Health Insurance Holders to Benefit from IRDAI’s Proposal on Proportionate Deduction

Recently, the Insurance Regulatory and Development Authority of India (IRDAI) presented a proposal regarding proportionate deduction in health insurance.

The proposal states that health insurance contracts where there is a sub limit for room rent and if the policyholder occupies a room with higher tariff than the one he/she is eligible, insurers need to define 'associate medical expenses' for proportionate deduction.

Most hospitals have different room rent depending on the type of room. They are usually categorised as general, shared, deluxe, super deluxe, etc. Other charges such as doctor's fees, medical test, surgery cost, etc., increases/decreases proportionately, based on the type of room the insured has opted for.

In case of hospitalization, room rent eligibility is based on the policy sum assured. But if you decide to opt (or do not have another option because of unavailability) for a room that has a higher rent, the insurer will pay the claim after deducting the differential room rent as well as the associate medical expenses.

This means that you will end up paying more out of your pocket even if the total bill falls under assured policy amount because the insurer does not reimburse the amount exceeding the eligible room rent limit and associated medical expenses. The proposed changes will restrict the amount deducted in this respect.

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In the interest of policyholders, IRDAI has asked insurers to put in place a uniform approach while applying proportionate deduction and has stated that they shall not recover any expenses other than the defined associated medical expenses.

IRDAI has stated that the following will not be part of the 'associate medical expenses'

• Cost of pharmacy

• Cost of implants and medical devices

• Cost of diagnostics

In addition, it has asked insurers to ensure that proportionate deductions are not applied for hospitals where in there is no differential billing based on the room category. Furthermore, as there are no different categories of ICU, insurers are not permitted to apply proportionate deduction for ICU charges.

These guidelines will come into force with immediate effect. With these proposed changes, the insured will have to pay less out of their pockets ensuring better insurance coverage and quality medical treatment.

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Is coronavirus covered under health insurance?

While the IRDAI has not posted any update regarding the coverage of coronavirus under health insurance after WHO declared it as a pandemic, its last circular states the following:

• Where hospitalization is covered in a product, insurers shall ensure that the cases related to Corona virus disease (COVID-19) shall be expeditiously handled.

• The costs of admissible medical expenses during the course of treatment including the treatment during quarantine period shall be settled in accordance to the applicable terms and conditions of policy contract and the extant regulatory framework.

• All the claims reported under COVID 19 shall be thoroughly reviewed by the claims review committee before repudiating the claims.

In the absence of any update from the IRDAI, standard eligibility criteria for availing claims such as the one in case of any other illness may apply for persons infected with coronavirus. This could include the following:

1. Hospitalisation for a minimum 24 hours is required

2. In case you decide to go for a new policy and if you are already suffering from coronavirus or any other respiratory disease, or contract the same during the policy waiting period, then you might not be eligible to avail claims

3. If any of your family members recently has been to coronavirus affected countries such as China, Italy, Iran, Japan, USA, UAE, etc. and you contract the disease from them, then your claim might not get settled.

4. But if you are travelling from the affected countries and are tested positive, your health insurance may cover you as long as you are quarantined in India.

IRDAI has asked insurers to design an insurance product covering the cost of treatment for coronavirus. Accordingly some companies have come up with dedicated plans to cover the disease.

Clinikk Healthcare, a healthcare platform, has announced the launch of Coronavirus Support Plan - India's first comprehensive protection plan against Novel Coronavirus COVID-19.

Additionally, DBS Bank and Bharti AXA have joined hands for insurance plan covering COVID-19. According to media reports, the plan would cover up to 10 days of hospitalisation, with a cover of Rs 5,000 per day, for a 30-day period.

But before you decide to opt for these products or any health insurance product, keep these points in mind:

• Types of expenses covered- hospitalisation, tests, room charges, intensive care charges, medications, and so on

• Waiting period

• Claim settlement ratio

• Illnesses covered and excluded

• Premium amount

• Policy term

• Availability of cashless facility

• Wide network of hospitals, etc.

If you are unsure about the type of policy suitable for your needs, contact a financial advisor.

Warm Regards,
Divya Grover
Research Analyst