Health insurance checklist: Key policy terms to watch out for before hospital admission

Buying a proper health insurance policy can shield you from spending large sums of money on hospital bills. While a comprehensive policy with a high sum insured that covers most illnesses can be effective in managing high hospitalisation expenses, it does not mean everything is covered.

Many policyholders get nasty surprises only during hospitalisation. This is mainly due to several limitations buried in the policy terms and conditions, resulting in high out-of-pocket expenses.

One of the biggest reasons for this is the way health insurance is sold. In a highly competitive market, policies are often marketed on the basis of premium affordability and sum insured, while important conditions are largely overlooked.

Customers tend to compare premiums and coverage amounts but rarely examine the fine print, partly because they assume that all hospital expenses will be covered once they have purchased insurance. Here is a primer on the policy terms that one must carefully consider before buying health insurance.

Room rent restrictions

This is the first condition that you should know in any health insurance policy. Most health insurers cap room rent at 2% of the sum insured. So, if your sum insured is ₹3 lakh, you can take a room that charges a maximum of ₹6000 per day. Anything above this will result in high out-of-pocket expenses as everything in a hospitalisation, including doctor fees, nursing charges and operation theatre charges, are tied to your room rent.

“It is often during hospital admission that families discover that their choice of room has financial implications extending far beyond accommodation charges. Room rent restrictions continue to be among the most common causes of disputes,” said Shilpa Arora, co-founder and COO, Insurance Samadhan, an online tech platform specialising in customer grievance redressal for insurance-related complaints.

“Many policyholders are unaware that choosing a room beyond the permissible category can trigger proportionate deductions, resulting in lower reimbursement not only for the room charges but also for associated expenses such as doctor visits, operation theatre charges and nursing costs,” she said.

Also, be careful with the room choice at the proposal stage itself. Some policies allow only twin-sharing rooms or hospitalisation only in the general ward. You should not take policies with such room limits. You will need a single room during hospitalisations to avoid infections.

Sub-limits on specific treatments

This is another area where typically huge differences arise between expectations and reality. Certain procedures such as cataract surgery, knee replacement, maternity expenses or modern treatment methods may have monetary caps even though the overall sum insured may appear adequate.

Cataract surgery is one procedure where most health insurance companies impose sub-limits that severely restrict payouts. Even if you have a high sum insured, a cataract surgery claim will cover only the amount specified in your policy. The cost of a modern cataract procedure for a single eye is in excess of ₹1 lakh in most cities. But if your policy allows only a maximum of ₹50,000 for this under ‘sub-limits’, then you may have to either go for an ordinary procedure or pay the difference from your funds. The same would apply to many modern treatment procedures.

“Some policies cap (limit) what they’ll pay for specific treatments or require you to bear a percentage of the bill yourself,” said Renuka Kanvinde, vice president – Health Insurance, Tata AIG General Insurance.

“A policyholder with a ₹10 lakh cover may assume that the entire amount is available for every treatment, only to realise during hospitalisation that a particular procedure carries a much lower payable limit,” Arora said. So, read the ‘sub-limits on specific treatments’ section carefully before buying a policy.

Co-payment clause

Check whether your policy carries a co-payment clause. Several health insurance policies, especially those that cover senior citizens, have this clause. A co-payment simply means that you agree to pay a certain percentage of your claim amount from your own pocket. For instance, if your co-payment is 20%, it means that you have to pay this percentage of your bill from your own funds during hospitalisation.

If your hospital bill is ₹2 lakh and you have a co-payment of 20%, then you must pay ₹40,000 from your pocket. Co-payment has serious implications for your health insurance as it can inflate your out-of-pocket expenses significantly. Moreover, co-payment is a recurring expenditure and you have to pay the agreed percentage for every hospitalisation.

Senior citizens and those with co-morbidities often get a policy only with a co-payment clause. If you are not able to get a policy without co-payment, the best thing to do is to restrict the percentage to 10% or 20%, as it will help you in lowering hospitalisation costs.

Waiting periods

Health insurance does not cover hospitalisation from the day you buy the policy. There are usually waiting periods for certain ailments that vary by insurer. Diseases such as hernia, cataract, gall bladder stones, arthritis and several pre-existing conditions are covered only after the completion of specified waiting periods.

“Most policies won’t cover pre-existing conditions/specific illnesses/maternity benefits right away. There is usually a waiting period before these kick in and you need to know the timeline so you’re not caught off guard,” Kavinde said.

“Since these conditions are not always explained adequately during the purchase process, policyholders often discover these exclusions when a claim is raised rather than when the policy is issued,” Shilpa said.

During the initial waiting period, which typically lasts for 30 days, no illness-related claims are covered. Then, there is a pre-existing disease (PED) waiting period during which ailments that you already had before buying the policy are not covered.

The PED waiting period typically ranges from one year to four years. There is also a waiting period for specific diseases and elective procedures such as cataract surgery, which can last up to two years. Some policies also have a maternity waiting period, which can be between two and four years. Only after this period is over can pregnancy-related expenses be claimed.

Consumables cover

This is an often-overlooked clause in health insurance. Most regular health insurance policies do not provide coverage for consumables, which include disposable medical items such as masks, syringes and PPE (Personal Protection Equipment) kits. They can account for up to 10% of your total hospital bill. The lack of coverage for consumables hurt policyholders the most during the COVID-19 pandemic, which saw widespread use of gloves, PPE kits, and disposables.

While a comprehensive health policy covers consumables now, you have to ensure that you get reimbursed for widely used disposable items in hospitals. So, read the fine print carefully to get adequate coverage for consumables.

Incomplete disclosures

Another reason behind claim disputes is incomplete disclosure at the proposal stage. Customers may omit information regarding diabetes, hypertension, previous surgeries or ongoing medications. They do it either inadvertently or due to a lack of awareness about the importance of full disclosure.

“Most disputes arise due to the gap between what people assume and what the policy actually says. Customers need to disclose accurate health information when buying the policy,” Kavinde said. “Insurers need to explain policy terms/exclusions and claims process in simple language,” she noted.

When a claim is made years later, and if insurers scrutinise medical records, they could invoke the non-disclosure clause. “Many policyholders are surprised to learn that what seemed like minor medical history can become material during claim assessment,” Arora said.

Every health policy has some situations where payments are not approved. They include

Initial waiting period: Barring accidents, most expenses in the first 30 days (or as specified) aren’t covered

Pre-existing diseases and specific illnesses: These are usually covered only after a defined waiting period

Cosmetic procedures: Not covered unless medically necessary due to an accident or illness

Self-inflicted injuries/substance abuse/hazardous activities are generally excluded

Experimental or unproven treatment methods are not covered unless explicitly mentioned in the policy

Non-medical expenses and treatment not requiring hospitalisation are excluded as well

Fraud and non-disclosures: Any claim linked to withheld or misrepresented facts can be rejected