In light of the incident where Bollywood actor Saif Ali Khan was stabbed, one piece of news is making headlines. It has been leaked that the actor claimed Rs 35.95 lakh for his treatment and that Rs 25 lakh has been approved by the insurer. The question that may arise is why the insurance amount approved is less than that of the claim.
Initial Approval Is Mostly Lower
One needs to understand that the initial approval is not the final approval. Usually, if the claim amount is large, the insurers provide a preliminary approval at first, which is often based on incomplete treatment estimates, allowing hospitals to begin therapy while leaving flexibility for revisions when additional information becomes available.
“Insurers frequently adjust claims downward for practical reasons. After the treatment is performed, the claim amount is amended if it is lower or higher than expected because full details may not be accessible at the time of first approval. The hospital may also lack complete information regarding the potential treatments and interventions that will be implemented,” says Hari Radhakrishnan, expert at IBAI and regional director, First Policy Insurance Broker.
Coverage Limits, Deductibles And Non-Medical Expenses
Health insurance policies often have specific coverage limits, which can prevent full reimbursement.
An insurance policy may also have sub-limits. “For example, a policy might have a room rent cap of Rs 5,000 per day. If the policyholder opts for a room costing Rs 10,000 per day, not only is the excess room rent excluded, but related charges (e.g., doctor’s fees or OT charges) might also be scaled down proportionately,” says Siddharth Singhal, head, health insurance, Policybazaar.com.
A policy may have a deductible, a maximum payout per claim, or an overall limit on the total amount that can be claimed within a year. “These factors can lead to a reduced claim reimbursement based on the policy details. Additionally, some claims may be lessened due to the deductible amount, which is the portion of the total cost the policyholder pays out of pocket,” says Bhaskar Nerurkar, head- health administration team, Bajaj Allianz General Insurance.
Non-medical expenses can be another reason policyholders may need to pay additional amounts. While many of these expenses may not be directly related to your medical treatment, they are part of hospitals' services. “If the policyholder has not opted for non-medical expense coverage, they must cover certain costs themselves. These non-medical expenses include gloves, urine bags, blood reservation costs, and more,” says Nerurkar.
The same situation occurs with policy exclusions, where the policy does not cover certain medical expenses, conditions, diseases, treatments, and specific circumstances or is subject to a waiting period before coverage begins. As a result, this affects the amount reimbursed at the time of a claim, as the insurance company is not obligated to pay for diseases or items listed as exclusions in your health insurance policy.
Reasonable And Customary Clause
This clause allows insurers to compare the claimed expenses with the average or standard rates for similar treatments in comparable hospitals within the same region. If a hospital charges higher than what the insurer deems reasonable, the excess amount may be excluded from the claim.
“For example, if a knee replacement surgery costs Rs 2,00,000 in most hospitals but the policyholder is billed Rs 3,00,000, the insurer may approve only Rs 2,00,000, citing the “reasonable and customary” clause,” says Singhal.
Insurance functions as a pooling mechanism and all policyholders pay premiums, which the insurance company collects and uses to settle claims. If a few people start making excessive claims, then the premium increases and everyone is affected.
“So to ensure that the system is equitable to all policyholders who claim or do not claim, reasonable and customary provisions remain in the policy so that policyholders and hospitals do not overcharge and take undue advantage of health insurance,” says Radhakrishnan.
How To Ensure Maximum Eligible Reimbursement
Know the sub-limits, exclusions, and waiting periods before seeking treatment. Use network hospitals to avail of cashless facilities and avoid out-of-pocket expenses for standard treatments.
“Stay within the room rent limit specified in the policy to avoid proportional deductions. Submit all necessary documents, including bills, prescriptions, and diagnostic reports, in a timely and organized manner. Before admission, clarify charges with the hospital to ensure they align with the insurer’s approved rates. For planned treatments, get a pre-authorization from the insurer to ensure higher claim approval,” says Singhal.
