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.
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.