Even as Sanjiv was in recovery mode after a recent surgery, he analyses his out-of-pocket medical expenses he incurred despite having a health insurance policy. Kiran, who navigated through a similar exercise last year, draws attention to the concept of room rent capping.

Kiran: Hi, you just started on the road to recovery. Why are you pouring over the bills already?

Sanjiv: Medically, I am finding my feet again. But financially, I am unable to make sense of some parts of the bills. The insurer informs me that the out-of-pocket expenses are on account of proportionate deduction based on room-rent capping. What is room rent capping and why has it reduced the insurance company’s settlement amount?

Kiran: Room rents in hospitals are subject to sub-limits in some health insurance policies. This either as a percentage of sum assured (ranging between one and five per cent of sum assured) or as an absolute figure. Insurance policies will declare the limit up to which they will reimburse the room rents. Your overall settlement is also linked to this limit on a proportionate basis

Sanjiv: Why so? Can’t I just pay the balance rent, while the insurer pays for everything else?

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Kiran: No, the insurance policy will also apply the same ratio to the overall claim and ask you to pay the balance . Let’s say you have an insurance policy whose sum insured is ₹10 lakh, with a room rent sub-limit of 3 per cent or ₹3,000 per day. Now, if your actual room rent is ₹4,000, which you agree to pay out of pocket, then the insurance policy may require you to pay for the entire procedure in a similar ratio. The insurer will pay three-fourths of the total reimbursable cost and you will have to pay the balance one-fourth from your pocket. Suppose you opt for a ₹6,000 per day room, you will bear halfof the reimbursable cost. Of course, if the room rent doesn’t exceed the sub-limit, then there will no proportionate deduction in the claim.

Sanjiv: Why should the overall reimbursement be guided by a simple room rent?

Kiran: The underlying assumption here is that by going for a room that costs more, you’re not only increasing that particular overhead, but also the overall service levels delivered to you by the hospital. They may be dedicating a higher area, higher number of personnel, and increased frequency of consultants helping pre and post procedure.

Sanjiv: Now that you link it to service levels, it seems intuitive and also intrusive. Is there a way around such room rent capping?

Kiran: Well, now you can get policies which do not limit room rent or allow single private A/C rooms as a standard offering. Most private insurers do not have rent capping. Some government health insurers have such limits. There may be add-ons that eliminate proportionate deductions or provide a waiver of room rent sub-limits.

Sanjiv: Yes, adding to the out-of-pocket expenses on account of higher room rents should be monitored carefully. As it is, we are shouldering the costs of consumables and other items not covered in insurance. No point in adding to the burden, beyond a certain measure.

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