Co-Pay or Deductible: Which Health Insurance Cost-Sharing Clause is Right For You?
Health Insurance policies use co-payments and deductibles to determine how much you pay out of pocket during a claim. Learn how these clauses work and which option may suit your needs.
Health Insurance costs can vary depending on whether your policy includes a co-pay or a deductible.
Health Insurance: Picture a family settling a ₹10 lakh hospital bill. Around ₹60,000 of it is made up of items the policy never pays for. On the remaining ₹9.4 lakh, the insurer would ask the family to bear 10 per cent, or ₹94,000. The family leaves with ₹1.54 lakh to pay, about 15 per cent of the invoice, even though they hold a policy.
That is the kind of arithmetic now being run by analysts after reports that India’s general insurers are considering a compulsory 10 per cent co-payment on retail health insurance claims, to take effect from January 1, 2027. The idea comes with a promise of cheaper premiums, but it has no regulatory clearance, and the General Insurance Council (GIC) declined to comment when contacted. Existing policy terms stay as they are until the Insurance Regulatory and Development Authority of India (IRDAI) issues an order.
Health Insurance: What insurers have put on the table
Under the proposal, a policyholder would pay a tenth of every admissible inpatient hospitalisation claim, with the contribution capped at ₹5 lakh per claim. Since the ceiling is a fixed rupee amount, it would start to matter only when the admissible bill reaches ₹50 lakh. On a ₹30 lakh admissible bill, for instance, the share would be ₹3 lakh.
The scope, as reported, is wide. The share would apply to cashless and reimbursement claims alike and would include accident-related admissions. Outpatient claims would stay out. The affected products would be retail indemnity policies, retail-under-group plans, the indemnity part of combination products, and policies moved internally or ported between insurers.
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The design also shuts the usual escape routes. The contribution could not be waived or reduced through a rider, and it could not be recovered from another health policy. In return, annual premiums are expected to come down, though no figure has been made public. One analyst estimated a fall of more than 30 per cent once the effect on claims behaviour is factored in, which is a projection and not an insurer commitment.
Insurers’ stated logic centres on how bills grow when everything is covered. Patients with comprehensive cover, the reasoning goes, are less likely to question longer stays, extra tests and procedures, or the choice of a pricier room, whose tariff often moves the doctors’ fees and procedure charges with it. A direct stake, they argue, would make patients and hospitals more cost-aware.
Alongside the co-payment, the GIC is reported to be planning common hospital empanelment and a formal route for settling disputes between insurers and hospitals. The backdrop is a long-running friction. In August 2025, a hospitals’ association announced a halt to cashless services for two insurers over rates and deductions, citing medical inflation of 7–8 per cent a year, while the GIC said insurers had paid claims worth over ₹87,000 crore in FY24.
Health Insurance: Why the final bill could be higher than 10 per cent
Health Insurance: A co-payment is levied only on the portion the insurer treats as admissible. Charges the policy excludes, such as certain consumables, administrative fees or the gap created by a room-rent limit, are paid by the patient on top of it.
Advisers said that where consumables are not covered, 10–25 per cent of a claim can already be deducted under that head. For treatments costing ₹30–40 lakh, one adviser estimated, a policyholder’s total outgo could approach ₹4–5 lakh.
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Other analysts have put the combined burden at roughly 15–19 per cent of the hospital bill when non-payable items form 5–10 per cent of it. One of them noted that the industry has been heading toward policies with fewer sub-limits, no room-rent caps and consumables cover, and that a compulsory co-pay would cut against that direction.
The proposal is not the first co-payment feature in Indian health cover. The standard Arogya Sanjeevani policy, rolled out in 2020, carries a fixed 5 per cent co-pay, and several insurers sell plans with 10–30 per cent. What would change is the removal of choice: today buyers can pick a plan with no co-payment, and the plan would end that option industry-wide.
Health Insurance: Approval hurdles and the wider debate
The main test is regulatory. Insurance executives, speaking without being named, have said the proposal may not get IRDAI’s approval, one pointing to the risk of cartelisation if all insurers adopt the same clause together. A broker noted that under the “use and file” system, individual insurers can alter their own products without prior approval, which would allow a company-by-company route. A financial adviser said no single insurer would act alone for fear of losing customers, and suggested that a 10 per cent co-pay offered as an optional rider would be likelier to find acceptance.
Critics raise several objections. They argue that insurance-wide adoption would remove the buyer’s ability to pay more for fuller cover, and that it could invite scrutiny by competition authorities. They also say patients cannot judge whether a test is needed or negotiate a hospital’s price, and that measures such as common provider networks, benchmark prices for procedures and outcome-linked contracts should come first. Citing the US RAND Health Insurance Experiment, they note that higher cost-sharing reduced healthcare use but not only unnecessary care.
Industry watchers also flag a commercial risk: if buyers see a large upfront payment, some may reconsider buying comprehensive policies, which could slow growth in the segment. An executive suggested insurers should instead press for a health regulator with authority over hospital charges.
There is a regional precedent. In January, Indonesia’s financial regulator dropped a plan that would have required policyholders to bear at least 10 per cent of private health insurance claims. Lawmakers had asked for a rethink over the financial impact on the public. The revised rule lets customers choose fully covered products and limits optional co-pay products to 5 per cent of the claim or a fixed maximum.
In India, the next move lies with IRDAI, which could clear the plan, require changes or reject it.
