You will not be reimbursed what you claim on your mediclaim policy

Many health insurance policies, specially the policies from PSU/Govt. Health Insurance Companies, and most of the Group Policies (The health insurance through your employer or Bank Policies) have limits on room rent (mostly @ 1% of Sum Inured). The limit basically puts a cap on the per day room rent you can claim, linked mostly to the sum insured (total coverage) you are entitled to. This may sound like an innocuous little restriction that will, at worst, shave off a few thousand rupees of your claim for hospitalization expenses.

But it is actually not so. Here is an example that will illustrate the huge impact of this clause. Let's say you have a mediclaim policy of Rs 3 lakh from a company that has a clause restricting room rents to 1% of the sum insured. This means the room rent limit applicable to you is Rs 3,000 per day.

Now, if you have to undergo a two-day stay in a hospital for a procedure (let's assume an angioplasty) that has the following costs:

• General Ward: Room rent Rs 1,000 per day plus all other eligible expenses - Rs 73,000 (total expenses are Rs 75,000 - room rent Rs 2,000 plus Rs 73,000 )
• Twin sharing room: Room rent Rs 3,500 per day plus all other eligible expenses - Rs 2,43,000 (total expenses are Rs 2,50,000 - room rent Rs 7,000 plus Rs 2,43,000)
• Single room: Room rent Rs 6,000 per day plus all other eligible expenses - Rs 3, 88,000 (total expenses are Rs 4,00,000 - room rent Rs 12,000 plus Rs 3,88,000 ).

What will be the amount you will be reimbursed if you decide to get the procedure done in a twin sharing room? It will cost you Rs 2, 50,000 (which is well within the policy limit of Rs 3 lakh) but how much will the insurance company reimburse you? If you are like most people, you would have answered Rs 2, 49,000 i.e. Costs of Rs 2, 43,000 incurred in the twin room combined with maximum room rent of Rs 6,000.

If this answer had been correct, then this restriction may not have such significant impact. Unfortunately the correct answer is Rs 79,000 only. A small fine print tucked away in the insurance policy states that the room rent restriction means that all expenses other than room rent will also be restricted based on what you would have incurred had you stayed in a room that you were entitled to. 

As per the article, here's how the claim will be paid.

Charge	Billed	Eligible	Total for 2 Days	Calculation
Room Rent	Rs. 3500	Rs. 3000	Rs. 6000	As per limit
Package	Rs. 243000	Rs. 208286	Rs. 73000	Nearest Eligible Room Charge
		Rs. 211286	Rs. 79000

In our opinion, here's how your health insurance company will pay claims, when you choose a hospital room, with rent higher than eligible under your health insurance policy.

1.   Where the Insurance Company or TPA has access to your hospital's tariff:

Most Hospitals have fixed tariffs or rate charts for all rooms. Bills generated are according to these tariffs. If the Insurance Company has access to the tariff chart, it will pay all charges as per the tariff for the eligible room rent category. In the above case, if there was a room of Rs. 3000 available, all charges would be paid as per the tariff. If there is no such eligible room in the limit available, the claim would be computed and paid proportionately (calculation below). So for instance, if in the above example, a room was available for Rs. 3000, the entire claim would be paid as per the tariff of the Rs. 3000 room. In case, where a Rs. 3000 room is unavailable, the charges under the claim would be paid proportionately as explained below.

2.   Where the Insurance Company or TPA does not have access to your hospital's tariff:

If Insurance companies do not have access to the hospital tariff, the insurance company would pay all other charges proportionate to the room rent eligible, as mentioned above. So if your room eligibility is Rs. 2000 and you opt for a Rs. 4000 room, you will pay 50% of all expenses. 

In short, if you look at it, in most cases, the claim would be paid proportionately, and not as per the nearest but lower available room rent tariff, which is fair for both parties (Insurance Companies and Customers)

To explain in the same example, here's how, in our opinion, the claim would actually be paid.

Charge	Billed	Eligible	Total for 2 days	Calculation
Room Rent	Rs. 3500	Rs. 3000	Rs. 7000	As per limit
Package	Rs. 243000	Rs. 208286	Rs. 208286	Rs. 243000 X 3000 / 3500
		Rs. 211286	Rs. 215286

An Exception

Now, there is an exception to this calculation only if it is explicitly mentioned in the policy wordings (terms and conditions) that the payment of claim for Room and other charges would be made as per the nearest eligible room.

What should you do?

But what about the general public, who are not looking at abusing such benefits, what should they do about this

• Go through the policy wordings of your health insurance policy, to check whether it has such a clause. Ask your health insurance advisor. If you have such a policy, you can look at porting the same to a better product. 
• If you are young family, and looking for a policy, go for a policy, which does not have room rent limits.
• If you have an existing policy, or don’t have a choice of a no room rent limit policy, go for a High Sum Insured. In the long term with Room Rents increasing and Room Rent limits remaining the same, one would witness deduction in claims due to the proportionate clause.
• If upgrade is not possible, create building a fund to bridge this gap in the cover you perceived and you really have.
• Finally, before deciding a room, in the hospital:  
• Go for packages, which are as per your room eligibility.
• If there are no suitable packages, negotiate with the hospital or treating doctor, explaining them how you would get proportionate deductions. In most cases, there would be a solution available.