Group Health Insurance

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Health insurance providers specify a room-rent cap in group health insurance policy. This post seeks to examine what this cap is and what its implications are, especially in the context of group medical insurance.

Room-rent cap

Simply put, a room-rent cap in group health insurance is an upper limit that a health insurance company puts on the expenses incurred for renting a room in a hospital. Typically, this is between 1% and 3% of the sum assured.

Room type and healthcare costs

Usually, the type of room determines hospital costs. For example, a doctor’s fees would be higher for a patient in a single AC room than for a patient in a shared room.

To take this example further, consider the costs at a leading hospital in Delhi. The cost of the same surgery changes depending on the patient’s room type.

Room rent per day

  • Single AC Room: Rs 9900
  • Shared Room: Rs 4000

Cost of bypass surgery by room type

  • Single AC Room: Rs 292,000
  • Shared Room: Rs 200,000

Claim admissibility and room type

A group mediclaim policy will specify the room you are eligible for. If you opt for a room that has a higher rent than what you are eligible for, the insurance company will only pay for the entitled category.

So, if, for instance, your health policy has a sum assured of Rs 4 lakh and your room-rent cap is 1%, then your room eligibility would be up to Rs 4,000 a day. Now, let’s say you get admitted to a room that has a tariff of Rs 8,000 a day, i.e., twice your insurance entitlement (and there are many hospitals that would charge that much). Then, the insurance will pay only half of your total bill. The proportional reduction of 50% is applied not only on the room charges but also on other costs such as surgeon’s fees or visiting charges.

Customizing room-rent cap

One of the advantages of a group health policy is that you can customize the room-rent type. Thus, you can choose a proportion of sum assured (1%, 1.5%, 2%) or a single AC room (irrespective of the cost) or opt to eliminate the room-rent cap altogether.

You might also want to have different room-rent caps for people in tier-1 and tier-2 cities because hospital tariffs are so different. You can also structure such plans in a group health cover. This is an effective way to manage costs.