Mandatory 10% Health Insurance Co-Pay May Raise Patient Costs to 19%

General insurance companies in India have put forward a proposal to introduce a mandatory 10 per cent co-payment on retail health insurance policies. If implemented, this would take effect from January 1, 2027. The move is intended to lower insurance premiums but is expected to increase the share of hospital bills that policyholders must pay themselves, potentially pushing their out-of-pocket expenses to between 15 and 19 per cent when combined with non-payable charges.

The proposal comes from the General Insurance Council (GIC), which represents the general insurance industry. It suggests setting a cap of ₹5 lakh on co-payments per claim and includes a stipulation that policyholders cannot opt out of the 10 per cent co-pay requirement by using add-on riders or top-up policies. Insurers argue that requiring patients to share a portion of the treatment cost will make both patients and hospitals more aware of expenses, reducing instances of inflated room tariffs, unnecessary diagnostic procedures, and extended hospital stays.

However, the actual financial burden on policyholders could be higher than the nominal 10 per cent co-pay. This is because the co-pay applies only to admissible charges covered under the insurance policy. Other expenses, such as consumables, administrative fees, and penalties related to room rent limits, are not covered and typically make up an additional 5 to 10 per cent of the hospital bill. When these non-payable items are added to the co-pay, the total out-of-pocket expense for the patient can range from 15 to 19 per cent of the total hospital bill.

For example, consider a ₹20 lakh hospital bill for tertiary care. The admissible amount covered by insurance might be ₹18.5 lakh. A 10 per cent co-pay on this admissible amount would mean the patient pays ₹1.85 lakh. Adding non-admissible expenses of ₹1.5 lakh (around 7.5 per cent of the total bill) raises the total out-of-pocket cost to ₹3.35 lakh, which is approximately 16.75 per cent of the entire bill.

Industry experts have weighed in on the proposal’s implications. Mayank Gosar, founder of Softcon Capital, highlighted that the combination of co-pay and non-payable charges could significantly increase the financial burden on insured patients. He cautioned that while the co-pay aims to control costs, it may end up making hospital stays more expensive for policyholders.

The proposal will require approval from the Insurance Regulatory and Development Authority of India (IRDAI), the regulatory body overseeing insurance policies in the country. Given the widespread impact such a change would have on consumers and the industry, IRDAI’s decision will be closely watched.

Mahavir Chopra, founder of Beshak.org, noted that individual insurers are unlikely to implement a co-pay clause independently as it would put them at a competitive disadvantage. The plan, he explained, is for the entire industry to adopt the measure simultaneously so that insurers operate on equal terms.

However, some analysts believe the proposal might face resistance from the market. Prashant Goyal, founder and CEO of Swadhyaay, pointed out that the mandatory co-pay could slow the growth of the health insurance sector. He suggested that if implemented, premiums might decrease by more than 30 per cent due to reduced moral hazard, but the increase in out-of-pocket costs could deter customers.

Gosar added that IRDAI may be reluctant to approve a blanket mandatory 10 per cent co-pay. Instead, he recommended offering a 10 per cent co-pay option as a rider that customers could choose for lower premiums. This would provide more flexibility and avoid increasing the immediate financial burden during claims. He also noted that the industry is moving towards policies with fewer restrictions on room rent, better coverage for consumables, and reduced sub-limits, making a mandatory co-pay a step backward and likely to face customer opposition.

For policyholders, the potential introduction of a mandatory co-pay means that health insurance alone may no longer be sufficient to cover hospital expenses. Since both the co-pay and non-payable charges are calculated on the total hospital bill, households should plan for higher out-of-pocket payments. It would be prudent to keep liquid funds ready to cover at least 15 to 19 per cent of a projected hospital bill. Taking the ₹20 lakh example, this could mean setting aside ₹3.35 lakh to meet immediate payment needs.

As the health insurance industry evolves, balancing affordability with comprehensive coverage remains a challenge. The proposed co-pay rule aims to reduce unnecessary medical expenses but could shift more financial responsibility onto patients. Stakeholders across the sector, including regulators, insurers, and consumers, will need to weigh the benefits and drawbacks carefully before any changes take effect.