Group health insurance pricing is a function of claims record, no. of lives covered with respective demography, and benefit structure of the policy. An increase or decrease in the benefit structure translates into a proportionate increase or decrease in projected claim costs and hence policy premiums. In this article, we’ll get to know how can deductible and co-pay help in lowering the price for GHI.
Co-pay and deductible are among the prime policy design parameters that help to control claim costs and help manage premium costs within budget in the case recorded GHI claims are higher.
Let us discuss these in some detail to understand how they manage premium costs –
- Co-pay– Copay refers to the percentage of the claim amount that has to be borne by the policyholder under a health insurance policy. For example, if policy co-pay is 10% and the admissible claim amount is INR 1L (after deducting non payable items like hospital registration charges, consumables, etc.) then the insurance company will pay INR 90K and the remaining INR 10K will have to be borne by the policyholder.
As you can see from the above example insurer now has a lower risk with co-pay than without co-pay. Therefore the introduction of co-pay helps to reduce premiums in proportionate terms.
- Deductible– Deductible is the amount that the policyholder has to pay as part of the claim whenever it arises, and the rest of the amount is paid by the insurance company. For example, if the policy deductible is INR 10K and the admissible claim amount is INR 1L, then the policyholder has to pay INR 10K and the rest INR 90K will be paid by the insurance company towards the claim. A point to be noted here is that deductible is not a percentage of the claim amount hence irrespective of whether the claim is INR 2L or 1L or 50K, the deductible will be the same as set in the policy terms i.e. INR 10K for the above example. Hence while applying the deductible clause to your policy please keep in mind that once it is introduced small value claims which fall under the deductible limit will not be entertained by the insurer.
You can choose different limits for deductible, from INR 1K to INR 25K, depending on your budget and what is best suitable for your employee group. Since deductible also results in lower risk for the insurer, they pass the benefit to the group administrator in premium terms.