Health insurance pitfalls: How understanding room rent limits can help you avoid unexpected costs

Health insurance policy is all about details. While factors like coverage amount and network hospitals take centre stage, a seemingly minor aspect – room rent – can significantly impact your out-of-pocket expenses during hospitalisation. Understanding the intricacies of room rent clauses is crucial to making informed decisions and avoiding unexpected financial burdens.

Therefore, when evaluating a health insurance policy, it is crucial to thoroughly review specific terms and conditions to ensure comprehensive coverage. Also, understand the following aspects when buying a policy:

1. Room rent limits: Many policies cap the daily room rent they will cover during hospitalisation. This can vary depending on the plan and could be a fixed amount (e.g. ₹5,000 per day) or a percentage of the total sum insured.

Exceeding these limits may require you to pay the difference out of pocket.

Sanjiv Bajaj, Jt. Chairman and MD, BajajCapital, explains, "Mr X has a health insurance policy with a sum insured of ₹3 lakhs. The policy includes a room rent limit capped at 1% of the sum insured per day, which translates to ₹3,000 per day (1% of ₹3 lakhs). If Mr X opts for a room costing ₹4,000 per day, he exceeds the permissible room rent limit by ₹1,000, which is a 33% excess (₹1,000 is 33% of ₹3,000)."

He further points out where it gets important: "Health insurance policies typically link the proportionate deduction clause to the room rent limit. This means if the policyholder exceeds the allowable room rent, all associated expenses—like doctor’s fees, nursing charges, and operation theatre costs—are proportionately reduced by the same percentage as the excess."

Impact of exceeding room rent limits:

a. Proportionate deduction:

If a policyholder opts for a hospital room costing more than the permissible room rent limit, the insurer applies a proportionate deduction to all associated medical expenses. This includes:

○ Resident Medical Officer (RMO) and nursing charges.

○ Operation theatre costs.

○ Fees for doctors, surgeons, specialists, and anesthesiologists.

b. For instance, if the room rent exceeds the limit by 33%, the insurer will reduce the settlement for all associated expenses by the same 33%.

c. Non-associated medical expenses:

Certain costs are not subject to proportionate deductions and are reimbursed in full, provided they are covered under the policy. These include:

○ Pharmacy and consumable costs.

○ Diagnostic costs.

○ Costs of medical devices and implants (such as pacemakers or artificial limbs).

2. Co-payment clauses: Some policies mandate a co-payment, where the insured must bear a fixed percentage of the claim amount (e.g., 10% or 20%) for each hospitalization. This clause can significantly impact out-of-pocket expenses, especially for high-value claims.

3. Waiting periods: Most health insurance plans impose waiting periods for certain conditions, such as pre-existing diseases or specific treatments like maternity benefits. These waiting periods can range from a few months to several years, so understanding them is critical to avoid surprises during claims.

4. Disease-specific sub-limits: Certain policies include sub-limits for specific diseases or treatments. For example, there might be a cap on expenses related to cataract surgery or joint replacement. It is essential to evaluate these restrictions to ensure they align with your health needs.

5. Network of cashless hospitals: Cashless hospitalisation allows the insured to receive treatment at empanelled hospitals without upfront payment, as the insurer settles the bill directly with the hospital. Reviewing the insurer's network of cashless hospitals in your area ensures convenient access to quality healthcare facilities during emergencies.

Thus, by understanding and analysing these elements, you can choose a health insurance policy that provides optimal coverage tailored to your needs while minimising unexpected costs.