Difference between Copay, Coinsurance & Deductible

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What is Copay, Coinsurance & Deductible

When it comes to availing health insurance, you should be clear on certain terms, which might often be confusing.

Particularly, when it comes to terms like copay, deductible and coinsurance, someone without proper information can become befuddled pretty fast.

Don’t worry, we have got you covered!

Here, we will explain all about coinsurance, deductible and copay meaning, and their implications on a health insurance policy.

Let’s take a look!

What Does Copay in Health Insurance Mean?

Copay refers to when policyholders have to bear a fixed part of their expenses towards medical treatment while the rest is borne by the insurer. This can either be as a fixed amount or a fixed percentage of the treatment costs.

For example, if your insurance policy comes with a copay clause of Rs. 2000 of your treatment expenses and the treatment costs you Rs. 10,000, you will be required to pay Rs. 2000 towards your treatment, while the rest of Rs. 8000 will be covered by the insurer.

Again, if the copay clause requires you to cover 10% of the total cost incurred, you will be required to pay Rs. 1000 towards it, while the rest 90% (Rs. 9000) will be paid by the insurer.

The features of copayment under insurance policies can be listed as follows:

  • With the copay clause, insurance providers bear the majority of the claim while the policyholder is required to cover a certain fixed part.
  • The copay amount is fixed according to the medical service availed.
  • A lower copayment amount means higher premium payment.
  • These clauses are levied mostly on health insurance policies for senior citizens.
  • These are more popular in metropolitan cities where the cost of treatment is higher.

No copayment means that the entire sum of treatment expense incurred is borne by the insurance provider.

 

Digit Insurance provides health insurance policies with 0% copayment and covers the entire treatment costs incurred by an individual.

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What do Deductibles Mean?

Deductibles is a fixed sum of money that policyholders are required to pay before their insurance policy starts contributing to their medical treatment. The term for paying deductibles is decided by the insurance provider - whether it is per year or per treatment.

For example, if your policy mandates a deductible of Rs. 5000, you will be required to pay for your treatment expenditures amounting up to Rs. 5000, after which your insurance policy will kick in. 

Following are some of the features of deductibles:

  • It is levied to help insurance companies guard their interest against regular and unnecessary claims.
  • It helps reduce premium payments towards insurance policies.
  • It might raise the total cost that an individual incurs towards their medical treatment.

 

Know more about Health Insurance Deductibles.

What does Coinsurance Mean?

Coinsurance refers to the percentage of treatment costs that you have to bear after paying the deductibles. This amount is generally offered as a fixed percentage. It is similar to the copayment provision under health insurance.

For example, if your coinsurance is 20%, then you will be liable to bear 20% of the treatment cost while the rest 80% will be borne by your insurance provider.

That is, if your expenses towards treating a certain disease are Rs. 10,000, you will be required to pay Rs. 2000 while Rs. 8000 will be covered by your insurance policy. This amount is generally calculated after you have paid your deductibles.

Following are a few features of coinsurance plans:

  • It helps to protect insurers against large claims.
  • Policyholders are required to pay their deductible amount before their coinsurance plan comes into play.
  • The percentage of coinsurance remains fixed.
  • This percentage adheres to the out-of-pocket maximum that you can pay for a year before your insurance policy pays the rest of it.

 

Now that we have explained what each of these terms means for your health insurance policy, let us take a look at the differences between each of these.

Understand Copay, Coinsurance & Deductible with an Example

All three cost-sharing options can be summed up in the table provided below:

Suppose a person has a health insurance policy of Rs. 5 Lakh. with a 10% copay on it and Rs. 5000 deductibles.

With the deductible, he further has a 10% coinsurance clause. If the treatment for a certain disease costs Rs. 10,000, his liabilities from these clauses will be:

Copay

Deductible

Co-insurance

10% of the treatment cost. Let’s say the treatment cost amounts up to Rs. 10,000. Thus, during treatment the policyholder will have to bear Rs. 1000 of the treatment expenses and the rest Rs. 9000 will be covered by the insurance policy.

Here, the deductible is Rs. 5000, which the policyholder has to first pay towards his treatment. The policy will start contributing only after the policyholder has paid his/her share of Rs. 5000.

Co-insurance is often levied on policies after the deductible has been paid. If the treatment cost is Rs. 10,000 and the deductible of Rs. 5000 has been paid, the policy will cover the rest Rs. 5000. Out of this Rs. 5000, the policyholder will have to pay 10% of Rs. 5000 i.e. Rs. 500 under the co-insurance clause. The rest Rs. 4500 will be covered by the insurance policy.

