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After being admitted to the hospital, the biggest mental strength that the patient and his family get is the fact that they have a comprehensive health insurance policy. When the TPA desk of the hospital issues the final bill at the time of completion of treatment and discharge, most of the policyholders get a big shock. If the total hospital bill is ₹ 5 lakh, then the insurance company often passes the claim for only ₹ 3.5 lakh or ₹ 4 lakh and the patient has to pay the remaining ₹ 1 lakh to ₹ 1.5 lakh from his own pocket (out-of-pocket expense). Be it cashless claim or reimbursement, this reduction in claim settlement creates huge dissatisfaction and confusion among the consumers. Insurance companies do not deduct money arbitrarily, but there are many technical conditions, hidden clauses and a long list of non-payable items recorded in the policy bond. If you also want to understand the mathematics behind this deduction and want to know how to get your money back in case of unfair deduction, then it is important to know every aspect of it in detail.
6 biggest and technical reasons for deduction of money in claim settlement
The following 6 reasons are mainly responsible for the reduction in claim amount by insurance companies and Third Party Administrators (TPA):
1. Non-Medical Items and Consumables (Consumables & Non-Payable Items)
Consumables constitute 10% to 15% of the total hospital bill, which are considered ‘non-medical expenses’ by the Medical Council and IRDAI. These include surgical gloves, PPE kit, mask, syringe, cotton, bandage, thermometer, sanitizer, diaper, tissue paper, admission fee, bio-medical waste charge, file charge and food expenses of the patient’s attendant. If your policy has basic cover, then the insurance company directly deducts the money for all these items.
2. Deadly trap of Room Rent Capping and Proportional Deduction (Room Rent Capping)
This is the main reason for the largest and most unexpected reduction in claims. Most old or low premium policies have a limit of 1% (per day room rent) and 2% (ICU charges) of the total sum insured. If your sum insured is ₹5 lakh, your room rent should be a maximum of ₹5,000 per day. If you get admitted to a hospital in a room that costs ₹8,000 per day, the insurance company not only deducts the difference in room rent but also applies the rule of ‘proportional deduction’. Under this, doctor’s visiting fees, surgeon charges, operation theater (OT) charges, nursing charges and diagnostic test bills are also reduced in the same proportion (about 37.5%), thereby reducing a major part of the claim.
3. Co-payment Clause
Co-payment is a mandatory rule of the policy, under which the policyholder himself has to bear a certain percentage of the total approved hospital bill in case of a claim. Health policies for senior citizens or for treatment in a specific zone (Zone-based Pricing) often have a co-payment clause of up to 10%, 20% or 30%. If a claim of ₹3 lakh is approved and the policy has a 20% co-payment, then the company will only pay ₹2.40 lakh and you will have to compulsorily pay ₹60,000 from your pocket.
4. Policy Deductibles (Voluntary / Compulsory Deductibles)
Many consumers choose ‘deductible’ policies or super top-up plans to keep premiums low. Deductible is the minimum limit below which the insurance company does not bear the expenses. For example, if your policy has a deductible clause of ₹25,000 and your hospital bill comes to ₹1 lakh, you will have to pay the first ₹25,000 yourself and the company will only pay the remaining ₹75,000.
5. Specific Disease Sub-limits
Many health insurance policies have a pre-determined sub-limit on the maximum expense for the treatment of certain common surgeries and diseases. Even if your total insurance cover is ₹10 lakh, the policy may have a capping of ₹30,000 for Cataract, ₹50,000 for Hernia, ₹40,000 for Kidney Stone or ₹2 lakh for Knee Replacement. If the actual hospital expenses exceed this sub-limit, the excess amount is deducted from the claim.
6. OPD expenses, uncovered investigations and non-prescription medicines
Health insurance mainly covers minimum 24-hour hospitalization or day-care procedures. If the hospital bill includes diagnostic tests (e.g. routine blood tests, vitamin profiles) that are not directly related to the main treatment of the disease as shown in the doctor’s discharge summary, the insurance company rejects them. Apart from this, tonics, food supplements and pre-hospitalization bills for which original receipts are not attached are deducted.
What to do if you see unnecessary deduction in claim settlement? Follow these 5 important steps
If you feel that the insurance company or TPA has deducted your claim unfairly or arbitrarily, instead of sitting idly by, follow these 5 steps to get your rightful money back:
Step 1: Examine the Settlement Voucher and EOB closely Ask for an ‘Explanation of Benefits’ (EOB) or claim settlement summary from the insurance company as soon as the claim is processed. In this, the reason for deduction (Reason / Deduction Code) is written in front of each item. Match the hospital’s detailed bill and this sheet to see which items have been deducted beyond the policy terms.
Step 2: Collect revised claim breakdown and justification letter from the hospital Many times the TPA deducts the claim due to the hospital billing team not doing correct medical coding or not providing detailed breakup. Get a ‘Medical Justification Letter’ (Justification Certificate) written by your consulting doctor, certifying that the medicines, injections or tests used were medically necessary to treat and save the life of the patient.
Step 3: File a written complaint with the Grievance Cell (GRO) of the insurance company Send a formal Re-Consideration Appeal (Claim Review Request) through email or portal to the ‘Grievance Redressal Officer (GRO) of the concerned insurance company along with revised documents and medical justification. As per rules, it is mandatory for the insurance company to give a written reply within 14 to 15 days.
Step 4: Lodge a complaint on IRDAI’s ‘Bima Bharosa’ portal If you are not heard at the company level or their response is unsatisfactory, you can approach the online portal of the insurance regulator IRDAI. ‘Bima Bharosa’ (bimabharosa.irdai.gov.in) or toll-free number 155255 You can lodge your complaint at. After the regulator’s intervention, companies are forced to re-review the claims.
Step 5: Take the case to the Insurance Ombudsman If the dispute is up to ₹50 lakh and the company has deducted the claim unfairly, you can file a complaint free of cost at your nearest ‘Insurance Ombudsman’ office. Lokpal is a quasi-judicial institution, where a simple application is heard without any lawyer. In most cases if the deduction is contrary to the rules, the Ombudsman orders the insurance company to pay the deducted amount along with interest.
Include these 3 smart add-ons in your policy to get zero deductible in future
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Consumables Cover Rider: By adding this add-on to your basic policy, the insurance company bears 100% of the cost of all non-medical items like gloves, syringes, cotton and PPE kits.
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No Room Rent Capping Rider: This rider gives you complete freedom to choose a Single Private AC Room or Deluxe Room of your choice and completely eliminates the risk of proportionate deduction.
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Zero co-payment and no claim sub-limit option: While taking a new policy, always choose a policy which does not have any sub-limit on any disease nor any mandatory co-payment clause.
Health insurance is not just a document that comes in handy at the time of claim, but having clear knowledge of its terms and conditions in advance is the biggest weapon to save your hard-earned money from being deducted at the hospital billing counter.