At the payment counter of the hospital, Subham, 22, was informed of an unsettling revelation. Despite the presence of active health insurance, his family was confronted with the obligation to personally bear the burden of Rs. 1 lakh out of a total operation cost of Rs. 5 lakh. This unforeseen circumstance came as a jolt to the middle-class household, already grappling with financial constraints, making even a sum of Rs. 20,000 unaffordable. Deeming it a potential error, they reached out to their insurance agent, only to be taken aback by his response: "Sir, you consciously selected a deductible scheme, thereby necessitating the payment of Rs. 1 lakh, irrespective of the circumstances. However, we have extended coverage for healthcare expenses exceeding this predetermined threshold."
So, what exactly is the problem that Subham has faced?
People most frequently choose co-pay or deductible while buying health insurance, and these are two different kinds of cost-reducing options in health plans that are used to reduce the cost of health insurance premiums. But, people must be aware that choosing either of the options will result in higher out-of-pocket costs, as happened in the case of Subham.
Co-pay Or Deductible?
Whether to choose a co-pay or deductible is totally subjective. It depends on individual healthcare needs and specific circumstances.
In health insurance, a co-pay and deductible are two different terms related to the cost-sharing between the insured individual and the insurance provider. Here's a brief explanation of each term:
Co-pay: A co-pay, short for "copayment," is a fixed amount that an insured individual is required to pay for a specific healthcare service or medication. For example, your health insurance plan may require Rs. 2,000 co-pay for each visit to a primary care physician or Rs. 1,000 co-pay for generic prescription drugs. The insurance provider covers the remaining cost of the service or medication after the co-pay has been paid. Co-pays can vary depending on the type of service or medication.
Deductible: A deductible is the amount of money an insured individual needs to pay out of their own pocket before their health insurance benefits kick in. Let's say you have a health insurance plan with a Rs. 50,000 deductible. If you receive medical services and the total cost is Rs. 5,00,000, you would be responsible for paying the first Rs. 50,000 (deductible), and then your insurance would cover the remaining Rs. 4,50,000 according to the terms of your policy. Deductibles can vary in amount depending on the insurance plan.
Who should opt for co-pays and deductibles in their health insurance plan depends on individual circumstances and preferences. Here are a few factors to consider:
Budget and Financial Situation: If you have a limited budget and prefer lower monthly premiums, you might choose a plan with higher co-pays and deductibles. This can help keep your monthly premium costs lower. However, it's essential to ensure that you can comfortably afford the out-of-pocket expenses associated with co-pays and deductibles.
Frequency of Healthcare Utilization: A plan with lower co-pays might be beneficial if you visit healthcare providers frequently or anticipate needing medical services often. This can help reduce the immediate out-of-pocket costs for each visit. However, keep in mind that plans with lower co-pays typically have higher monthly premiums.
Risk Tolerance: If you prefer financial predictability and want to limit potential large expenses in the event of a major medical issue or hospitalization, a plan with a lower deductible might be more suitable. It ensures that the insurance coverage starts sooner, and you have to pay a smaller portion of the medical costs initially.
Ultimately, the decision to opt for co-pays and deductibles should be based on your personal financial situation, healthcare needs, and risk tolerance. It's recommended to carefully review the terms and costs of different health insurance plans before making a decision, and if necessary, seek guidance from a healthcare insurance professional.
To know how deductible works, Rajeshwar Panda, 56, Insurance Agent at Star Health, says, "Many individuals choose co-pays or deductibles in health insurance to lower their monthly premiums by approximately 45%. For instance, a 24-year-old purchasing Rs. 10,00,000 health insurance plan may have a monthly premium of around Rs. 10,000. However, by opting for a deductible of Rs. 50,000, the premium could reduce to approximately Rs. 5,500 per month (a 45% reduction). In this scenario, if the insured person has a medical bill of Rs. 1,00,000, they would be responsible for paying Rs. 50,000, with the insurance covering the remaining Rs. 50,000. Similarly, the insured would bear the Rs. 50,000 deductible amount for other claims, while the insurance covers the remainder."
Opting for a high deductible plan can result in lower premiums. Still, it means policyholders will need to pay a larger amount from their own pockets before their insurance coverage begins.
Is Deductible For Salaried Class?
Careful evaluation of financial capability is important before deciding on the deductible option.
Suppose ABC's child is employed with XYZ and has listed ABC as a dependent. In that case, there is an opportunity for ABC to benefit from both XYZ's mediclaim coverage for minor medical expenses and ABC's own health insurance plan with a deductible up to a certain percentage, which reduces their premium. The advantage lies in ABC paying a lower premium while having coverage for small expenses through XYZ's mediclaim. However, it's crucial for ABC to consider their financial capacity to meet the deductible amount. If ABC is unable to afford the deductible, it would be advisable not to opt for it, and vice versa.
Deductible: A Blessing Or A Nightmare?
The deductible option in health insurance can be both a blessing and a potential nightmare for policyholders. On the one hand, selecting a higher deductible can lead to lower monthly premiums, providing financial relief for individuals who are generally healthy and don't require frequent medical care. It offers cost-saving benefits and can be a wise choice for those who have the means to handle higher out-of-pocket expenses in case of major medical events.
However, the downside emerges when policyholders face unexpected medical expenses surpassing their deductible amount. In such cases, they may find themselves burdened with significant out-of-pocket costs before their insurance coverage kicks in. This can create financial strain and cause hardship for individuals who are unprepared to meet the deductible.
Therefore, while the deductible option can bring financial advantages, it requires careful consideration of one's financial situation, risk tolerance, and healthcare needs. Policyholders should assess their ability to afford the deductible amount and evaluate the potential trade-offs between premiums and out-of-pocket costs. Seeking guidance from insurance professionals can help individuals make informed decisions and strike a balance between cost-saving benefits and financial security in healthcare coverage.
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