What Is Copay In Health Insurance

What is copay in health insurance?

Copay or copayment in health insurance refers to the percentage of the health insurance claim amount on the medical bills that the policyholder has to pay on their own, while the insurance company settles the rest of the claim amount. However, this copayment option is not mandatory. Some health insurance policies come with mandatory copayment options. While the others have a copayment clause as an option which the policyholder opts according to their needs.

Read: Why health insurance? A complete guide.

Examples of health insurance copay and how copayment works?

Understanding copay in health insurance gets better with an example.

For instance, let us consider Tia opts for a health insurance plan with 20% copay and the sum insurance is 5 lakhs. She goes for a treatment to a hospital and the bills add up to Rs. 50,000. In this case she pays 20% of 50,000 which is Rs.10,000 from her hands. While her health insurance company covers the rest of the bill amount, which is Rs.40,000.

In the above scenario, the sum insured is 5 lakhs and the bills have not crossed the sum insured. But still Tia has to pay the 20% of her bill as she opted for copayment of her bills. Health insurance providers pay the rest 80% of the bill amount. This is how copay in health insurance works.

Types of copay in health insurance - clauses

Let us take a look at the clauses where health insurance copay mostly applies

Senior citizen health insurance policies

The treatment costs for senior citizens are usually higher. Hence, most of the senior citizens’ health insurance policies come with mandatory copay clauses.

Hospitalization in metropolitan cities

The cost of medical treatments in the hospitals in the metropolitan cities are always higher than those hospitals available in small towns and cities. As a result, health insurance companies in India may impose a copay on the hospital bills.

Treatments at Non-network hospitals

At a non-network hospital, the policyholders file for a reimbursement claim. In this case, some insurance providers may impose a co-payment clause during treatment at any non-network hospitals or while filing for a reimbursement claim.

Medical Conditions-related Copay Clause

It applies to pre-existing conditions or high-cost chronic illnesses (like cancer, heart disease) to prevent over-utilisation of claims and maintain policy sustainability for high-risk individuals.
Example: A policy may impose a 20% copay on treatments related to diabetes or hypertension.

Features of copay in health insurance policies

Here are a few features of a copay option in your health insurance plan.

When we opt for copay in health insurance, we pay only a percentage of the claim amount. While the insurance company settles the majority of the claim amount.
The percentage of the copayment depends upon the medical services that we opt during the treatments.
If we opt for lower percentages of copayment in the health insurance policy then mostly, the premium paid towards the plan gets higher and vice versa.
Copayment clauses are mostly applicable for senior citizens’ health insurance policies.

Read: Co-payment in Insurance guide: What it is & how it works?

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Feature	Copay	Coinsurance	Deductible
Definition	Fixed percentage of the bill the insured pays	Both insurer and insured split the cost by %	Fixed amount paid by insured before insurance kicks in
When It Applies	On specific healthcare services (e.g., consultation)	On total bill or a specific portion	At the start of the policy year
Example	20% copay on ₹50,000 bill → you pay ₹10,000	80:20 split → insurer pays 80%, you pay 20%	₹10,000 deductible → insurer pays only after this is spent
Premium Impact	Higher copay = Lower premium	Higher policyholder share = Lower premium	Higher deductible = Lower premium
Popular in India	Common in senior citizen or metro-based policies	Rare, and often used synonymously with copay	Less common; more typical in global markets
Risk Sharing	Yes – only for defined services	Yes – across the entire eligible amount	Yes – before coverage begins
Clarity for Policyholders	Simple and predictable	Slightly complex in calculation	Straightforward, but requires upfront cost
Used Interchangeably?	Yes – sometimes confused with coinsurance	Yes – coinsurance is often used interchangeably with copay	No – deductible is a distinct and separate concept

Advantages and disadvantages of copay

The advantages and disadvantages of copay revolve mostly around the premiums paid.

Advantages of Copay in Health Insurance

1. Lower Premiums

One of the main advantages of copay is that it helps reduce insurance premiums. Since the policyholder shares part of the medical expenses, insurers offer more affordable plans. This makes copay-based group health insurance cost-effective, especially for employer-sponsored group health policies

2. Promotes Responsible Healthcare Usage

Employees become more thoughtful about when and how they seek medical care. It discourages raising claims for minor treatments. When employees contribute a fixed portion of each medical bill, they tend to avoid unnecessary hospital visits or consultations.

