Many policyholders believe a substantial health insurance cover assures full reimbursement for hospital bills up to the insured amount. However, a recent case highlights how the 'reasonable and customary charges' clause can drastically cut a claim payout, leaving individuals responsible for a significant portion of their medical expenses.
Understanding 'Reasonable and Customary Charges'
There is no universal pricing standard for medical procedures across hospitals. This allows for varied charges for identical treatments. To prevent what they consider excessive billing, insurers implement a 'reasonable and customary charges' clause.
This clause defines the maximum amount an insurer deems acceptable for a specific medical treatment, service, or procedure within a particular geographic area. If a hospital's charges exceed this benchmark, the insurer will only pay up to their assessed 'reasonable' amount, regardless of the actual bill.
The Case: A ₹25 Lakh Cover, ₹12 Lakh Bill, ₹5 Lakh Payout
Consider a situation where a policyholder had a ₹25 lakh health insurance policy but faced a ₹12 lakh hospital bill. Despite the bill being well within the sum insured, the insurer paid only ₹5 lakh. The significant reduction of ₹7 lakh was primarily due to the application of the 'reasonable and customary charges' clause and other deductions.
Why Deductions Can Be Substantial
The lack of a standardized definition for 'reasonable' charges is a major issue. Medical costs fluctuate widely based on factors like the city, hospital reputation, doctor's expertise, treatment complexity, technology utilized, and the quality of implants or consumables.
In the aforementioned claim, specific deductions included:
- ₹1,12,230 for surgeon charges
- ₹76,570 for anesthesia charges
- ₹3,07,100 based on comparisons with other hospitals' charges
- ₹29,040 for consumables deemed not covered
- An additional ₹9,500 under the reasonable and customary clause
These itemized deductions demonstrate how an insurer can systematically reduce the payable amount, creating a substantial gap between the hospital bill and the final claim settlement.
Sum Insured Doesn't Guarantee Full Payment
It's crucial to understand that the sum insured represents the absolute maximum coverage. The actual payout is always subject to the policy's specific terms and conditions. Beyond 'reasonable and customary charges,' other factors can also reduce a claim settlement, including:
- Policy exclusions
- Sub-limits on specific treatments
- Room-rent restrictions
- Co-payment clauses
- Deductibles
Policyholders should never assume every hospital charge will be fully reimbursed just because the total bill is less than their sum insured.
What Policyholders Can Do
To mitigate potential claim shortfalls, policyholders should take proactive steps:
- Demand Explanation: If a deduction occurs, request a clear, detailed explanation from the insurer. This should include which specific charge was deemed excessive, the amount considered reasonable, the benchmark used, and the exact policy clause permitting the deduction.
- Choose Wisely: Opt for insurers with a strong reputation for claims settlement. Research hospitals for transparent and fair pricing practices.
- Seek Expert Advice: Engage with a reliable insurance agent or advisor who can provide guidance and assistance in case of partial claim settlements or disputes.
Ultimately, a high sum insured is only one aspect of comprehensive health coverage. Understanding the 'reasonable and customary charges' clause and how your insurer assesses treatment costs is vital before purchasing a policy.