What is co-payment or co-pay?
A “co-payment” or “co-pay” is a specific charge that your health insurance plan may require that you pay for a specific medical service or supply, each time a medical service is accessed. In other words Co-payment refers to the portion of claim that a policyholder agrees to bear, while the insurance company undertakes to chip in with the rest.
A health insurance plan may impose a Rs.250 co-pay for a primary care physician visit and then a Rs.500 co-pay for a specialist, like an orthopedic surgeon, after which the insurance company often pays the remainder of the charges.
Why it has been used by insurers?
This feature is primarily used by insurance companies to discourage policyholders from availing of treatments in plush rooms at high-end hospitals. Insurance companies use copayments to share health care costs to prevent moral hazard. Though the co-pay is often a small portion of the actual cost of the medical service, it is meant to prevent people from seeking medical care that may not be necessary (eg: an infection by the common cold). The underlying philosophy is that with no co-pay, people will consume much more care than they otherwise would if they were paying for all or some of it. Also, it deters policyholders from going in for treatment that would have otherwise not been necessary.