Health Insurance Policy: IRDAI's New Rules- You Need To Know

Health insurance plans have become a necessity in today's time. Urbanization has led to a fast-paced life full of stress and anxieties, which has further deteriorated living quality. Several chronic diseases have caught the hold of most of the population today.

Even young age people have diabetes, hypertension, and heart diseases.

Not to mention the pandemic that we all have been witness to.

All this has led to an increase in buying the health insurance policy, medical emergencies are uncalled, and medical expenses might blow out your entire life savings. Hence, to be secured on that front, a health plan provides cover for such expenses and lessen the load of your worries.

Since there have been many health plans available in the market today, it might get complicated as to what to choose and what not to. Hence, the Insurance Regulatory and Development Authority of India (IRDAI) loos after all of these and makes suitable changes for the users' benefit. The recent change by IRDAI has come with new health insurance policy guidelines defining 'proportionate deduction'. It is applicable under plans with room rent sub-limits.

Let's understand what a proportionate deduction is and how the Authority's recent changes will impact you:

Sub-limits on Room Rent:

If you have a health insurance policy or are planning to get one, you must have the idea of the sub-limits on room rent covered under the policy, especially when the sum insured is up to INR 5 lakhs. This sub-limit usually ranges between 1-2% of the total sum insured. If the sum insured is INR 5 lakhs and the sub-limit is defined as 1% of the sum insured, the appliable limit is INR 5000/day.

What is Proportionate Deduction?

Many hospitals have pre-defined fees for doctors and defined pricing for treatments, based on the type of room the patient gets admitted. So, if the policyholder is admitted to a suite room and is undergoing an appendectomy, the cost will be higher than the same treatment happening in a normal room. Since the hospitals have their cost based on the room rent, health insurance companies avoid paying higher claims for rooms with higher rents, and that's why they have a defined sub-limit on the room rent under the policy.

So, Proportionate Deduction becomes applicable when the actual room rent exceeds the specified limit. If the actual room rent is higher than the defined rent under the policy, the insurer does not pay the total cost of inpatient hospitalization. It reduces the bill proportionately to the cost that would have otherwise been incurred if the patient had taken the same treatment in a room that comes under the allowed room rent.

What Has Changed Now?

IRDAI has brought two changes under the concept of proportionate deduction. Let's discuss them.

1. Costs Included Under Proportionate Deduction:

Earlier, while calculating the payable claim, the insurance providers used to consider the total inpatient hospitalization. With the recent guidelines onboard, IRDAI has reduced some medical costs regarding the proportionate deduction. The eliminated expenses are as follows:

• Pharmacy costs
• Costs of medical implants and devices
• Cost of diagnostic tests.
• Consumables

While other hospitalization costs would be considered when calculating the proportionate amount of claim, this will eventually lead to a reduction in your out-of-pocket expenses.

2. Non-applicability of Proportionate Deduction:

According to the recent guidelines by the IRDAI, if hospitals don't possess variable room rents, the entire concept of proportionate deduction gets eliminated. In that case, even if the actual room rent is higher than the sub-limit, the total inpatient hospitalization claim would be payable by the insurer without any deduction.

Implementation of the Change:

These changes are effective for all the new health insurance plans that have been bought on or after 1st October 2020. For the existing policies, these policies will be made effective from 1st April 2021.

What do the Changes Mean for You?

As the specific costs get excluded from the overall calculation of proportionate claim, now the policyholder is eligible to get full coverage for such costs irrespective of the room rent. Moreover, if the policyholder seeks a hospital with no variable rooms or room rents or ICU admission with a fixed charge, the concept of the proportionate deduction is ruled out. When taken into consideration, all these aspects would eventually increase the claim amount payable and reduce the expenses from your pocket, making the health plans more user-friendly.

The Health Insurance Policy new rules by IRDAI are a welcome change for the people who have a health insurance policy or are seeking to get one. This will also lead to a surge in buying health insurance policies, thus benefitting the insurance providers. Your health plan is now better, and now you are also aware of the changes that will reduce your out-of-pocket expenses.