5% GST on hospital room rent: How will it impact health insurance policyholders?

5% GST on hospital room rent will further increase the hospitalisation cost in cases where the hospital room rent is above Rs 5000 for non-ICU rooms, according to experts.

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The 47th GST Council meeting in June 2022 capped the GST at 5% to be applicable on room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital.

When someone gets hospitalised, one has an option to choose different types of rooms—single private room, twin sharing, suite room, etc. The per-day room rent charges for each of them are different and vary from hospital to hospital. Under certain health insurance policies, insurers only cover a portion of the room rent or have a cap on the same (depending on the sum insured opted).

Experts say that the 5% GST on hospital room rent will further increase the hospitalisation cost in cases where the hospital room rent is above Rs 5000 for non-ICU rooms.

“Under the new guidelines, a 5% GST will be imposed on hospital room rent above Rs 5,000 for non-ICU rooms. This will result in an overall increase in the hospitalization cost in cases where the per day room opted is higher than Rs 5,000,” Dr Sudha Reddy, Head – Health and Travel at Digit Insurance, told FE.

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Who will pay the GST?

Since the applicable hospitalization costs are typically borne by the insurer, the GST charges, too, will be paid by the insurance company and there will be no direct impact on the policyholder during claim settlement, according to Dr Reddy.

Premiums to go up?

Dr Reddy said that if the GST leads to a rise in overall claims cost for the insurers, there could be a probability of health insurance premiums going up in the near future.

What should policyholders do?

Certain health insurance policies have a capping on the hospital room rent. This capping could be on the basis of co-payment, where the insured is required to bear a portion of the room rent from his/her own pocket or based on the allowance of only certain types of room for hospitalization.

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In cases of co-pay, the insured may have to bear a portion of the room rent cost, including the GST amount.

“To negate such a scenario, it is advisable to opt for a health insurance policy that does not have any capping on room rent. One should always read the policy document carefully to ensure no additional payment is being charged by the insurer for room rent or any other type of co-payments and additional deductions,” said Dr Reddy.

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