Mandatory 10% health insurance co-pay: What it means for policyholders

The General Insurance Council is reportedly considering a proposal to introduce a mandatory 10% co-payment in retail health insurance policies, with the policyholder’s contribution potentially capped at ₹5 lakh per claim.

The proposal aims to address rising healthcare costs and potential distortions in hospital billing. However, if implemented, it could increase the out-of-pocket burden for health insurance policyholders, particularly those facing large hospitalisation expenses.

The proposed co-pay is reportedly being considered for retail indemnity health insurance products, irrespective of whether a claim is settled through cashless treatment or reimbursement.

What is a co-payment in health insurance?

A co-payment is a cost-sharing arrangement in which the policyholder pays a specified percentage of an eligible medical claim, while the insurer covers the remaining amount.

Under a voluntary co-pay arrangement, the percentage is generally selected when the policy is purchased or renewed. For instance, with a 10% co-pay, if the admissible hospitalisation claim is ₹5 lakh, the policyholder would pay ₹50,000 and the insurer would pay the remaining ₹4.5 lakh.

A higher co-pay can result in a lower premium, making it attractive to policyholders with adequate savings who expect relatively low claim frequency.

However, a lower premium does not necessarily mean a policy is cheaper overall. In the event of a major hospitalisation, the policyholder could incur substantial out-of-pocket expenses.