Coinsurance vs Copay – Key Differences And Which One To Choose?
Health insurance is a vital financial product that allows a policyholder to cover their medical expenses. To avail of an insurance policy, one needs to pay a premium amount to the insurance provider based on the type of plan they choose. To understand the costs of a health insurance policy, you must familiarise yourself with coinsurance vs copay – what each of them means and the difference between the two.
This article discusses copayment, coinsurance, deductible, how each works and which one to choose. Read on!
What is Copay in Health Insurance?
When a policyholder raises a claim, the insurers charge policyholders a flat fee for their medical treatment. This amount can be a fixed percentage of the treatment costs. For instance, if an insurance policy comes with a copay clause of Rs.3000 and the treatment costs Rs. 12000, you need to pay the former amount out of your pocket, and your insurer will pay the remaining amount of Rs.8000. This is known as copay in health insurance.
Here are a few features of copayment:
- As per the copayment clause, an insurer must pay a majority of the claim amount.
- The copay amount depends on the type of medical service availed.
- A lower copayment signifies a higher premium payment.
- This type of clause is generally applicable to senior citizen health insurance plans.
Also, note that an insurer will bear the entire treatment if a health insurance policy comes with a no copayment clause.
Prior to understanding the meaning of coinsurance, one should know what deductibles mean in a health insurance policy.
What are Deductibles?
Before an insurance plan covers medical expenses, a policyholder must pay a fixed sum of money to their policy provider. For instance, if a policy comes with Rs.2000 deductible, you are required to pay this amount for your treatment expenditure before raising a claim.
If an individual has an issue with paying a higher premium amount then they can go for a higher deductible amount. Individuals must take this option if they have good medical conditions and no senior citizen is covered under this plan.
On the other hand, if the policyholder is suffering from any critical illness or a senior citizen is covered under the insurance plan then they must go for a lower deductible amount. If the insured individual is planning to undergo major surgery in near future then he/she must opt for a lower deductible amount. It allows complete health coverage and saves a huge amount at the time of treatment.
Here are some features of deductibles:
- Insurers levy this amount to guard their interest against unnecessary and regular claims.
- Payment of deductibles reduces the amount of premium paid towards a health insurance policy.
- Deductibles can increase an individual’s total cost of medical treatment.
Also Read: Deductible in Health Insurance: What Is It and How Does It Work?
What is Coinsurance?
After paying the deductible, an insured must pay a fixed percentage of his/her treatment costs. However, being almost similar to copay, members are often confused between the two terms. Accordingly, one should refer to the coinsurance vs copay section mentioned later in this article.
But first, take a look at some of the features of coinsurance plans.
- Insurers can avoid huge claims under this clause.
- Before a coinsurance plan kicks in, one must mandatorily pay the deductible amount.
- The coinsurance percentage remains fixed.
- This plan adheres to the maximum amount of out-of-pocket expenses one needs to pay in a year before a health insurance plan progresses.
- Coinsurance percentages apply to lab work, doctor visits, prescription drugs, and more.
Now that you know the meaning of each of these terms, understanding their differences will be effortless.
How to Select the Right Coinsurance Amount?
One can select the right coinsurance amount on the basis of their premium paying capability as well as medical history. A higher coinsurance will lead to a lower premium and a lower coinsurance will lead to a higher premium payable. Therefore one must be very careful when opting for a health insurance policy that has a coinsurance clause.
If the policyholder is young and does not have any serious medical condition or he/she does not foresee any immediate hospitalisation then they can go for a higher coinsurance amount. On the other hand, if a senior citizen or elders are covered under the health insurance plan then they should go for a lower coinsurance amount. This is because it will cover a significant portion of treatment costs which can be quite high. A lower coinsurance amount will provide relief to policyholders during serious medical emergencies
Risks with Higher Coinsurance Percentage
The biggest risk that one may face with high coinsurance percentages is that it will lead to a huge financial burden at the time of a medical emergency. Even though a high coinsurance percentage corresponds to lower premiums, those savings will vanish once an individual goes for major medical treatment.
Therefore one must go for a high coinsurance amount only if they do not foresee any medical emergency in near future and they have a clean medical history.
Also Read: How To Use A Health Insurance Premium Calculator To Choose The Best Policy For You
Coinsurance VS Copay
Check out the table of differences between copay and coinsurance with respect to a few parameters:
| Parameter | Copay | Coinsurance |
| Payment Process | Under this clause, one needs to pay a portion of treatment costs every time he/she seeks medical service. | An individual should pay the coinsurance amount for medical services availed after paying the deductible. |
| Effect On Deductibles | Only under certain conditions, a copay counts toward deductibles. | One must pay coinsurance only after covering deductibles. |
| Applicability | This is a predetermined fixed portion a policyholder must bear towards his/her medical expenses. It may be a fixed amount or percentage of the treatment expenses. | The actual coinsurance amount varies, whereas; the percentage of expenses one needs to pay towards their treatment remains fixed. |
| Payment Time | One needs to bear this expense during the time of seeking service. | An insurance provider bills the amount paid towards a treatment. Therefore, policyholders need to pay directly to the insurers. |
Coinsurance VS Copay vs Deductibles
To understand the differences between copay, coinsurance and deductible, one must consider the following example:
Mr X has a health insurance policy of Rs. 10 lakh. His policy comes with a 10% copay clause and Rs. 5000 deductible. Along with the deductible, he has a coinsurance clause of 10%.
