs. People usually ignore this fact and choose the policy that comes with a lower premium.

What is Copay in Health Insurance?

Copay is a fixed portion of a claim amount that a policyholder has to pay out of their pocket. It can be either a fixed amount or a percentage of the claim. The insurance company decides the copay amount, which is different for different medical services. A policyholder has to pay the copay amount whether or not he/she has met the deductible limit.

Suppose you have to visit a specialist for a specific illness, and the copay mentioned in your policy for the consultation with a specialist is Rs 1,000. In this case, you will have to pay Rs 1,000 for the consultation with the specialist, irrespective of whether or not your deductible is met.

To Conclude:

Although the terms Deductible and Copay seem perplexing at first, but relating them with an example may help you understand it clearly. When you make a claim, these terms play an important role. Hence, it is necessary to choose the right amount of deductible. Also, pay attention to the copay amount for specific medical services you may need. Therefore, we suggest you buy the health insurance policy only after reading and understanding all such terms and other policy details. This will help you make an informed decision and avoid future disputes.

Warm Regards,
Ketki Jadhav
Content Writer