Lower premiums, higher out-of-pocket expenses: Experts decode the proposed 10% health insurance co-pay rule

Non-life insurers are considering a 10% co-payment on retail health insurance claims from 1 January 2027, with the policyholder’s contribution proposed to be capped at ₹5 lakh per claim. The proposal could lower annual premiums, but policyholders would have to arrange part of the hospitalisation cost themselves.

Retail health insurance means a health insurance policy that an individual or family buys directly from an insurer for themselves, rather than getting coverage through an employer or another group.

“The proposal, being considered by the General Insurance Council, would pair the change with common hospital empanelment and a formal mechanism for settling disputes between insurers and hospitals,” according to a report by The Times of India (TOI).

If implemented, even people with comprehensive health insurance would have to bear 10% of the in-patient hospitalisation cost, whether the claim is settled through a cashless facility or reimbursement.

The proposed co-payment cannot be waived, reduced or modified through riders or endorsements, and the policyholder’s contribution cannot be recovered from another health insurance policy, according to the report. Here is what it could mean for policyholders.

What is co-payment in health insurance?

A co-payment, or co-pay, refers to the 10% of a claim amount that the policyholder has to pay from their own pocket.

Deepika Reddy, Co-founder & Finance Director at Anvayaa, said, “It is being considered for retail indemnity health policies, retail-under-group policies, the indemnity portion of combination products, as well as policies coming through migration or portability. Outpatient claims are proposed to remain outside this arrangement.”

Indemnity health insurance reimburses eligible medical expenses up to the policy’s coverage limits. Migration refers to moving from one health insurance policy to another with the same insurer, while portability generally means shifting a policy from one insurer to another while retaining eligible continuity benefits.

Outpatient claims are proposed to remain outside the arrangement. Outpatient treatment refers to medical care where the patient does not require hospital admission, such as a doctor consultation or certain diagnostic procedures.

How would the 10% co-payment work?

If the final admissible claim is ₹5 lakh, a 10% co-payment would mean the policyholder pays ₹50,000, and the insurer pays ₹4.5 lakh, subject to the policy terms and available sum insured, said Jose Peter, Co-founder & CEO, Arogya Finance.

The proposed ₹5 lakh cap means the co-payment would stop increasing once it reaches that amount. At 10%, this happens at an admissible claim of ₹50 lakh. For claims above ₹50 lakh, the co-payment would remain capped at ₹5 lakh per claim.

However, Peter said the actual amount a customer pays could be higher because other policy deductions may apply.

Is co-payment calculated on the entire hospital bill?

Reddy said co-payment is generally calculated on the admissible claim amount, rather than the hospital’s total bill. He explained the following case scenarios:

• If the total hospital bill is ₹5 lakh but only ₹4.5 lakh is admissible under the policy, the 10% co-payment would generally be calculated on ₹4.5 lakh. The policyholder would pay ₹45,000 as co-payment, while expenses not covered by the policy would be paid separately.
• If the policy has room-rent or disease-specific sub-limits—caps on what the insurer will pay for a hospital room or particular treatment—the claim amount may be reduced further.
• If the policyholder chooses a room that costs more than the eligible room limit, a proportionate deduction may apply, meaning the insurer could reduce its payment across eligible hospital expenses.

“This means the actual out-of-pocket expense can be higher than 10%. Room-rent limits, deductibles, sub-limits, exclusions and other non-payable expenses can all add to the amount finally paid by the policyholder,” Peter said.

How much could premiums fall?

There is no standard premium reduction announced at this stage, so it would be difficult to put a realistic percentage on the savings today. The benefit is also unlikely to be identical for every policyholder, because premiums depend on factors such as age, sum insured, health profile, product design, and the insurer, Reddy said.

Peter said the relevant question is therefore not simply, “How much cheaper is my policy?” but also, “If a medical emergency happens tomorrow, how much money will I have to arrange myself?”

Can customers pay a higher premium to avoid co-payment?

Under the proposal, the co-payment is not expected to be waived, reduced or modified simply through a rider or endorsement. So, consumers should not assume that they will automatically be able to pay a higher premium and opt out of it, Reddy mentioned.

What should policyholders check before choosing such a plan?

Peter said consumers need to look at their total out-of-pocket exposure, not just the co-payment percentage.

They should check the room-rent entitlement, deductibles, procedure- or disease-specific sub-limits, exclusions, waiting periods, non-payable expenses, available sum insured and restoration benefits. These can affect how much of the final hospital bill is reimbursed, he added.

They should also understand how the co-payment is calculated after other policy deductions and which expenses remain completely outside the cover, Reddy mentioned.

Peter said the practical test is simple: after accounting for all policy conditions, how much money could the family still need to arrange during a hospitalisation. That amount should ideally be planned for separately through liquid savings or another appropriate financing arrangement.

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