In a medical emergency, he had treatment worth Rs. 12000. Therefore, his liabilities under the above clauses will be:
| Clauses | Values |
| Copay | Mr X’s share, 10% of Rs. 12000 = Rs. 1200 Insurer’s share,Rs. (12000 – 1200) = Rs. 10,800 |
| Deductible | Rs. 5000. Mr X’s policy will start giving coverage benefits only after he pays this amount. |
| Coinsurance | As the treatment cost is Rs. 12000 and the deductible amount is Rs.5000, Mr X’s policy will cover Rs. (12000 – 5000) = Rs. 7000. Out of the Rs. 5000 deductible, Mr X will pay a coinsurance of 10% of Rs. 5000 = Rs. 500. Insurance will cover the rest, that is, Rs. (5000 – 500) = Rs. 4500. |
Now that you have clarity regarding the insurance fees and coinsurance vs copay, you can avail of a health insurance policy from reputed insurance companies such as Navi. Download the Navi app and enjoy cashless claims in 20 minutes from more than 10,000 network hospitals across 400+ locations in India.
How do Copay, Coinsurance and Deductibles Work Together?
These three are the most crucial components of a health insurance plan. The complete working of health insurance revolves around these three. Suppose that Mr.Agarwal has opted for a health insurance policy with coverage amounting to Rs. 10,00,000. The copay component is 10% and the deductible amount is Rs. 6,000 Furthur Mr Agarwal also has to pay a coinsurance amounting to 10% of the total treatment cost.
Now, let’s consider how these three work together. Mr Agarwal gets admitted to the hospital for a certain illness and the total treatment cost that he will incur is Rs. 50,000. As the insurance plan has a copay clause amounting to 10% of treatment costs, therefore he will have to bear Rs. 5,000 out of his own pocket. The rest RS. 45,000 can be covered with the insurance. Now, his policy will become operational only when he makes an initial out-of-pocket expenditure i.e. deductible amount. He needs to pay Rs. 6,000 before the policy will start contributing.
After paying the deductible amount from the total treatment cost, the remaining amount of Rs.44,000 will be eligible for coverage. However, there is a coinsurance clause in the health insurance plan which is 10% of the insurance amount. Hence he will have to bear another Rs. 4,400 from his own pocket as coinsurance amount which is 10% of Rs.44,000 (insurance coverage amount).
After taking into consideration all these components, Mr Agrawal will be getting insurance coverage of Rs. 39,600 out of his total treatment cost of Rs.50,000.
Is It Worth Buying Health Insurance Which has Copay, Coinsurance and Deductible Clauses?
One needs to be very careful while selecting a health insurance plan, as these come with copay, coinsurance and deductibles which will affect the premium amount as well as insurance coverage. A higher copay, coinsurance and deductible amount will directly lower the premium payable for the policy. Similarly, a lower amount of these components will increase the premium burden.
It is always ideal to buy a health insurance policy that does not come with any of these clauses. It will help policyholders complete coverage of their treatment expenses. However, if insurance companies incorporate these clauses, then it is imperative that the insured party must consider their health history, and members’ covered before taking any decision. A health insurance policy provides a cushion to policyholders during medical emergencies and it can also be used for claiming tax benefits. Therefore, one must go for a health insurance plan even though it comes with copay, coinsurance and deductible clauses.
Final Word
Although coinsurance vs copay might seem similar, there is a finer difference between copay and coinsurance in understanding which will help an individual obtain long-term benefits. Therefore, learning about coinsurance vs copay will enable a policyholder to choose a health insurance plan conveniently.
FAQs
Ans: Health insurance fees like copayments, coinsurance, and premiums are tax-deductible if a policyholder’s adjusted gross income exceeds 7.5%.
Ans: Generally, high premium plans do not require their members to pay a copayment.
Ans: No, policyholders only need to pay a fixed amount under the coinsurance clause after their medical expenses have reached the deductible.
Ans: The biggest advantage of a health plan with a high deductible is a lower premium burden on the policyholders. The high deductible plans are suitable if one is making a plan for preventive measures and not for covering any serious illness.
Ans: Copay is a fixed percentage amount that one needs to pay from his/her own pocket out of the total treatment cost. As it is a percentage-based cost, the amount will vary depending on treatments and medications.
Ans: Yes, copay directly influences the premium one pays for their health policy. A higher copay means a lower premium and vice versa.
Ans: These clauses vary from one insurance provider to another. Generally, insurance companies make it mandatory for insured people to pay both these amounts so as to limit the number of frivolous claims.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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