When you buy a health insurance policy, you are signing into a plan that relieves the financial stress of the medical expenses charged by a hospital in case you have to go through treatment for some disease or accident. However, most people buy health insurance without properly looking through and understanding the terms and conditions of the insurance plan. Every policy has terms and conditions which affect the way in which claims are processed. Therefore, it is very important to understand the terms and conditions of the policy you buy and how these will affect you financially when you make a claim.
‘Sum Insured’ is often the most important term for most people when they consider buying health insurance but there are other terms which significantly affect how the policy covers the expenses and how the claims get paid.
This article is about a very important condition that exists in all health insurance policies. It is commonly called the Room Rent Limit. The Room Rent Limit mentions the amount which your policy would cover for the charges of using a hospital room or the room category you would be eligible for use at the hospital. This is a highly misunderstood condition and affects the overall payment in a claim.
How Room Rent Limit is specified in health insurance policies
Even though Room Rent Limit is specified in all health insurance policies, there might be differences in how it is articulated in the terms and conditions of the policy. There are mainly four ways in which room rent limit is specified in health insurance policies.
As a percentage of sum insured
The room rent limit may be specified as a percentage of the sum insured of the policy. For example, if the sum insured of a policy is INR 3,00,000 and the room rent limit is stated as 1% of sum insured, then, in this case, this limit would be calculated as INR 3000 per day.
As a category of the hospital room
The limit may be specified as a room category in some policies. For example, it may be stated as eligibility for Shared Room or Single Private Room. It is important to check if the policy adds qualifiers to the room category such as a single private room of the lowest category available in the hospital. Hospitals sometimes have a variety of rooms and qualifiers of the categories can limit the options of room you can take.
As a comparison of two different amounts
The room rent limit may also be specified as a certain percentage of the sum insured subject to a maximum amount that the policy is willing to cover. For example, the policy may state that the room rent limit is 2% of the sum insured or INR 5,000 per day whichever is lower. Say, if the sum insured is INR 5,00,000 and we follow the parameters we just discussed, then the room rent limit would be the lower of INR 10,000 and INR 5,000 per day and hence room rent limit applicable will be INR 5,000 per day in this case.
No room rent limit specified
Some policies may have no room rent limit specified and therefore, the actual room rent paid becomes the eligibility.
It is also important to keep in mind that the room rent limit defined in policy is a sum total of room rent or the ward charges as well as nursing charges of that ward in the hospital. On the same note, doctor charges, if added to the bill by the hospital, is not part of the room rent limit. The way it impacts you is that when deciding on the bed category for your hospitalization, you have to compare and evaluate the sum of room rent and nursing charges of your chosen bed category with the room rent limit in your policy. If you cross this limit, it impacts your contribution to the claims. Let’s see how, in the next section.
Misunderstanding the room rent limit
Let us look at a real example to get the perspective. If the daily room rent is INR 5,000 and per day nursing charges are INR 2,700 for a bed category selected by the patient, while the policy limit on room rent is INR 4,500, then effectively, we are comparing INR 7700 with INR 4500. Now, most people believe that they will only have to pay the difference between 7700 and 4500, i.e. their per day contribution or liability will be to pay this difference of INR 3200. However, this is not what happens.
When processing a health insurance claim, a term called as the proportionate deduction is applied which can significantly reduce the amount approved in a claim. If the patient opts for a room category whose rent is higher than the room rent limit as per her policy, then her claim would be processed with all other charges proportionately deducted based on the amount by which the actual room rent exceeds the room rent limit.
For example, if A buys a policy having room rent limit of INR 3,000 but chooses to opt for a room with a rent and nursing charge adding up to INR 4,000. In this case, A exceeded the limit by INR 1000 which is 25% of room rent of INR 4000. Hence, A would be required to pay 25% of the hospital bill out of his pocket. If the hospital bill comes out to be INR 1,00,000 for a 4-day stay, then INR 25,000 would be a contribution from A rather than INR 4000 as many would have generally imagined.
A lot of times, the policyholder might not even have the option to choose the type of room due to factors such as unavailability of beds or emergency situations and would be forced to pay a certain percentage of the claimed amount out of his pocket.
In cases of some policies in which there is a lower amount allowed for some treatments (like cardiac ailments or knee transplants) than the sum insured, room rent limit is still applicable and the claim would still be subject to proportionate deduction if the policyholder takes up a room whose rent is higher than the room rent limit specified in the policy.
The concept of proportionate deduction is something every health insurance policyholder should be aware of so that he or she can make the best decision as to what policy to buy that provides them the comprehensive coverage they are comfortable with.
