General insurance companies are advocating for a mandatory 10 percent co-payment on retail health insurance policies, aiming for implementation by January 1, 2027. This initiative, organized by the General Insurance Council (GIC), includes a proposed cap of ₹5 lakh on co-payments per claim and a stipulation that policyholders cannot opt out through add-on riders or top-up policies.
Insurers assert that a mandatory co-payment would help mitigate “moral hazard” by making both patients and hospitals more sensitive to costs. They believe this could deter inflated room charges, unnecessary tests, and extended hospital stays. However, the actual financial burden on policyholders may be higher than anticipated. Current estimates suggest that when non-payable expenses—such as consumables and administrative fees—are included, a policyholder may face out-of-pocket costs amounting to 15 to 19 percent of their total hospital bill.
For example, on a ₹20 lakh hospital bill, with an admissible amount of ₹18.5 lakh, the mandatory co-pay would result in ₹1.85 lakh paid by the policyholder. Coupled with non-payable expenses, the total out-of-pocket liability could reach ₹3.35 lakh, or 16.75 percent of the bill.
The proposal’s acceptance hinges on approval from the Insurance Regulatory and Development Authority of India (Irdai). Experts suggested that it is unlikely individual insurers would independently adopt this clause due to competitive disadvantages. Some industry leaders warn that the proposal could hinder the overall growth of the health insurance sector and suggest alternative approaches, such as voluntary co-pay riders. Consumers are encouraged to prepare for increased hospital expenses by setting aside funds for potential out-of-pocket costs.
Why this story matters: This proposal could significantly affect healthcare affordability for many policyholders.
Key takeaway: A mandatory co-payment may lower premiums but could increase actual out-of-pocket expenses for those seeking care.
Opposing viewpoint: Some industry experts argue against mandatory co-payments, advocating for voluntary options instead to maintain competitiveness and affordability.