What is the Difference between Copay and Deductible?

The difference between copay and deductible clauses can be illustrated in the table below:

Parameter

Copay

Deductible

Applicability

Copay is the fixed portion that policyholders have to pay towards their treatment expenses while the rest is borne by insurance providers. It can be given as a fixed amount or a fixed percentage of the treatment expense.

A deductible is the fixed amount that policyholders have to bear before their insurance policies start contributing and cover the larger portion of your medical bill.

Effect on premium

With larger copay amount, policyholders are liable to pay lesser premiums.

Deductibles also allow policyholders to pay smaller premium amounts.

Coinsurance clause

Copay is often used interchangeably with coinsurance.

Policyholders often have to pay the coinsurance after meeting the deductible part of their policy.

Implementation

The copay clause is levied only on specific healthcare services.

A deductible is implemented before the insurance policy starts contributing to an individual’s treatment expenses.

What is the Difference between Copay and Coinsurance?

Even though these are sometimes used alternatively, copay and coinsurance have certain minute differences. To learn what is coinsurance vs copay, let us take a look at the table below:

Parameter

Copay

Coinsurance

Applicability

It is a pre-determined fixed portion that you have to pay towards the expenses incurred in due course of medical treatment. It can either be given as a fixed amount or a fixed percentage of the treatment expenses.

The actual amount for coinsurance varies. But, the percentage of expenses you need to bear towards your treatment remains fixed as per the coinsurance clause.

Payment process

With the copay clause, you need to make a portion of payments each time you seek any medical service.

Coinsurance needs to be paid for the medical services after you have covered your deductible.

Time of payment

Under the copay clause, you need to bear the expense at the time of seeking service.

The amount you pay towards your treatment is billed by your insurance provider, and you are required to pay directly to them.

Effect on deductibles

Copay count towards deductibles only under certain circumstances.

Coinsurance is paid only after meeting deductibles.

Differences between Coinsurance and Deductible

Now that you have learnt the differences between copay and deductible and that between copay and coinsurance, it will be easy enough to differentiate between coinsurance and deductible. Some of them are as follows:

Parameter

Coinsurance

Deductible

Applicability

It is a fixed percentage of expenses incurred towards treating a disease that policyholders have to bear while the rest is covered by their insurance provider.

Deductible refers to the fixed amount that insurance holders have to pay to cover medical treatment expenses before their insurance policy starts contributing.

Payment limitation

Coinsurance is paid every time you raise a claim against your insurance policy.

The payment towards deductibles for one year ends after you have paid the stipulated amount. You will again be required to pay the deductible next year.

Payment amount variability

The amount paid towards coinsurance varies according to the expenses borne towards treatment.

The amount for deductible remains fixed.

Risk factor

As far as liabilities are considered, coinsurance bears more risk because you will have to bear a particular percentage of the treatment expenses. This can be a substantial amount if the cost for treatment is high.

Deductibles do not pose as a liability because the amount to be paid is fixed, even if the treatment costs are substantial.

So, now that we have learned at length about what is copay, coinsurance and the deductible and their differences, it will be easier to seek out health insurance policies with the maximum benefits.

 

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What does Copay with Deductible Mean?

While copay, deductible and coinsurance are cost-sharing terms, their applicability can make a huge difference to your overall health insurance plan.

Deductibles and coinsurance are clauses that are mostly implemented together under one single insurance plan. But, a few insurance plans also implement copayment and deductible clauses simultaneously. 

If your health insurance plan does the same, here is what it will mean for you – 

  • You will have to pay a fixed amount towards your treatment plans. Your insurance plan will start contributing towards your treatment only after the deductible amount you have paid has been exhausted.
  • Once the insurance plan kicks in, you will be required to pay a fixed sum of money every time you raise claims against the policy. The insurance plan will cover the amount outstanding after you have paid your copayment amount.
  • You will have to pay smaller premiums towards the policy, making it cheaper to avail.

Should You Opt for a Health Insurance Plan with Copayment, Coinsurance and Deductible Clauses?

Well, even though on paper your premium payment will be reduced if you opt for a policy with such cost-sharing terms but your liability towards the policy will increase. You will have to take care of a portion of the expenses every time a medical emergency arises. This can lead to difficulties if you do not have readily available cash in hand.

It is, thus, more beneficial to avail a health insurance plan that does not impose such cost-sharing terms. With the plethora of health insurance policies provided by insurance companies in India, you can easily find a policy that can suit your requirements effectively.

Make sure to check all the terms and conditions put forth under each policy to avail the one best-suited to your requirements!

FAQs about the Difference between Coinsurance, Copay and Deductible