3. Reduces Financial Burden on Employers

For organizations, copay plans help keep group health insurance costs under control. This makes wellness programs more scalable and sustainable over time.

For example, an early-stage tech startup in Bengaluru chose a 10% copay model for its team of 300 to keep premiums affordable. Employees used Pazcare’s tele consultation services for minor issues and saved on in-person visits reducing claims by 28% over the year.

Disadvantages of Copay in Health Insurance

1. Out-of-Pocket Expenses for Employees

With copay, employees must pay a fixed percentage of each medical expense. This can become costly for those who need frequent doctor visits, especially in cases of chronic illnesses.

2. May Discourage Timely Medical Attention

The extra cost might cause employees to delay or skip medical appointments. This could lead to bad health outcomes and higher costs in the long run.

3. Complexity in Understanding Copay Terms

Copay policies can be confusing, especially when different percentages apply to various services like 10% for general consultations and 20% for diagnostics. This lack of clarity can lead to dissatisfaction.

4. Less Beneficial for Low-Income Employees

Employees with limited incomes may find copay plans

burdensome. High out-of-pocket expenses can lower the perceived value of the health insurance provided by their employer.

Read: Calculate health insurance premium

When Does Copay Apply and When It Doesn’t?

Copay applies in health insurance under the following scenarios:

Hospitalisation costs – Some health insurance policies apply copay on expenses like room rent, ICU charges, and overall treatment costs.
Specialist consultations – Visiting super-specialists or availing services at premium healthcare facilities may attract a copay clause.
‍Pre-existing diseases – Treatments related to conditions like diabetes, hypertension, or asthma may have a mandatory copay clause applied by insurers.

Copay does not apply when:

Preventive health check-ups – Annual health check-ups and wellness screenings are usually covered without any copay.
Daycare procedures – Many minor surgeries and daycare treatments (like cataract, dialysis) are free from copay clauses.
Emergency treatments – In emergencies, some insurers may waive off the copay requirement as a goodwill or under humanitarian clause.
Corporate group plans (fully covered) – Employer-provided group health insurance policies may offer plans without any copay for employees, especially in comprehensive coverage options.

Things to keep in mind before opting for copay in health insurance

The health insurance policies that come with copay clauses are affordable but always keep in mind to understand your coverage requirements before opting for this option.
Also, it is important to check for the finances and keep it ready before hospitalization as you will pay a percentage of your medical bills when you opt for a copay option.
If you are a healthy person with no history of medical illness, then the copayment option can save you some money as you will pay a lesser health insurance premium.

Hence, always consider your medical condition before you opt for a copay option in your health insurance policy.

However, if you are a person with a history of illness, then it is always better to go with a regular health insurance policy.

Rising Healthcare Costs in 2025: Why Copay Matters

According to PwC’s Health Research Institute (HRI), the medical cost trend for 2025 is projected to rise by:

8% year-on-year for the Group market
7.5% year-on-year for the Individual market

As healthcare costs continue to rise steadily, insurers and employers are introducing copay clauses to keep premiums affordable and reduce misuse of insurance coverage. Copay allows risk-sharing between the policyholder and insurer, making it a viable strategy to control claim frequency and manage premiums, especially in group health insurance plans for startups and SMEs.

Employee healthcare benefits by Pazcare

Looking to lower premiums for your growing team without compromising on care? Explore flexible copay-enabled group health insurance plans with Pazcare—backed by 24/7 support and customizable wellness add-ons.

Now purchase group health insurance policy, group term life insurance policy and group personal accident policy for your team at competitive prices from Pazcare. You can also include corporate wellness programs as part of your employee benefits plan. Get unlimited doctor consultations, health check-ups, therapist consultations at discounted prices. To know more about group insurance and employee wellness programs, take a look at our group health insurance guide and corporate wellness program guide.

What Is Copay In Health Insurance

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What is copay in health insurance?

Examples of health insurance copay and how copayment works?