The IRDAI wants to ensure that uniformity is maintained by insurers when any proportionate deduction is applied in health insurance claims related to the room rent.
Health Insurance Sub Limits: The settlement of health insurance policies is set to become more transparent and simpler for policyholders. A recent proposal by IRDAI will also help policyholders to pay lesser out-of-pocket expenses at the time of claim. IRDAI had floated a draft proposal to insurers to make sure that uniformity is maintained by them when any proportionate deduction is applied in health insurance claims related to the eligible room rent.
Here, it is important to know how ‘proportionate deduction’ works and the importance of ‘room rent’.
In most health insurance plans, the room rent is the ‘hook’ to which the other medical or hospital expenses are linked to. It is generally 1 per cent of the sum insured that a policyholder chooses to keep. So, in a Rs 3 lakh sum insured health cover, the policyholder will be eligible for a per-day room-rent of Rs 3000.
Now, if the policyholder during hospitalisation opts for a room with rent higher than Rs 3,000, say Rs 5,000, the other medical expenses in the hospital bill gets ‘proportional deducted’. As a result, the claim gets partially paid by the insurer and the policyholder has to incur out-of-pocket costs.
“Most Insurance policies have a room category concept wherein it is specific as to which room type the Insurer is eligible for. In case the insured opts for a higher room category, he has to bear the cost of ”associated medical expense” in the same proportion as the difference between the room rent that she or she has opted for vs his or her eligibility,” says Shanai Ghosh, CEO and ED Edelweiss General Insurance.
In the above example, the proportionate deduction will be about 67 per cent as a room with higher rent had been opted.
While reducing the medical expenses proportionately, the draft rules have asked the insurers to keep certain cost-heads out of it. “Now the draft wants insurers to be very specific about what this term includes. Further, it mandates that the insured cannot be made to bear any difference on this count on the cost of medicines, implants and medical devices, diagnostic and ICU charges,” informs Shanai.
According to Shanai, another crucial point which the draft rules highlights is – “The draft also says that in the case the hospital does not follow differential billing practice based on the room category, the insured should not have to bear any proportionate deductions. All of these are huge pluses for the customer.”
But, will the draft rules also apply even to existing policies? “While the draft guidelines on Proportionate deductions is not explicit about its applicability on existing approved products, it is definitely applicable for new product filings,” adds Shanai.
It remains to be seen, how soon the new rules in health insurance claims settlement is in place for the benefit of the policyholders.