How room-rent sub-limits can jeopardise your health insurance claims

Typically, most of the expenses are allowed in your hospital bills so long as your overall bill is within the sum insured limit.

But some policies come with a cap on how much you can spend on your hospital room a day. This limit is called the room-rent limit. The per-day rent of the hospital room that you can choose is capped at, say, 1-2 percent of the sum insured.

For instance, the standardised Arogya Sanjeevani policies that all insurers have to offer come with a room rent ceiling of 2 percent of the sum insured or Rs 5,000 per day, whichever is lower.

So, even if your total hospitalisation bill is unlikely to exceed your cover amount, you are not free to select the room of your choice. You may have to settle for a shared room instead of an exclusive room if you do not want to shell out the difference out of your pocket.

For instance, suppose your sum insured is Rs 5 lakh and you wish to select a single occupancy room with a daily rent of Rs 6,000, but your room rent ceiling is 1 percent of the sum insured.

In this case, you will have to settle for a lower-priced room or shared room where the rent is less than Rs 5,000 per day. Alternatively, you can opt for a room of your choice, but be prepared to make the good the shortfall out of your pocket.

Also read: Own a health insurance policy with room rent sub-limits? Hospital room GST will pinch

Why Moneycontrol-SecureNow Ratings punishes policies with room rent caps

We know that a health insurance policy is a vital tool in our money box but picking the right policy is a difficult task.

Moneycontrol has done the hard work so that you do not have to. All you need to do is to refer to our definitive guide to all things health insurance— Moneycontrol-SecureNow Health Insurance Ratings— before buying, porting or enhancing your health insurance cover.

When picking a policy, there are some features that can be disadvantageous —things that you should steer clear of. Room-rent sub-limits and co-pay ratio are two such restrictive clauses that can dent your cover’s utility when you need it the most.

This is why health insurance policies without room-rent sub-limits get a higher billing in MCSN Health Insurance Ratings. Moreover, policies that cap room rent to a single private air-conditioned room get full marks.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: Picking the health insurance that really matters

Understanding the math of room rent

A cap on room rent doesn’t just mean that your room charges’ reimbursement gets limited. There are other repercussions as well.

If you were to spend five days in the hospital in a room with rent of Rs 6,000 when you were eligible for only Rs 5,000 per day, the shortfall will not be just Rs 5,000 (Rs 1,000 x 5 days).

It will be far higher due to the proportionate deduction clause, which ensures that several other charge heads – doctor’s consultation fees, operation theatre charges and so on – are linked to the room rent. Therefore, the claim amount that you are eligible for will be reduced proportionately.

In the same example, let’s say your final hospitalisation bill works out to Rs 1.5 lakh. Now, although it is lower than the sum insured, you may have to pay up to Rs 30,000 from your pocket because of the proportionate deduction clause. This is because the insurer will pass the claim only to the extent of Rs 1.2 lakh.

Since your room rent is 20 percent higher than the policy cap, the claim amount for the associated expenses would be proportionately reduced by 20 percent. This calculation does not factor in expenses payable at actuals or the ones not linked to room rent.

Policies with sub-limits are likely to be cheaper than those without this restriction, but the savings on premium outgo cannot justify the hassles that your or your family members are bound to face at the time of claim settlement.

If, in the example mentioned earlier, you believe you only have to pay up the difference in the daily rent, you would be committing the mistake that many do, resulting in heartburn and disputes with your insurer.

“We have had cases of policyholders telling us that when they decided to opt for a room upgrade, they weren’t informed that all room rent-linked expenses would be reduced proportionately,” says Chirag Nihalani, General Manager, Insurance Samadhan, a platform that helps policyholders get their grievances resolved.

“Room-rent caps can materially reduce claims payout if you stay in a room with rent higher than your eligibility. That's because insurers make deductions in room as well as some other non-room charges while paying the claim. The best option is to buy a policy that allows you to use any single room,” says Kapil Mehta, co-founder, Securenow.in.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: The Methodology

Co-pay will mean partial claim settlement

This is yet another restrictive clause in health insurance policies that gets a thumbs down from MCSN Health Insurance Ratings. Such policies get no marks.

If your policy comes with a co-pay clause, you are required to share a part – typically 5 percent to 30 percent - of the approved claim burden before the health insurance company settles the balance claim.

And like policies with sub-limits, plans with co-pay clauses are also cheaper. But it is best to choose a policy without such restrictions to avoid claim hassles.

“Some policyholders make the mistake of selecting policies with co-pay clauses while buying them online. They tick the box when asked if they want to opt for this clause and pay lower premiums without realising the implications at the time of claim settlement,” says Nihalani.