The No. 1 reason why you’ll pay most of your hospital bill, despite having insurance
Imagine this - you get diagnosed with a condition and have to undergo an urgent surgery. The doctor tells you that the total expenses would be around INR 2 Lakhs. You’re not worried as you have health insurance with a sum insured of INR 4 Lakhs, that’s way above the estimated cost. Later, when you actually claim for the expenses, you’re shocked when the insurer only approves INR 1 Lakh of the bill amount - and you have to pay the rest from your savings!
Why did this happen? Despite having a sufficient cover, why did the insurer settle only a partial claim?
Well -it is a long story. So, we’ll take you through it one step at a time.
Understanding room-rent limits
Every health insurance policy comes with a long list of terms and conditions. One such condition is the room rent limit - which is as important to know about, as the sum insured of your policy itself. You may have taken an adequate overall cover, but with a restrictive room-rent limit, you might end up paying large sums of money out of your pocket - even without exhausting the cover itself.
Basically - the insurer decides a maximum cap on the type of room you can choose (that they’ll pay for). There are different types of room rent limits that insurers impose based on the policy you’ve bought -
1️⃣ Financial limits
Some insurers apply a limit of a specific percentage on the sum insured of your policy. Usually, a room rent limit of 1% is applied on policies with a sum insured of less than INR 5 Lakhs.
2️⃣ Category limits
Some insurance plans cover specific types of rooms - such as a private room or a shared accommodation. This kind of a limit ensures that you have the type of room, regardless of the cost of it.
If you choose a room that falls within the financial limit/ category that your plan allows, you won’t have to pay anything out of your pocket. However, if you choose a room with a rent that is more than what you’re eligible for, there will be deductions.
Just now - a thought will cross your mind. “So - I’ll just pay the difference in the room-rent, that shouldn’t be a major cost” Right? Well, wrong.
Enter - proportionate deductions.
Proportionate deductions are the reasons you must worry about room-rent limits. Basically, because of this clause - you won’t “just pay the difference in the room-rent”, as you imagined.
You’ll actually pay a proportionate amount of the entire bill. For instance, if you pick a deluxe room when you’re eligible for a general room - the insurer will not only deduct the additional room charges but you will also suffer a deduction in the ‘same proportion’ for all other associated expenses that are linked to the room you’ve chosen.
Let’s explain with an example.
Rohan is hospitalized for 3 days. He has a health insurance cover of INR 3 lakhs and his policy has a room rent limit of 1%. So, he’ll be eligible for a per-day room rent of INR 3000. During hospitalization, he opts for a room that has a rent of INR 6,000 per day.
The total billing during this hospitalisation is INR 1 Lakh. But - here’s how much the insurer will pay.
Sum Approved = (Room-rent approved / Room-rent Claimed) X Amount Claimed
So, Sum Approved = (3000/6000) X 1,00,000
= 0.5 X 1,00,000 = 50,000/-
So, the insurer will only pay INR 50,000/- while Rohan will have to foot the rest of the amount from his savings.
However, if Rohan had chosen a room that cost only INR 3000 - and the bill came upto INR 1,00,000 - the insurer would have paid the entire amount.
Now that we have an overview of how proportionate deductions work - let’s take a look at some costs which won’t suffer proportionate deductions.
Charges where proportionate deduction won’t apply
Earlier, insurers calculated proportionate deductions on the entire hospital bill. But, with a recent IRDAI regulation, the following costs have now been excluded and can’t be subject to proportionate deduction -
- Cost of pharmacy (all medicines, medical supplies etc.)
- Cost of implants and medical devices
- Cost of diagnostics (lab tests, imaging etc.)
All other expenses, other than the ones mentioned above, will be subject to proportionate deduction by the insurer.
It gets murkier!
Proportionate deductions on one side - there’s more damage that room-rent limits can cause.
Hospitals have different rate-cards for all their services - based on different room categories. A service that costs X for a patient in a shared room, could cost 2X for a patient in a single, private room. Here’s what we mean, let’s take an example.
Nisha and Arjun both have a health insurance policy of INR 4 Lakhs with a room rent limit of INR 4000. Let’s assume both of them got hospitalized in the same hospital for the same treatment but picked different rooms. Nisha opted for a single, private room with a rent of INR 6000 per day and Arjun opted for a general room with a rent of INR 3000 per day.
Let’s see how the hospitals will charge both of them.
|Hospital expenses||Nisha (Deluxe room)||Arjun (General room)|
|Room rent (3 days)||18,000||9000|
So - even the amounts that both of them would ‘claim’ wouldn’t be the same, leave alone the amounts ‘approved’.
The main takeaway from the above example is that - a majority of your hospitalization expenses are linked to the type of room you choose. If you choose a lower category room, your treatment expenses, doctor’s fees, and other miscellaneous expenses will be low and vice versa. Further, room rent limits can significantly impact your health insurance claim. And even if the room rent limit looks sufficient today, inflation will catch up and the money that will fetch a private room today may not even cover a general ward 10 years down the line.
Therefore, as far as possible, try to buy a policy without room-rent limits - cost or category.
But my policy has a room-rent limit, what can I do about it?
In case you already have a policy with room rent limit, you can -
- Upgrade to a cover without room-rent limit with the same insurer, if available.
- Port your current plan to a plan without room-rent limits.
If you aren't able to do any of the two -
- Buy a policy with a Hospital Cash feature
Hospital Cash is one of the best ways to make up for some of the proportionate deductions, as it gets activated regardless of the type of hospitalization.
- Buy a Super Topup, with a low deductible and no room-rent limit.
A Super Topup becomes active when your hospital bill exceeds its deductible. Buy a Super Topup with the lowest possible deductible, without linking it to the base cover amount. This will ensure that super top-up gets activated quickly in case of a claim and the impact of room-rent limit related proportionate deductions remains minimal.
- Buy a Critical Illness cover.
Such a policy provides fixed cash benefits in case you get diagnosed with a serious illness that might require longer, more expensive hospitalisations. This amount can help compensate for the deductions.
A room rent limit can easily go unnoticed, especially if this is your first health insurance policy in life. But - they can drastically impact your claim at the time of hospitalization - and cost you your savings, despite investing in health insurance.
So, you should be mindful of these limits and try to buy a policy without them, as far as possible. If you already have a policy with the room rent limit, either upgrade or port to a policy that doesn’t have these limits.
If you have a question, you can post it on our forum and get replies from insurance experts within 6-8 hours!
- You should check for the room rent limit when you buy a health insurance policy, and if possible, buy a policy without such a limit.
- Mostly, health insurance policies below Rs. 5 lakhs have a room rent limit of 1%.
- If you opt for a higher room type than what you are eligible for, insurers won’t only deduct the difference in room charge eligible vs availed but also make proportionate deductions on associated expenses
- If your policy already has room rent limits, you should either upgrade or port to a policy without any limits.
We are a group of young members of the Beshak community. We come together to brainstorm, write relevant and useful content for people (just like us) who want to figure insurance on their own. If you too want to share inputs/write for us - send us a "hey" to firstname.lastname@example.org