Room rent limit feature is a talked about bottleneck when a claimant decides to raise a dispute after their expectations are not met. Many insurance companies face this issue and are trying to resolve this. It is imperative to understand the limits on a person’s cover for a hospital room rent as it has a significant impact on the settlement claim remitted.
Understanding room rent capping and its limits
In health insurance, room rent cap is the maximum amount you are entitled to use towards the hospital room rent per day.
One of the most popular methods of capping room rent is up to a certain percentage of the total sum insured. Most health insurance policies generally cover between 1% to 2% of the sum insured, i.e. you can only claim up to that percentage as room rent for a regular room.
The limit is generally higher for ICU rooms (2% to 5%). Room rent generally will also include nursing charges, DMO charges & some miscellaneous room related expenses within the capping.
Exhibit: if your policy sum insured is INR 500,000 and with a room rent limit of 2% for normal room and 5% for ICU, this would mean the hospital room rent limit will be INR 10,000 per day for normal room and INR 25,000 per day for ICU room.
Ways in which room rent cap can be applied
Various health insurance companies have their own take on room rent capping. As a consumer, you must be able to make an informed choice when selecting your policy according to the type of room rent you have chosen. There could be multiple ways in which room rent capping or limit could be applied:
As a percentage on the sum insured: If your health insurance Sum Insured is INR 3,00,000 and room rent capping is 1 percent of the Sum Insured, then you will only be eligible to avail ₹3000 per day (1% * 3,00,000) for the room rent.
Fixed amount: The rent covered by your insurer is a fixed amount (for example ₹2000/ day) irrespective of the Sum Insured.
Fixed and variable capping: Between the fixed amount and a percentage, you will be eligible for whichever is the lower amount. For example, 1 percent of sum insured or ₹2,000 whichever is less.
As per room category: The different room categories are daycare rooms, single rooms, twin sharing rooms, deluxe room and private rooms. Your insurance may only cover up to a particular category out of these.
No capping: There are some policies without any room rent capping. Since they also come without other sub-limits, the premiums on these policies can be much higher.
What happens when the room rent is exceeded
It’s important to remember that if your room rent exceeds the stipulated limit mentioned in the policy, a term called ‘proportionate deductions’ will be used. In simple terms, it means you will have to pay (from your own pocket) for the cost of health insurance claim in a similar proportion to your amount of limit exceeding for room rents.
If the policy holder opts for higher room limit, the difference amount will be converted into percentage and this percentage of amount will be deducted across the final bill except medicines.
The sum insured is Rs. 3,00,000, the room rent cap per day is 1 percent of the SI and the total comes to Rs. 3000 in this case.
If the actual room rent while being hospitalised is ₹4,000 / day.
The difference amount converted into percentage is (4000 - 3000) / 4000 = 0.25.
Hence, 25% of the amount will be payable by the patient across the final bill (except medicines).
The payable claim for the insurance company is ₹75,000 while ₹25,000 will have to be borne by the policyholder.
Restriction on room type, rather than room rent capping
When the room rent limit goes uncapped, the hospital could end up urging the patient to opt for a luxury room. This means use of more of the sum insured than actually required, leaving the customer and their family with less coverage during the year.
Even though a sum insured of ₹5-10 lakhs can suffice, assuming your sum insured is ₹1 crore, the insurer may choose to not put a room rent cap. Instead the patient will be allowed to avail only a single private AC room, rather than a luxury room.
This way the insurance company will be able to ensure that the product is not misutilized and that the high premiums do not give a pricing shock to customers. The claim amount will only increase or decrease based on the fact that you chose to stay in a room that was under or over the room rent cap.
Should your policy have a room rent capping?
While it should sound desirable to have a no room capping in your health insurance plan. However, it may not be a best option, the reasons provided below:
When the room rent limit goes uncapped, the hospital urges the patient to opt for a luxury room. This means use of more of the sum insured than required, leaving the customer and their family with less coverage during the year.
With higher claim payout due to room rent charges, next year during annual renewal, it is likely that insurance premiums will rise multi-fold & provide a pricing shock to both retail customers and a corporate/SME.
To avoid such scenarios, sometimes insurance companies only allow hospitals to allow a patient up to single private room if they want to avail cashless facilities, so that hospitals do not urge patients to opt for luxury rooms. This way, even if you are paying for no room capping charges, you are still getting the benefit of a capped limit.
Scenarios that can have apt application of room rent capping
First ensuring that appropriate sum Insured is taken: With rising medical costs, at least Rs. 5 lakh sum insured shall be available for anyone willing to purchase a health policy.
With appropriate sum insured, following room capping should be sufficient:
Normal rooms: 2% of the sum insured exclusive of nursing charges, DMO and other charges
ICU room rent: 5% of the sum insured exclusive of nursing charges, DMO and other charges
Here, we are ensuring that limits in the room rent are naked room rent limits and the insurer does not include any other charges under your capping.
With these limits, if you have sufficient sum insured like 5 Lakhs under your health insurance plan, you can easily opt for the single private AC rooms.
Further, this room rent limit is as per IRDA’s Arogya Sanjeevani Policy which is the standard health insurance product where the regulator along with insurance and healthcare experts have benchmarked the hospital room rent and has come up with this limit.
Ensure that no proportionate deductions apply: This clause is a reason that many would desire a no room capping, but this clause can be removed by talking to your provider.
If the above 3 points are being taken care of, then you can design best insurance plan for you as it will provide you best of claims experience which is equivalent to a no room capping while you also ensure that cons of no room capping like pricing shocks due to inflated claims of non-capped room are being avoided. Also, this would ensure that most of your sum insured is being used for your treatment expenses rather than your room stay!
Yogesh Agarwal is the Founder and CEO at Onsurity