HEALTH INSURANCE: Think before opting for deductible

In order to lower the health insurance premium, individuals most often opt for co-pay or deductible in the policy, which are two different types of cost-sharing mechanisms in health plans. However, they must note that opting for these features will lead to an increase in out-of-pocket expenses.

A co-payment is a fixed amount paid by policyholders each time they file a claim, while a deductible is the amount policyholders must pay out of pocket before the insurance coverage kicks in. Co-pay option will be better if the individual has a lower income as it lets him pay a lesser percentage of the overall cost. In contrast, if individuals have a higher income and can manage to pay for higher medical outlays, then a deductible option could be the optimum choice as it allows them to pay a fixed amount and possibly lower their overall premium costs.

For instance, Mr X has opted for a policy with a sum insured of Rs 5 lakh with 20% co-pay or Rs 1 lakh as deductible. Now, if he gets hospitalised, and the total expense comes to Rs 1.5 lakh, in case of co-pay the company will deduct 20% of total expense; i.e, Rs 30,000, and pay Rs 1.2 lakh to him. In case of deductible, Mr X will have to first spend Rs 1 lakh on a single hospitalisation and then claim the additional amount of Rs 50,000. So, a high deductible plan may lower the premium, but policyholders will have to pay more out-of-pocket before their insurance kicks in

Co-pay or deductible

The best option for an individual depends on their specific circumstances and healthcare needs. Chirag Nihalani, general manager, Insurance Samadhan, says a high-deductible plan with lower monthly premiums may be a good fit for someone who is generally healthy and does not require frequent medical care. People who are financially sound and can bear out-of-pocket hospital expenses up to a set limit should opt for deductible. “On the other hand, a plan with a co-pay may be a better choice for someone who is above a certain age and who expects to need more medical care going further,” he says.

There are several factors to consider before opting for a deductible such as financial situation, medical history and anticipated medical expenses. Rakesh Goyal, director, Probus Insurance Broker, says policyholders should be sure that they can afford to pay the deductible amount in case of any health emergency. “They should also review their medical history and anticipate any future medical expenses before deciding on the deductible amount,” he says.

Opting for deductible

Someone with a higher risk tolerance may opt for a higher deductible plan to save on monthly premiums, while one with a lower risk tolerance may prefer a lower deductible plan, even if it comes with higher monthly premiums.

“Be sure to consider the specifics of each health plan, such as network coverage and the types of medical expenses that are subject to the deductible,” says Nihalani.

If policyholders have higher income and can afford higher medical expenses, they can go for a higher deductible amount to lower the total premium payout. Conversely, if they have a lower income, they may choose a lower deductible, even if it leads to higher premiums. “It is important to strike a balance between the deductible amount and premium cost to ensure that the health policy provides adequate coverage while remaining affordable,” says Goyal.

TAKING COVER

* Opting for deductible or co-pay will lead to an increase in out-of-pocket expenses

* Choose on the basis of your financial situation, medical history & expect-ed medical expenses

*Those with a higher risk tolerance may opt for a higher deductible plan to save on monthly premiums