When Radhika Sheth was diagnosed with kidney stones, she was advised laser treatment by her doctor. She promptly took an appointment with the referred hospital for undergoing the procedure. Just two days prior to the admission, Seth gave details of her health insurance policy to the Third Party Administrator (TPA) desk for availing cashless treatment at the hospital.
A day later she was told that the treatment would cost around Rs 25,000 and the hospital had received the approval from the TPA for that amount. The laser treatment was able to break the stone, but the same could not be removed due to complications and a stent was placed subsequently.
A few weeks later Seth was again suggested to get admitted to the hospital for removal of the stone and the stent. This time the estimated cost of the surgery was around Rs 75,000. The TPA desk told her that since her health insurance cover was for a sum assured of Rs 2 lakh, as per the policy conditions, only 25 per cent of the sum assured or Rs 50,000 can be approved for this type of treatment. Since she had already claimed Rs 25,000 earlier, the TPA gave approval for only Rs 25,000. Seth had to pay Rs 50,000 from her own pocket in spite of having an insurance cover of Rs 2 lakh.
Seth suffered because of the sub-limit clause in the policy which stated that for specific common illnesses there will be a limit in terms of treatment costs.
There are hundreds of such cases where people have bought health insurance policies without understanding or reading the policy conditions or sub limits. Sub-limits clause is employed by some insurance companies to reduce their claims outgo and is restricted to some common ailments such as cataract, piles, tonsils, sinus, hernia, kidney stones, and so on. The list of ailments under sub-limits and restriction in treatment costs varies from company-to-company.
Before buying a health insurance policy one needs to understand the sub-limits clause to avoid paying from your own sources and, thereby, defeating the very purpose of buying health insurance.
The explanation for some of these sub-limits is given below.
Sub-limits on room rent:
Many health insurance companies specifically mention that per day room rent should not exceed 1 or 1.5 per cent of the sum assured.
For example, if the policy sum assured is Rs 2 lakh then the room rent cannot exceed Rs 2,000 per day if the applicable sub limit is 1 per cent. Several hospitals have standard surgery/treatment packages which are defined in terms of the room that is selected.
For example, the surgery package for a hernia operation may cost Rs 15,000 in a standard room, but the same can cost Rs 25,000 in an AC single room. So, for a Rs 2 lakh policy with 1 per cent sub limit for room rent, any room with maximum Rs 2,000 per day rent can be selected and accordingly the package offered for that room will be approved by the insurance company. If you opt for a room which has higher rent, than what is permitted as per the sub limit, you will have to pay the additional charges from your own pocket.
One needs to check the list of ailments which come under the sub limits clause and the amounts specified against each of them. Even though your sum assured may be high, it may happen that the due to the sub limit clause you won't be able to claim your entire hospitalisation expenses. For example, if there is a sub limit clause of 50 per cent of sum assured for cardiac ailments or cancer, then even if your sum assured is Rs 5 lakh, you cannot claim more than Rs 2.5 lakh due to the 50 per cent sub limit clause.
Some of the policies specifically mention that after discharge from hospital, any additional costs related to that ailment will be paid subject to a ceiling. This ceiling can be in terms of 5 per cent of sum assured or Rs 5,000 in some cases.
If you don't want any nasty surprises at the time of claim, it makes sense to go through the sub-limit clause and select only those policies, which does not contain such clauses.
Ideally the premium for policies without sub limits may be slightly higher than those which contain those limits, but the benefits far outweigh the costs.
Also, do not forget to review your insurance cover and increase it if required to take care of increasing healthcare costs.
The writer is chief planner, Proficient Financial Planners