Choosing the right health insurance terms is crucial because you’re making a long-term commitment. You’ll be paying premiums for years, so understanding vital terms ensures your coverage truly suits your needs when you eventually need it.
The term “hospital room rent limit” in health insurance policies may seem straightforward, but its scope extends beyond solely covering room charges. Insurance Regulatory and Development Authority of India (IRDA), defines room rent in its Master Circular on Standardization of Health Insurance Products dated 22July 2020, as
“Room Rent means the amount charged by a hospital towards Room and Boarding expenses and shall include the associated medical expenses.”
Now, what are associated medical expenses that are subsumed under the room rent expenses of the hospital?
Most of health insurance policies include this standard definition of Associated Medical Expenses
“Associated Medical Expenses means expenses which shall include Room Rent, nursing charges including RMO charges, operation theater charges, fees of Medical Practitioner/surgeon/ anesthetist / Specialist conducted within the same Hospital where the Insured Person has been admitted. The below expenses are not part of associate medical expenses. a. Cost of Pharmacy and consumables b. Cost of implants and medical devices including artificial limbs. c. Cost of diagnostics.”
How does room rent capping impact your coverage?: if your health insurance policy has a limit on room rent expenses, for example: 1% of sum insured, and you opt for a hospital room of higher than eligible room category then proportionate deduction on the associated medical expenses is applied by the insurance company while settling your health insurance claim.
Insurance companies explain proportionate deduction in their health insurance as:
If the insured individual stays in a hospital room that exceeds the eligibility specified in the policy, they will share a portion of the total associated medical expenses. This share will be based on the difference between the entitled room category’s rent or eligible room rent and the actual room rent. However, this sharing won’t apply to medicines, consumables, medical devices, implants, or diagnostic costs. No proportional deductions are made for hospitals that don’t implement varying charges based on room categories or for expenses where such differential billing isn’t applied
I would try to explain this through an example.
Assume:
Your policy covers a hospital room rent expenses up to 1% of sum insured: This means the insurer will cover the room rent up to a specified amount, say Rs. 2,000 per day.
- You choose a deluxe room: This room costs Rs. 4,000 per day, which is twice the eligible room rent limit.
- Your hospital has billed at Rs. 50,000 under different heads like room rent, consultant charges, diagnostics and medicines.
| Billing heads | Per day charges | Total |
|---|---|---|
| Room charges | 4000×5 | 20000 |
| Consultant Fees | 1000×10 | 10000 |
| Diagnostic tests | 10000 | |
| Medicine charges | 10000 | |
| Total bill | 50000 |
1. Excess room rent: You chose a room Rs. 2,000 higher than the covered amount.
2. Proportion of excess: This is 2,000/4,000 = 50%.
3. Proportionate deduction: The insurer will apply a 50% deduction to all associated medical expenses except medicines, pharmacy, consumables, medical devices, and diagnostics. This means they will deduct 50% of Rs. 30,000 (excluding the exempted expenses), which is Rs. 15,000.
4. Amount covered by the insurer: Rs. 50,000 (total bill) – Rs. 15,000 (proportionate deduction) = Rs. 35,000.
| Billing heads | Per day charges | Total | Payable by insurance co. after Proportionate deduction |
|---|---|---|---|
| Room charges | 4000×5 | 20000 | 10000 |
| Consultant Fees | 1000×10 | 10000 | 5000 |
| Diagnostic tests | 10000 | 10000 | |
| Medicine charges | 10000 | 10000 | |
| Total bill | 50000 | 35000 |
How to avoid claim amount deduction from proportionate clause?
Most health insurance policies these days provide for a Private Single A/C room. However, this should not be mistaken as having no limit on room rent. Hospitals classify their rooms into various categories such as deluxe, suite, super deluxe, etc. Therefore, it’s essential to inquire with the hospital about which category of room is considered a Private Single A/C room to avoid additional costs.
It is also important to verify your hospital bill to ensure you’ve been charged according to the room category you selected. Often, billing staff may not be aware of your chosen room type and might bill you based on your insurance policy limit. This has been a common occurrence in many instances.
One should always try to buy a health insurance policy which has no limit on room rent or at least provide coverage for Private Single A/C room irrespective of sum insured.
Certain group of people should preferably opt for the shared room category (such as general ward, twin sharing etc), regardless of the room rent coverage in their health insurance policy, to conserve the sum insured or cover limit of their health insurance. Otherwise, a single hospitalisation bill could exhaust their entire sum insured. These groups include:
- Individuals with chronic illnesses that require frequent hospitalisation should choose a shared room
- Policies with a low sum insured – below 5L sum insured
Moreover, there are few health insurance plans which offer cash back if people chose shared room category.
Therefore, if you have a health insurance policy that has low sum insured limit, then it makes sense to opt for shared room category to avoid exhaustion of sum insured in single event of hospitalisation.
I hope this clarifies on room rent clause in health insurance policies. For any queries, drop your comments in comment box.
With over 12 years of industry experience, I am an associate and fellow from the Insurance Institute of India. I am dedicated to guiding individuals through the complex world of insurance, helping them make well-informed decisions.