Mediclaim Co-Payment: Don't Make Patients Pay for the Insurer-Hospital Fight

By Sunil Garodia
First publised on 2026-10-05 10:28:31

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Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack

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The proposed 10% co-payment on health insurance claims has been presented as a way to make patients more cost-conscious. That sounds reasonable until one asks a simple question: what costs is the patient actually in a position to control?

Under the proposal being considered by the General Insurance Council, policyholders would have to pay 10% of admissible inpatient hospitalisation costs, subject to a maximum of Rs 5 lakh per claim. In return, insurers say, premiums would be lower. The proposal is expected to apply from January 1, 2027, if approved.

But the insurers' own explanation exposes the problem.

The industry says comprehensive insurance can make patients less sensitive to prices and can encourage hospitals to order additional diagnostic tests, recommend procedures, extend stays and move patients into higher-priced rooms. The General Insurance Council is simultaneously proposing common hospital empanelment, benchmark tariffs, outcome-based contracts and a mechanism to settle disputes between insurers and hospitals.

In other words, the industry itself says there is a problem in the insurer-hospital relationship.

Why, then, should the patient pay for it?

A patient admitted to hospital is not sitting across the table negotiating the price of an MRI, an implant, an operation or a day's stay. In an emergency, the patient may not even know what procedure is being performed. The decisions that determine much of the hospital bill are made by doctors and hospitals, within a system in which insurers and providers negotiate rates and settle claims.

A mandatory 10% co-payment does not directly solve that billing dispute. It simply transfers part of the financial risk to the person who bought insurance precisely to protect himself against the cost of hospitalisation.

There is also a practical problem. A 10% share is not small when the underlying bill is large.

A Rs 5 lakh hospital bill means Rs 50,000 out of the patient's pocket. A Rs 10 lakh bill means Rs 1 lakh. The proposed Rs 5 lakh ceiling is per claim, not per year. A person hospitalised twice can therefore face the co-payment twice.

And the promised lower premium has not been quantified. That is crucial.

A customer cannot decide whether to accept a substantial new financial risk unless the insurer tells him exactly how much premium he is saving by taking it.

There is nothing inherently wrong with co-payment. It can be a legitimate insurance choice when the consumer knowingly chooses it in exchange for a lower premium. India already has health insurance products with voluntary co-payment options.

That is fundamentally different from making a co-payment a condition of the policy.

What would be better for India?

First, let consumers choose. Offer two clearly priced products: one with full indemnity and a higher premium, and another with a voluntary co-payment or deductible and a lower premium. Tell the customer exactly how much he saves and exactly how much he can have to pay.

Second, put a sensible annual ceiling on the patient's exposure. A family should not face a fresh 10% liability every time someone is hospitalised. The protection should be annual, not merely per claim.

Third, fix the insurer-hospital relationship directly. The General Insurance Council is already proposing common empanelment, benchmark tariffs and a mechanism for resolving disputes. Those measures should be made effective before policyholders are asked to absorb more of the cost. Transparent treatment packages, standardised tariffs where appropriate, prompt settlement of legitimate claims and an effective mechanism for resolving disputes over deductions and bills would address the problem at its source.

Fourth, protect portability. A policyholder should not lose existing protection simply because he decides to move to another insurer offering better service or value. If portability or migration brings a new co-payment liability, consumers could effectively be discouraged from exercising a right that regulators have encouraged.

Finally, the regulator should demand evidence before imposing a universal co-payment. If insurers believe that co-payment will reduce unnecessary treatment and premiums, they should demonstrate how much of the saving will come from lower hospital costs, how much will be passed on to customers and how much additional financial risk the customer will assume.

India needs cheaper health insurance. It also needs insurers to control unnecessary costs. But the answer cannot be to make the patient the shock absorber whenever insurers and hospitals cannot agree on the bill.

The consumer bought health insurance to transfer financial risk, not to become a party to the industry's commercial dispute. If insurers and hospitals have a billing problem, they should settle it between themselves. India will be better served by giving patients genuine choice, capping their annual exposure and forcing the industry to fix the hospital-billing problem at its source.