To suggest the best health insurance plan suitable for your client depends on their requirement and affordability. Recommending the best health plan requires you to consider various parameters. Room rent caps or sub-limits is one of those parameters that ultimately affects the claim settlement. Hence, you need to carefully consider sub-limits set in the particular health insurance plan and the role it plays at the time of claim.
Co-relation between room rent cap and proportionate claim settlement of the total amount
Sub-limits are the parameters that limit insurers’ liability to a certain extent. Sub-limits can be of many types with structured in many ways. Room rent cap is one of the most important sub-limits. Insurance companies put a maximum cap on its liability on room rent per day when insured is hospitalized. Medical bills are charged according to the accommodation or room type chosen by your client (insured) in the hospital.
In case the health plan offered has no sub-limits or room rent caps, then the insurance company will have to bear all the covered expenses in the medical bill. In case, the policy has a room rent caps and the room rent per day exceeds the prescribed upper limit, the insurer is liable to pay in the proportion of room rent caps to actual rent. And all the other covered expenses in the medical bill that amounts to total claim is compensated in the same proportion except the cost of medicines.
Let’s take an example to understand this. Mr. Atul is aged 40 years has taken a health insurance plan with INR. 4 lacs coverage. Unfortunately, he met with an accident recently. Though he is recovering now, he was hospitalized for a few days. Let’s take a look at his health insurance claims for this with different scenarios.
Scenario 1: With sub-limits
Let’s say, when it was time to choose the hospital room, Atul chose a private AC room costing INR.6000 per day. However, his policy had a room rent capped at INR. 2000. Now let’s see how this impacts his total health insurance claim.
- Sum insured: INR. 400000
- Actual room rent: INR. 6000
- Room rent cap: INR. 2000
- Number of days of hospitalization: 6 days
Now that there is a cap on room rent, the insurance company will make a reimbursement proportionately. Even though Atul has 4 lakhs coverage, he would not be able to get the complete medical bill reimbursed.
|Actual hospitalization bill (in INR.)||Reimbursement amount (in INR.)|
|Room rent charges||36000||12000||Proportional (3:1)|
|Doctor visit charges||18000||6000||proportional|
|Total||237000||95000 (health insurance claim amount)|
|The cost to be borne by Atul||142000|
Scenario 2: without sub-limits
In the same case, if there were no cap on room rent and no sub-limits applicable to the health insurance plan, the entire coverable hospitalization expenses i.e. INR. 237000 would be paid by the insurance company to Mr. Atul.
Basic sub-limits explained
There are different types of sub-limits. Limits can be imposed based on room rent and also can be illness-specific. Some of the basic sub-limits are:
- Room rent: the insurer will only permissible limits and whatever costs above the limit need to be borne by the customer himself.
- ICU charges: just like room rent caps, the insurer can also fix an upper limit for ICU charges.
- Surgery charges: Sub-limits can be specific to medical procedures. Insurer limits its liability for certain ailments and pre-planned medical procedures such as cataract surgery, tonsils, knee ligament reconstruction, kidney stones, and maternity etc.
Important things to note
When it comes to shortlisting health plans with sub-limits, a few important points are to be kept in mind.
- Sub-limits may vary from case to case basis. For some cases, sub-limits can be in terms of percentage of sum insured such as 2% of sum insured as room rent and 1% as ICU charges. Likewise, it may also be a specified amount such as INR.25000 for cataract removal and INR.30000 for knee ligament reconstruction.
- Most of the other hospital charges like doctor’s fees, surgery fees, ICU charges, etc. are all linked to the type of room chosen. Hence, the reimbursement of the plan is done proportionately, as per your eligibility.
Let us understand with an example. Mahesh has a health insurance plan of INR 5 lakhs with a room rent cap of 1%. However, when he gets admitted to a hospital, he opts for a single room where the room rent is INR 7500, i.e. more than his eligibility. The room that he is technically eligible to be twin-sharing of INR 4500.
So, he will get a claim proportionate to the next level of the room, i.e. twin-sharing. So, the surgery fees for Mahesh in a single room is INR 36000, which is lesser than his total sum insured. However, if he had chosen a twin sharing room, his surgery fees would have been INR 24000 only. So, even though INR 36,000 is well within his sum insured limit, he would only get a claim proportionate to his room type eligibility and thus only INR 24,000 would be payable for surgery fees.
This is a tricky situation and needs to be well understood as far as room rent capping and proportionate claim settlement are concerned!
Educate your clients on room rent caps and sub-limits in health plans and guide them with the right plan as per their requirement. If you are suggesting a plan with sub-limits to your clients ensure they use their policies fairly!