Claim Stories: ~80% Claim Not Paid Because Of Room Rent Limits!

Health insurance is a financial shield to protect yourself and your loved ones from the ravages of any medical treatments, whether they’re needed because of disease or injury. The insurer promises to cover the costs you incur for these treatments, and you pay them premiums in return. Sounds like a nice deal, right?

Well, not in all cases. What if you find cracks within the sturdy shield? What happens if you make a claim, thinking your expenses will be covered, but the insurer refuses to pay it?

One of the reasons why this may happen is the room rent limit. It is the maximum amount that the insurer will cover for the room you’re hospitalised in. This limit can affect not just the room’s price but also the associated medical expenses you’ve incurred.

Hospitals in India employ a price discrimination strategy for their billing. All the expenses you incur, except for MRP products, will vary depending on the hospital room you pick. 

For example, a hospital may charge Rs 300 for an X-ray undergone by a person hospitalised in a twin-sharing room, but Rs 600 for the same procedure if it’s undergone by a person hospitalised in a deluxe room. Doctor charges and other medical costs are calculated in the same way. 

This can be thought of as a subsidy that makes sure people across all income levels can afford the bills. 

Here’s a picture that displays the charges for the same surgery in the same hospital but for different room types -

So, your hospital room and the medical costs you incur are interrelated to one another. And, if your health insurance policy comes with a room rent limit, you’ve got to be extra careful. If you go for a room that’s beyond your eligibility, you’ll have to face not only the difference between the rents of both room types, but also a proportionate share of the associated medical costs.

Let’s look at a real-life example. This is the story of an individual named Mr M Ramesh Chand, who made a claim for his hospital expenses, but the insurer denied to pay out a massive portion of it - because he chose to be hospitalised in a room beyond what he was eligible for.

Mr M Ramesh Chand had individual health covers of Rs 5 Lakhs for both him and his spouse. He had bought the policies from an insurer in December 2005 and had continued renewing them.

In an unfortunate turn of events, Mr Chand was admitted to Venkataeswara Hospital in Chennai on 2 July 2020 owing to the cold, cough, and breathing problems he was facing. The doctors diagnosed him with a Covid-19 infection, bilateral pneumonitis with acute respiratory failure, and anaemia. He received treatment for the same and was discharged from the hospital on 11 July 2020.

Mr Chand had incurred a medical bill of a whopping Rs 4,42,811. He raised a claim for the same with the insurance company, but they only paid out Rs 97,662. 

Shocking, right? :(

Mr Chand was disappointed at this fact and went to the insurer’s Grievance Department to raise his concerns and get the remaining amount of Rs 3,45,149. 

The insurer said that the claim deductions were made because of the room rent limits, proportionate payment clause, and the non-payment for items of a non-medical nature - as per the policy he owned.

Let’s understand this in more detail. 

Mr Chand’s policy had a daily room rent limit of 1% of the sum insured, which equals Rs 5000, but he had chosen a room with a tariff of Rs 24,000 per day. Since he exceeded the limit, he had to face not only the difference in the rents but also a proportionate deduction on associated medical expenses. 

Next, expenses like admission and amenities fees, special housekeeping, MRD, and charges for items like food and beverages, face masks, scrubs, surgical caps, etc., weren’t payable and, hence, weren’t considered a part of the claim. However, the claim for PPE was honoured in accordance with the tariff put forth by the General Insurance Council.

The insurer said that the claim was processed and settled as per the terms and conditions of Mr Chand’s health insurance plan.

Mr Chand was obviously not happy about this, and he approached the Ombudsman for his grievances.

Here’s what Mr Chand said at the hearing with the Ombudsman.
Mr Chand submitted that he had incurred medical expenses of Rs 4.42,811 during his hospital stay. He got only Rs 97,662 as the claim payout for the insurer - which isn’t even ~20% of the total amount he had claimed. 

Plus, he has been a steadfast policyholder with the insurer from 2005 to 2020, with zero claims in the past. He did accept the room rent limit of Rs 5000 but made a request to settle the case in his favour, stating that the hospital had charged him way too much.

And, here’s what the insurer said.

The insurer said that Mr Chand’s room rent limit was Rs 5000 per day. But, he had selected a room with a tariff of Rs 24,000 per day. So, they not only restricted the room rent as per his eligibility but also proportionately deducted the other associated medical expenses that were payable. This was done in accordance with the Proportionate Payment Clause in Mr Chand’s health insurance plan.

The Ombudsman’s verdict.

The Ombudsman found the claim settlement by the insurer in order, except for the amount they paid for the PPE kits. 

36 PPE kits had been used. Here’s the actual cost that was incurred - 

Here’s what was paid by the insurer -

The Ombudsman said that, in accordance with the tariff approved by the Govt. of Tamil Nadu, it is actually reasonable to permit Rs 3000 daily for PPE kits. This tariff also applies to the Chief Minister’s Comprehensive Health Insurance Scheme (CMCHIS).

As per the Ombudsman -

So, the Ombudsman’s verdict said that since Mr Chand was entitled to Rs 27,000 for the PPE kits, he should be paid an additional amount of Rs 15,300 to settle the claim fully.

The primary purpose of writing about such real-life examples is to help you understand how health insurance works practically. Everything looks good on paper, but you never know what situations you can face during a hospitalisation. Decisions have to be made in the spur of the moment, and you’re often left with expenses that you wouldn’t have even imagined. 

So, from Mr Chand’s story, we can surmise that - 

👉 A huge chunk of your medical expenses will be linked to the room category you choose to be hospitalised in. A lower-category room means lower treatment costs, doctor fees, etc. A more expensive room means higher expenses and charges. 

👉 Next, room rent limits will also affect any health insurance claim you make. If you choose a room that’s beyond your eligibility, the insurer will not only charge you the difference but also a proportionate share of the associated medical expenses.

👉 Even if the room rent limit under the plan you’ve selected today looks enough, medical inflation will swoop in. The same amount may not be adequate after a few years; the money that will get you a private room now won't even cover being hospitalised in the general ward later.

So, if you’re planning to buy health insurance, go for a plan that has no room rent limits. But, if your policy comes with one, you should ideally upgrade to a cover that has no room rent limit with the same insurance company or port to another plan without room rent limits.

Already have a health insurance plan with room rent limits? Talk to a vetted financial advisor to figure out the course of action you can take - at absolutely no cost! :)