Room Rent Capping in Health Insurance - (Room Rent Limit)

After staying at a hospital for treatment, the patient has to pay a bill. This hospital bill consists of services that are availed during stay and treatment. If you notice, there are various items on the bill and one of the most important is the room rent. When a person is covered under Health Insurance, the bill is settled by the insurer and how room rent is calculated in the claim can be tricky for a few of us. This article sheds light on what is room rent capping and how it affects the hospital bill.

Room rent capping in health insurance is a limit placed on the amount that an insurance company will pay for a hospital room per day during a insured's hospitalization. This means that if the cost of the room exceeds the cap, the insured will have to pay the difference out of pocket.

The insurance company mentions the room rent cap in a health insurance policy document for your reference. It can either be a specific amount, for example, Rs. 15000, or in percentage, i.e. 3% of the sum insured. It can also be capped at a certain number for each day of hospitalization. 

Consider, Mr A bought an Individual Health insurance policy with a room rent cap of Rs. 15,000 and Mr B bought an insurance policy with a room rent capped at 3% of the sum insured. The sum insured of Mr B's health insurance policy is Rs. 5 lakhs. Thus, the room rent cap on Mr B's policy is also Rs. 15,000.

One the other hand, Mr C’s Individual Health insurance policy has a room rent cap of Rs. 2,000 per day during the hospital stay.

Hospital room rent is a major component of treatment costs for any hospitalisation case. Room rent expenses typically vary across cities and hospital types. Here is an overview of average room rent costs per day at hospitals in India:

Key Notes:

When purchasing health insurance, evaluate average room rentals in your city and opt for adequate coverage. Policies without room rent capping provide maximum flexibility.

Room rent is one of the major components of hospitalisation expenses covered under health insurance. Most health policies define a room rent limit or capping in their terms and conditions. This impacts the room type you can opt for during hospitalisation and your out-of-pocket expenses.

Let's look at the common ways in which room rent limits are structured:

A fixed percentage of the sum insured is defined as the room rent limit per day. For example, the policy may state the room rent is capped at 1% of the sum insured per day.

So if you have a ₹5 lakh sum insured policy with 1% room rent limit, your maximum eligible room rent per day would be ₹5,000 (1% of ₹5 lakhs).

The room rent limit is specified by mentioning eligibility for a broad room category such as "single private A/C room" or "shared non-A/C room".

Some policies add qualifiers like "single standard private room" or "lowest category of room rent available in the hospital". This puts additional restrictions.

Sometimes the limit is defined through two parameters - a fixed amount per day and a percentage of sum insured. For example:

"Room rent covered to the extent of 1% of sum insured or maximum ₹4,000 per day, WHICHEVER IS LOWER".

Here, you have to compare both amounts and the lower figure will apply.

Some premium plans do not impose any capping on room rent and cover your actual expenses for the room category you choose, subject to other terms.

Apart from understanding how the room rent limit is defined, also analyse what all is included in it - ward charges, nursing expenses etc. This will help you evaluate options during hospitalisation.

While calculating the claim amount, the insurance company will consider the room rent and applicable capping as the main component. The claim amount will increase or decrease based on the fact that you choose to stay in a room that was under or over the room rent cap. Let's understand how room rent capping will affect your overall claim amount through an example

Consider Mr John has bought a health insurance policy of Rs. 5 lakhs that has a room rent cap of 1% of the sum insured. After a few years of buying the policy, he had to be hospitalised for Hip Replacement Surgery. His hospital stay was going to be 5-days long, and now he had to choose a room. 

His insurance policy allowed him a room that cost Rs. 5,000 per day, however, he chose to stay at one that was worth Rs. 8,000 per day. He did quick maths and concluded that the insurance company will bear Rs. 5,000 per day, and he will bear the difference of Rs. 3,000 per day for 5 days.

However, the concept of Room Rent does not work as Mr John calculated. It works on the principle of proportionate deductions. It is calculated as the percentage of room rent allowed upon actual room rent.

Proportionate Deductions = Room Rent Allowed / Actual Room Rent * 100 The insurance company will pay Mr John’s claim as per the following table:

Note: Non-associated expenses mean items like medicines as they are sold on MRP. Hence, no deductions. However, based on the room you select, other charges like doctor visits also vary. Due to this, the differential price structure is proportionately deducted.

Since the percentage difference in the room rent limit and the actual room rent is 62.5%, his overall bill will also be affected by 62.5% for applicable items. He has to bear approximately Rs. 1,03,125 from his pocket excluding other deductions.

Here are some advantages of health insurance policies without limits on room rent charges.

The concept behind room rent is not common knowledge and policyholders feel cheated when they receive a low claim amount. This is where the importance of reading the policy document, the fine print, and the terms and conditions is highlighted. Someone who is not familiar with health insurance may have many questions related to things like room rent, co-pay, sub-limits, etc. and the insurance company will readily solve those queries when asked. 

ACKO urges you to get your doubts clarified before signing the policy document. In case you receive a lower claim amount, you will know the exact reason behind that claim settlement. Rather you can be prepared for such situations if you are aware of the different concepts of health insurance.

Disclaimer: