Claims payable could be higher, settlement process smoother for policyholders
Relief could soon be on the way for health insurance policyholders with policies that come with hospital room rent sub-limits.
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed the exclusion of costs related to medicines, diagnostics and implants from the list of associated medical expenses when insurers compute proportion deductions from hospital bills. This could potentially mean that the claim amount settled could be higher.
“Health Insurance, with so many limits and exclusions, is one of the most complex personal insurance products in the market. This draft is another attempt in the series of steps IRDAI has been taking towards standardising health insurance. It will reduce dissonance, grievances when customers make claims,” says Mahavir Chopra, an independent health insurance advisor.
The genesis of this proposal lies in the way hospital charges vary according to the rooms chosen by the patients. Let’s say you were to check into a hotel and opt for the most expensive room category, say, an executive suite and someone else were to choose a less expensive ‘deluxe’ room. Now, if the two customers were to order the same dish, the price will be the same for both. “But that is not how it works with hospitals. They have this concept where all associated charges – nursing charges, doctor’s fees and so on – will be linked to the room category you have chosen,” explains Nikhil Apte, Chief Product Officer, Product Factory (Health Insurance), Royal Sundaram. So, not only will your base room rent be higher, all other charges will be proportionately higher too.
“Patients may choose pricier rooms without understanding the implications on the overall hospital bill and the claim paid by the insurance company,” explains Apte.
Understanding proportion deduction
Health insurance plans to offer several variants for you to choose from. Depending on your affordability, you can either choose a policy that comes with no room rent sub-limits or one where the eligible room rent is restricted to, say, 1 per cent of the sum insured. So, if you have a cover of Rs 5 lakh, under the ‘with-sub-limits’ variant, the room rent will be restricted to Rs 5,000 per day. However, that does not mean that you will have to bear an additional cost of only Rs 2,000 per day out of your pocket if you were to select a room with a rent of Rs 7,000 per day. Since the room rent in this example is 40 per cent higher, the insurer will proportionately reduce the claim payable. For example, if your total bill is Rs 50,000, you will be entitled to receive a claim of Rs 30,000.
If the IRDAI’s proposal goes through, insurers will have to clearly define the associated medical expenses. Also, they will not be able to make such proportionate deductions straightaway. They will have to pay for charges related to pharmacy, implants, medical devices and diagnostics in full – that is, the actual expenses mentioned in the bill. “We will share our feedback with the regulator after analysing our claims data. But, overall, this move will ensure simplicity and reduce disputes at the time of claim settlement,” says Apte.
The draft note has made it clear that insurers cannot apply the proportionate deduction clause in the case of hospitals that do not follow the differential billing practice based on the room category. “Insurers are also not permitted to apply proportionate deduction for ‘ICU charges’ as different categories of intensive care unit (ICU) are not there,” the note says. It has invited comments from all stakeholders till April 2. “This proposal will give clarity on devising clauses for standard health product (which all health insurers are mandated to offer from April 1),” says Apte. This product – to be called Aarogya Sanjeevani followed by the health insurer’s name – comes with a room-rent sub-limit of 2 per cent of the sum assured or Rs 5,000, whichever is lower.Despite greater clarity that could come through if this proposal is implemented, Chopra recommends buying policies without room sub-limits. “Given the rise in room rents, such caps will only shrink the capability of your policy. You must move out of policies that have room rent caps and port into health insurance policies with either room eligibility caps or no room rent limitations,” he says.
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