Deductible vs co-pay in health insurance: Which option can increase your out-of-pocket medical costs? Experts explain

A health insurance policy can cover a large part of your hospital bill, but it does not always mean you pay nothing from your own pocket. Deductibles and co-pays are two policy features that can leave consumers paying a part of the medical expense even when the treatment is covered.

The difference matters because a deductible is generally a fixed amount, while a co-pay is linked to the size of your claim. On a small hospital bill, a co-pay could cost you less than a deductible. But as the claim gets larger, the same co-pay percentage can translate into a much bigger out-of-pocket expense.

This makes it important to look beyond the premium when comparing health insurance policies. A policy with a lower premium may come with higher cost-sharing, potentially leaving you with a substantial bill during a medical emergency.

Deductible vs co-pay: How are they different?

With a deductible, the amount the policyholder has to bear is known upfront. However, consumers need to check how the deductible applies under their particular policy.

“The amount to be paid is precisely known to the policy holder—it is normally specified upfront and specified clearly in the policy documents, along with how it applies—for example, whether it is applicable per claim or annually,” said Shashi Kant Dahuja, executive director and chief underwriting officer, Shriram General Insurance.

A co-pay works differently. Here, the insurer specifies a percentage of the admissible claim that the policyholder must bear. Therefore, the actual amount paid by the consumer increases as the claim amount rises.

For example, with a 10% co-pay, a ₹2 lakh admissible claim would leave the policyholder paying ₹20,000. On a ₹5 lakh admissible claim, the out-of-pocket expense would rise to ₹50,000, Dahuja explained.

Bikash Choudhary, CEO of FatakSecure, said a deductible remains a fixed amount irrespective of whether the claim is ₹3 lakh or ₹30 lakh, while a co-pay rises with the size of the claim.

Which one can leave you paying more?

The answer depends on the size of the claim and the amount of deductible or percentage of co-pay chosen.

Choudhary gave the example of a ₹50,000 deductible versus a 5% co-pay. On a ₹10 lakh claim, both would result in a ₹50,000 contribution from the policyholder.

But the difference becomes clear on a smaller claim of ₹1.5 lakh. Under the ₹50,000 deductible, the policyholder would bear ₹50,000, while a 5% co-pay would mean an out-of-pocket expense of ₹7,500.

On a ₹30 lakh claim, however, a 5% co-pay would mean the policyholder pays ₹1.5 lakh, whereas a ₹50,000 deductible would remain ₹50,000, assuming the deductible applies as a fixed amount to that claim.

Therefore, consumers need to assess how much they can comfortably pay during a hospitalisation, rather than simply choosing the option with the lower premium.

Choudhary said a deductible can make sense for someone who wants to insure against high-cost medical events but can comfortably handle smaller hospitalisation expenses themselves. He suggested choosing a deductible that the policyholder can realistically arrange within 48 hours.

Don't calculate your cost only on the hospital bill

Another important point is that the deductible or co-pay may not simply be calculated on the final hospital bill.

“The most common misunderstandings are assuming that a deductible or co-pay applies only once during the policy year,” Dahuja said. Consumers should check whether the deductible applies per claim, per hospitalisation or annually, and whether the co-pay applies to the entire admissible claim or only to specified treatments, hospitals, age groups or conditions.

Experts also stressed the importance of understanding the admissible claim amount.

The total hospital bill can include expenses that the policy does not cover. Room-rent limits, non-medical expenses, exclusions and sub-limits can reduce the amount considered admissible before the deductible or co-pay is applied.

Choudhary also highlighted the possibility of proportionate deductions when a policyholder chooses a room above the permitted room-rent limit. Such deductions can affect other hospital expenses, including surgeon and intensive care unit charges.

Consumers should also check whether the policy contains age-based or zone-based co-pay provisions that can apply under specific circumstances.

The safest approach is to ask the insurer or intermediary to show exactly how much the policyholder would pay under different claim scenarios. If the answer is unclear, the policy wording needs a closer look.