How deductible & co-pay help keep Group Health insurance prices low?
Group health insurance pricing is a function of claims record, number 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 deductible and co-pay keep Group Health insurance price low.
Co-pay and deductible are among the prime policy design parameters that help to control claim costs. And also help manage premium costs within budget in the case recorded prices for GHI claims are higher.
Deductibles and co-payments are effective strategies for lowering prices in Group Health Insurance. Deductibles require policyholders to pay a predetermined amount before the insurance coverage kicks in, reducing the insurer’s financial burden. Co-payments require individuals to share a portion of the healthcare costs with the insurance company. These cost-sharing mechanisms incentivize responsible healthcare utilization, discourage unnecessary medical visits, and ultimately help control insurance costs while maintaining comprehensive coverage for the insured group.
Managing Group Health Insurance costs through deductibles and co-payments
Let us discuss impact of deductibles and co-payments on Group Health Insurance pricing:
1. Co-pay- Keep Group Health Insurance prices affordable with co-payments
Copay refers to the percentage of the claim amount that the policyholder has to bear 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 pays INR 90K and the remaining INR 10K will have to be borne by the policyholder.
When deciding on the co-payment amount for Group Health Insurance, it’s crucial to strike a balance between affordability for the insured members and the insurer’s financial sustainability. Factors such as the desired level of cost-sharing, market research on industry standards, and considering the members’ ability to pay can help determine an appropriate co-payment amount.
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 keep Group Health insurance price low.
2. Deductibles-Managing Group Health Insurance price through deduction
A deductible is an amount, the policyholder has to pay as part of the claim whenever it arises. And the insurance company pays the rest of the amount. For example, if the policy deductible is INR 10K and the admissible claim amount is INR 1L. Then the policyholder pays INR 10K and the rest INR 90K is 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 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 introduces small value claims which fall under the deductible limit, the insurer will not entertain it. So, the main benefit of opting for deductibles in group health insurance is that it helps lower premium costs for both the insured members and 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.
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