Take the case of a cap on room rent, which also means a cap on all the associated costs, such as doctors’ fees and diagnostics. So if you choose a higher category room, you not only pay the difference in room rent, but also associated costs. The regulator also seems to have taken cognizance of this. Through a draft circular dated 17 March, which is open for feedback till 2 April, 2020, Irdai aims to make the associated costs with room rent uniform to minimize confusion. This is part of Irdai’s larger focus on standardization of terms and conditions in health insurance contracts. We tell you what the draft says and how it can benefit you.
At present, the total hospital bill varies depending on the category of room picked by the policyholder. “If the sub-limit on room in a policy only allows for a twin sharing room, and the policyholder goes for a deluxe room, then insurer deducts not only the difference in the room rent but also the associated medical expenses. This has always been an area of concern and a cause for disputes because there are no clear guidelines," said Shreeraj Deshpande, chief operating officer, Future Generali India Insurance.
In its draft, the regulator stated that if there is a sub-limit on rooms and the policyholder occupies a room with a tariff that exceeds what he is eligible for, the proportionate deduction on “associated medical expenses" cannot include cost of medication, implants and medical devices, and diagnostics. “Hospitals cannot charge for medicines differentially for two different categories of rooms because the maximum retail price is fixed. Diagnostics, which includes scans and doctor’s fees, is where there has always been differential pricing. But Irdai is now saying that diagnostics cannot qualify as an “associated medical expense", and therefore cannot be proced differently either," said Mahavir Chopra, a health insurance expert.
The draft also states that insurers are not permitted to apply proportionate deduction on intensive care unit (ICU) charges, because hospitals don’t have different categories of ICU. “The regulator is trying to establish a fixed definition for ‘associated medical expenses’ to make health insurance simpler and transparent in nature," said Deshpande.
The regulator has also asked insurers to list expenses which are classified as associated and non-associated. This means, services and materials that a hospital does not charge differentially for will all qualify as non-associated expenses. For expenses that are non-associated, there will not be any proportionate deduction. Associated expenses would be medical expenses charged by the hospital, which vary based on the type of room selected by the patient or his kin. “Most of the charges in the hospital can be variable, including surgeon’s fees, doctor visit charges and diagnostic expenses. Cost of diagnostics may not be associated anymore, but we will have to wait for the final draft. Charges which may not vary and hence categorized as non-associated will be ICU charges, pharmacy charges, equipment charges, implants, etc.," said Chopra.
On insurers: This is an exposure draft. The cost of diagnostics may continue to be categorized as an associated cost, because hospitals do have differential pricing. “This can only happen if hospitals stop charging differentially for diagnostics," said Chopra.
Implants too, typically, are not charged differentially. Deshpande said the cost of pharmacy and implants can be removed from “associated medical expenses", but removing cost of diagnostics may not be possible. Standardization of proportionate deductions will also push insurers to move towards following a single method of deduction on claims.
On policyholders: “Uniformity of associated expenses will make it easy for policyholders to understand how much of a payout they will get, and for what kind of expenses. This will improve overall transparency in health policies and reduce grievances," said Chopra.
“These guidelines will stop any deductions that were happening on non-associated expenses. Proportionate deduction will now be applicable only for associated expenses, which will enhance the claim amount," said Ravi Vishwanath, president, accident and health, HDFC ERGO General Insurance. “This is a welcome move because any step taken to make the policy clearer and simpler for the insured is a step in the right direction," he added.
The guideline, when enforced, is expected to have negligible impact on premiums because most insurers are now moving towards having an eligibility capping (type of room) or removing the room rent limits altogether. Mint recommends opting out of policies that have a room rent cap, because it complicates things and lowers the claim amount