Reasonable And Customary Charges In Health Insurance: When An Insurer May Cut Your Claim

A high sum insured does not always guarantee that the entire hospital bill will be paid. One reason is the “reasonable and customary charges” clause commonly found in health insurance policies. Under this provision, insurers can look at whether the amount charged for a treatment or medical service is broadly in line with what is usually charged for similar treatment in that location. The issue often arises when a hospital’s charges are far higher than what other comparable hospitals charge. In such cases, even if the treatment is covered and there is enough sum insured available, a part of the bill may still be left for the policyholder to pay.

What Does The Clause Mean?

• The clause gives the insurer the right to examine whether the amount charged for a treatment, consultation, test or procedure is broadly reasonable when compared with the going rate for similar medical services.

• Hospital charges are not uniform. The same procedure can cost differently depending on the city, hospital category, doctor, room chosen, facilities used and the complexity of the patient’s condition.

• Trouble can arise when the difference is unusually large. If a hospital charges much more than comparable hospitals for a similar procedure, the insurer may ask why. In such cases, the insurer may agree to pay only part of the amount charged, leaving the policyholder to bear the rest.

What Happens When You Make A Claim?

• A policyholder may end up paying a portion of the hospital bill even though the sum insured is large enough. The deduction is not necessarily linked to exhaustion of the cover.

• Suppose a hospital charges Rs 70,000 for a particular service, while the insurer considers Rs 50,000 closer to the normal rate for that service. The remaining Rs 20,000 could become an out-of-pocket expense.

• The same issue can arise in a cashless claim. Cashless does not mean that every charge raised by the hospital will necessarily be accepted. The insurer will still check the final bill, and some charges may be left out if they are not covered under the policy or appear much higher than usual.

What Can Policyholders Do?

• In case of planned hospitalisation, ask the hospital for an estimated bill before admission. This gives you a fair idea of the likely cost and also allows time to check with the insurer if any charge looks unusually high.

• If you are using the cashless facility, look closely at the amount approved at the pre-authorisation stage. It may not be the final figure, but it can give an early indication of how much the insurer is prepared to pay.

• If a claim is reduced on the ground of reasonable and customary charges, ask the insurer for a clear breakup. Find out which charge was cut and why. This can help you decide whether the deduction appears justified or needs to be questioned.

FAQs

Can an insurer reduce a claim even if the sum insured is sufficient?
Yes. If certain hospital charges are considered much higher than prevailing rates, the insurer may restrict payment under the reasonable and customary charges clause.

Does cashless treatment mean the entire hospital bill will be paid?
No. Cashless only means the insurer settles admissible expenses directly with the hospital. Some charges may still be excluded or reduced.

What should you do if the insurer cuts a claim on this ground?
Ask for a detailed breakup showing which charges were reduced and why. You can then check whether the deduction appears justified under the policy terms.