How to check the room rent limit?
The room rent limit is specified on the policy document or brochure provided by the insurance company. If you are part of group policy in your workplace, the information can be obtained from the HR. Aside from that, information about the policy may be found on the internet in the insurance company’s website and other websites. As a last resort, you can contact the customer support of the insurance company to obtain how much the room rent limit is.
Is the room rent limit adequate for you and what to do if it is not?
Once you know the room rent limit of your policy, you must decide if it is adequate for you or not. An easy way to find out if you are should be happy with the room rent limit provided in your policy is to call up a hospital and enquire about the costs of the various kinds of rooms they have available. On the basis of that, you can decide on an amount that you would like as your room rent limit.
However, there is a chance that you might not be happy with the room rent limit provided by your policy. In that case, you have a few options.
Upgrade the sum insured in the same plan
As room rent limit is determined by the sum insured, you can increase the room rent limit by increasing the sum insured. You can continue with your same plan but with a higher sum insured which would, in turn, mean a higher room rent limit.
Move to another plan with the same insurance company
If you are not happy with the room rent limit specified in your policy, you can buy another health insurance product sold by your insurance company with a higher room rent limit for the same sum insured.
Port out to a plan from another insurance company
You can choose to buy a new plan from a completely different insurance company which has better terms and conditions than your current policy. And while doing so, you must port your policy to the new plan making sure you get the credit of duration of time spent in existing policy.
All of these options are only available during the time of renewal of the policy.
Some frequently asked questions regarding room rent limit
If the policyholder has two or more health insurance policies and the amount of room rent incurred is higher than the limit individually in any of the policies, can the room rent limit of all the policies be clubbed together?
The answer is no, as clubbing of the room rent limits of two policies is not allowed. These are separate policies and their limits are specific to their sum insured and thus, clubbing of the room rent limits to be eligible for a higher category of room is prohibited.
Is the room rent limit applicable when there is a co-payment clause in the policy?
A co-payment clause means that a certain percent of the claim has to be paid by the policyholder. So even when there is a predetermined percentage of the clause that has to be paid by the policyholder, the room rent limit is still applicable.
Even in this case, the concept of the proportionate deduction would be applicable and the policyholder has to pay both the co-payment amount and the proportionate deduction amount.
Is room rent limit applicable in day-care surgeries?
As day-care surgeries do not require overnight stay at the hospital room, room rent isn’t really applicable but some hospitals do charge an amount for the few hours spent in the room during the day-care surgery. But for the most part, room rent limit is not applicable to day-care surgeries.
Will the proportionate deduction be applicable even when the room rent limit in the policy is lower than the lowest category room in the hospital?
It may be possible in certain situations that the room rent limit specified in policy is lower than the rent of the lowest category room available in the hospital. Even in this case, the room rent limit would be applicable and proportionate deduction would still be applied in the claim.
What is the recommended room rent limit?
As stated earlier in this article, the room rent limit is a very important condition in an insurance policy and anyone buying a health insurance policy should think about this carefully. It is only logical to ask then, what is a good room rent limit that one should opt for?
A general mistake that people make while buying health insurance is that they do not visualize the policy they are considering in the longer term and how it would apply over a 5-year period or a 10-year period. They do not grasp the concept of medical inflation which means that treatment expenses would continue to increase every year.
In the context of room rent limits, medical inflation could mean that a room whose rent is INR 5,000 per day today could be costing INR 8,000 per day in two or threes year from now. Therefore, if you buy a policy with an INR 5,000 per day room rent limit, you might be in for a surprise when you might have to undergo treatment in the future and are not able to find a room of the same quality for the same price. Therefore, your health insurance policy should be dynamic enough to adjust for medical inflation.
There are two options for making sure that the policy you buy is adjusted for medical inflation.
The policy and the room rent limit should be reviewed every two years and if the room rent limit is not adequate, the sum insured should be increased.
Buying a policy whose room rent limit is specified in the form of a category of the room than an actual amount which is prone to be hit because of inflation.
The importance of understanding the conditions in your policy
As discussed in this article, it is easy to see how important terms and conditions are when it comes to your health insurance policy. For more details and for claim assistance please contact us.
It is advisable to anyone who buys any policy to go through and understand what the underlying terms and conditions of the policy are before deciding to buy it. Even though the language may be hard to understand, there are many resources available both online and offline which can help you find the best policy for yourself and your loved ones. In the end, it is important to make a well-informed choice when it comes to something as important as your health.
