Starting on January 1, 2027, non-life insurers are looking into a 10% co-payment on retail health insurance claims, with the policyholder’s contribution limited to Rs 5 lakh per claim. The General Insurance Council is considering the proposal, according to media sources.
The proposal could lower health insurance premiums, but insurers have not yet indicated by how much and hence actual savings will depend on factors such as age, location, coverage, claim history, and product design.
While the current proposal suggests that the 10% co-pay would be mandatory, insurers may offer product variants or add-on features that provide greater coverage at a higher premium, subject to regulatory approval and final product design.
Here’s what policyholders should know about the proposal and how they will benefit if the proposal gets implemented.
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What is the 10% co-payment rule and how will it work?
A 10% co-payment means that the policyholder would bear 10% of the admissible claim amount, while the insurer would pay the remaining 90%, subject to the terms and limits of the policy.
For example, if a hospitalisation claim has an admissible amount of Rs 5 lakh, the policyholder would contribute Rs 50,000 and the insurer would settle Rs 4.5 lakh.
Co-payment is generally defined as a percentage of the admissible claim amount, rather than simply a percentage of every rupee appearing on the hospital bill.
IRDAI’s definition of co-payment similarly describes it as a specified percentage of the admissible claim amount.
For example:
Suppose the hospital bill is Rs 5 lakh, but after applying policy terms, exclusions, sub-limits or non-payable items, the insurer determines that only Rs 4 lakh is admissible.
The 10% co-payment would then be:
Hospital bill: Rs 5 lakh
Admissible claim: Rs 4 lakh
10% co-payment: Rs 40,000
Insurer’s liability: Rs 3.6 lakh
Other non-admissible expenses: Rs 1 lakh
Therefore, the customer’s total out-of-pocket expense could be Rs 1.4 lakh — Rs 1 lakh of non-admissible expenses plus Rs 40,000 towards co-payment.
According to Surinder Bhagat, President, Employee Benefits Large Account Practices, Prudent Insurance Brokers, the potential benefits of the proposed 10% Co-pay are as follows:
Lower premiums: Sharing a portion of claim costs could reduce insurer payouts, potentially translating into lower policy premiums.
Greater cost discipline: With policyholders bearing part of the expense, unnecessary tests, procedures, and inflated hospital bills may be reduced.
More sustainable premium increases: Better control over claim inflation could help moderate future premium hikes.
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How will the proposal benefit insurance holders, especially those with comprehensive health insurance?
The primary potential benefit is lower premiums. By sharing a defined portion of the claim cost with the customer, insurers may be able to price health policies lower because their expected claims payout per policy reduces.
This could make comprehensive health insurance more affordable, particularly for customers who want a higher sum insured but are sensitive to premium increases.
However, there is an important trade-off. The trade-off is clear: lower premiums today could mean higher out-of-pocket expenses during hospitalisation, even for customers with comprehensive health insurance.
“A comprehensive policy today is generally expected to provide broad financial protection against hospitalisation expenses. With a mandatory co-payment, the policyholder would still have an out-of-pocket liability even when they have a large sum insured,” said Amit Chhabra, CBO – General Insurance, Policybazaar.
Therefore, the benefit is essentially a lower upfront cost in exchange for some cost-sharing at the time of a claim.
How will the 10% co-payment work for cashless and reimbursement claims?
The co-payment should work in the same manner whether the claim is settled through cashless treatment or reimbursement: the customer’s share would be calculated on the admissible claim amount.
In a cashless claim, the insurer pays the eligible portion directly to the network hospital, while the policyholder bears the co-payment and any other non-admissible expenses.
For example, if the admissible claim is Rs 3 lakh:
Total admissible claim: Rs 3 lakh
10% co-payment: Rs 30,000
Insurer’s share: Rs 2.7 lakh
Policyholder’s co-payment: Rs 30,000
“In a reimbursement claim, the policyholder may initially pay the hospital and subsequently submit the documents to the insurer. The insurer would reimburse the admissible amount after applying the applicable 10% co-payment,” according to Chhabra.
How the 10% Co-pay Works
Cashless Claim: For a hospitalisation bill of Rs 5 lac, if the insurer secures a 10% network hospital discount, the admissible amount reduces to Rs 4.5 lac. The policyholder then pays Rs 45,000 (10%), while the insurer pays Rs 4.05 lac (90%).
Reimbursement Claim: For the same Rs 5 lac bill, the policyholder may bear a co-pay of Rs 50,000 (10%), with the insurer reimbursing Rs 4.5 lac (90%).
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Co-pay in health insurance: Can you pay more to skip it?
This is one of the important issues that needs to be clarified in the final regulatory/product framework.
“Currently, insurers already offer products with different co-payment structures, including products with zero co-payment and products with co-payments ranging from around 10% to 30%,” stated Chhabra.
“However, if a 10% co-payment is eventually mandated uniformly, it would need to be clear whether insurers can continue offering customers an alternative higher-premium product with zero co-payment,” Chhabra further explained.
From a consumer perspective, having such a choice would allow customers to decide between:
Lower premium + higher cost-sharing at claim stage versus Higher premium + greater financial protection at claim stage.
The final rules and product structures will determine whether such an option is available.
What should policyholders check before choosing such a plan?
Customers should look beyond the headline premium and examine the total potential out-of-pocket exposure. Key points to check include:
Maximum out-of-pocket liability: Particularly important for high-value hospitalisations.
Disease/procedure sub-limits: Check whether specific treatments have separate caps.
Non-payable expenses: Consumables and other excluded items can add to the customer’s bill.
Deductibles: Understand whether a deductible applies in addition to the co-payment.
Premium versus protection: Compare the premium savings with the amount you may have to fund from your own pocket during a major claim.
Key takeaway
A co-pay plan may suit individuals with lower hospitalisation risk, but the premium savings should be weighed against the additional out-of-pocket costs during a claim.
Co-pay is already prevalent in corporate health insurance.
Approximately one in four corporate policies already incorporates some form of co-pay, typically applied to specific member segments, relationships, treatment types, or benefit structures.
A 10% co-pay does not translate into 10% savings.
According to Bhagat, actual claims cost savings are typically in the range of 4% to 7%, depending on factors such as sum insured limits, ailment-specific caps, relationship-based co-pay provisions, and the underlying claim mix.
Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions.
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