Understanding your out of pocket responsibility – Revealing Co-pay and Deductible clauses in Health Insurance

Health insurance can sometimes feel like a maze of jargon and hidden costs.In a world where there is no dearth of diseases, infections, and other health-related risks, it is utmost important to have a suitable health insurance policy which requires a minimum knowledge of few common terms.

Co-pay and deductible are terms that significantly influence your out-of-pocket expenses and premium, although they may seem synonymous, they have distinct impacts.  This makes it important for policyholder to understand the terms and their use during your claims.

This post will empower you to make informed decisions about your healthcare costs.

CoPay Vs Deductible in Health Insurance Now, let’s delve into…

What is Co-pay?

In basic terms, co-pays involve splitting the cost of healthcare between the insurance provider and the Policyholder. The amount of share to be borne by the policyholder is predetermined.

For instance: Let’s say you have a health insurance plan with a co-pay clause of 10,000 or something like 20% of the cost incurred and the medical treatment costs you 50,000, you will need to pay 10,000 from your pocket and the rest 40,000 will be covered by your insurance.

This clause will reduce your premium amount while you will need to bare out of pocket costs at the time of the insurance claim.

Remember to review your health insurance plan’s policy documents or contact your insurance provider to determine the specific co-payment amounts for different services and medications.

What is Deductible?

It is a provision in your policy that outlines the amount you must pay out-of-pocket before your insurance coverage begins. It sets the threshold you need to meet before your insurance company kicks in. It is typically an annual requirement, meaning you need to meet the deductible within a specific time frame, usually a calendar year

For instance:  Let’s say you have a health insurance policy with a deductible clause of 60,000.  Your total medical expenses incurred are 30,000 which you will need to bare the expenses wholly.  In the next month you have incurred 70,000 medical expenses for which you will need to pay 30,000 out of pocket to reach her deductible of 60,000.  As you have already reached the deductible of 60,000, your insurance coverage comes into effect from the payment point of the next 40,000 and further expenses to be incurred.

This clause might raise the total cost that an individual incurs towards their medical treatment while reducing premium payments.

Remember to review your policy, plan for potential expenses, and explore cost-effective options to optimize your healthcare spending while balancing your financial well-being.

If you are confused with the clauses, this differentiation table will clear the concept.

  Parameter

Co-pay

Deductible

  Purpose

Serves as cost sharing mechanism where policy holder pays a fixed amount at the time of receiving health care service.

Establishes a threshold that the policy holder must meet before the insurance coverage starts to contribute towards expenses.

  Cost Coverage

Represents a pre-determined portion of the total cost of a specific service or medication, with the insurance company covering the remaining amount.

Policy holder is responsible for paying the full cost of medical services until the deductible is met.

  Frequency

Payment is required each time you utilize your health insurance policy for cashless insurance or when filing a reimbursement claim.

Once you have met the ceiling of the medical expenses in accordance with your health insurance deductible, you can use your health insurance plan without having to account for deductibles for every claim.

  Effect on premium

Larger co-pay amount with lesser premium

Also allows low premium amounts

It is easy to choose the best medical policy but it is equally confusing if you do not understand the terms and differences among the clauses which seriously effect your expenses in future.  Therefore, it is important to understand and minutiae of these clauses and concepts and be mindful while selecting an insurance policy.