New Delhi: Health insurance policyholders may have to bear 10% of eligible hospitalisation expenses under a proposed co-payment framework being considered by non-life insurers from January 1, 2027.

Under the proposal, insurers would cover the remaining 90% of eligible inpatient hospitalisation costs, while the policyholder’s contribution would be capped at ₹5 lakh per claim, according to a report cited by NDTV Profit. The proposal is aimed at controlling rising healthcare costs and reducing overbilling by hospitals.

However, the proposal is not yet a confirmed regulatory rule. The Insurance Regulatory and Development Authority of India (IRDAI) would need to approve any such change. A separate report has indicated that the proposal may face regulatory hurdles.

What is the proposed 10% co-payment rule?

Under the proposed framework, customers with eligible retail health insurance policies would be required to pay 10% of the covered hospitalisation bill from their own pocket.

For example, if an eligible hospitalisation claim amounts to ₹5 lakh, the policyholder could have to pay ₹50,000, while the insurer would cover ₹4.5 lakh, subject to the policy’s other terms and conditions.

For a larger claim of ₹60 lakh, a 10% contribution would technically amount to ₹6 lakh. However, under the proposal reported by NDTV Profit, the customer’s contribution would be capped at ₹5 lakh per claim.

The proposed contribution would apply even where the policyholder has comprehensive health insurance coverage.

Which hospital expenses could be covered?

The proposed co-payment would apply to inpatient hospitalisation expenses, including treatment related to accidents.

The framework is expected to cover retail indemnity health insurance policies, retail-under-group policies and the indemnity component of combined insurance products. It could also apply to internal policy migrations and portability, according to the report.

Outpatient claims would remain outside the proposed 10% co-payment framework. The proposal would also reportedly prevent customers from removing or changing the co-payment through riders or endorsements.

This distinction is important because hospitalisation can result in substantially higher bills than routine outpatient consultations and treatment.

Cashless and reimbursement claims could be affected

The proposed co-payment would reportedly apply to both cashless and reimbursement claims.

Under a cashless arrangement, the insurer settles the eligible portion of the hospital bill directly with the network hospital. If the proposed rule comes into effect, the policyholder would still be responsible for their 10% share.

In a reimbursement claim, the customer initially pays the hospital and later seeks reimbursement from the insurer. The 10% contribution would similarly remain the policyholder’s responsibility.

The proposal also reportedly states that the customer’s 10% contribution cannot be recovered through another health insurance policy.

Why are insurers considering co-payment?

The proposal comes amid concerns over the rising cost of healthcare and health insurance claims.

Insurers reportedly believe that when patients have policies covering almost the entire medical bill, they may be less likely to question expensive tests, procedures, room charges or prolonged hospital stays.

This can contribute to higher treatment bills, which eventually put pressure on insurers and premiums.

A co-payment could make policyholders more conscious of treatment costs because they would have to bear a portion of the bill themselves. The broader objective is to encourage cost awareness while helping insurers manage claim expenses.

Health insurance premiums may become cheaper

One potential benefit for policyholders could be lower insurance premiums.

When customers agree to bear part of their medical expenses, insurers take on a smaller share of the financial risk. This could allow insurers to offer policies at comparatively lower premiums.

However, cheaper premiums would come with a trade-off: customers would need to have sufficient funds available when they make a hospitalisation claim.

For someone with limited savings, even a 10% share of a large medical bill could create financial pressure.

Why emergency funds will become more important

The proposed rule could make emergency savings even more important for health insurance customers.

For example, a policyholder facing an eligible hospital bill of ₹10 lakh could have to arrange up to ₹1 lakh as their share if the proposal becomes applicable. On a ₹20 lakh claim, the contribution could rise to ₹2 lakh.

Although the proposed ₹5 lakh cap limits the maximum co-payment for a single claim, that amount could still be significant for many households.

Financial planning therefore cannot stop at buying health insurance. Policyholders may need to maintain a separate emergency fund that can cover deductibles, co-payments, exclusions and other expenses that an insurance policy may not pay.

NDTV Profit notes that maintaining savings equivalent to around three to six months of expenses is already commonly recommended as an emergency-fund measure.

Co-payment already exists in many health policies

The proposed framework would not introduce the concept of co-payment for the first time.

Many health insurance products already offer co-payment options. Customers may accept a specified percentage of co-payment in exchange for a lower premium.

At the same time, many policyholders prefer plans without co-payment because they want greater financial protection during a medical emergency.

The difference with the proposal being discussed is that the 10% contribution could become a broader feature across specified retail health insurance products rather than simply an optional feature selected by individual customers.

Common hospital panel and dispute mechanism proposed

The proposed changes reportedly go beyond the co-payment requirement.

Insurers are also considering a common hospital empanelment system and a formal mechanism to resolve disputes between insurers and hospitals.

A common panel could help standardise hospital networks and potentially improve transparency around treatment costs. A formal dispute-resolution mechanism could help address disagreements over hospital bills, claims and other issues between healthcare providers and insurers.

These measures are being considered alongside the co-payment proposal as part of efforts to control healthcare costs and reduce excessive billing.

What policyholders should do now

There is no need for existing policyholders to assume that a mandatory 10% co-payment has already come into force. The proposal still requires regulatory approval, and reports suggest its implementation is not certain.

However, customers can use the development as an opportunity to review their existing health insurance policies.

Policyholders should check whether their current plan already contains a co-payment clause, the percentage applicable, room-rent restrictions, deductibles, exclusions and the maximum sum insured.

It may also be useful to assess whether existing emergency savings would be sufficient to meet an unexpected share of a large hospital bill.

If the proposed framework is eventually approved, the combination of insurance coverage and adequate emergency savings could become increasingly important for managing healthcare-related financial risks.

For now, the key point is that the 10% co-payment is a proposal, not a confirmed rule. Its final form, applicability and implementation date will depend on regulatory decisions and the eventual framework adopted by insurers and IRDAI.