Insurance - What's the Gap Between 'Approved' and 'Paid'?

This series began with one question: does a bigger sum insured actually solve the problem, or does it just make us stop asking why the bill got that big? Part 1 argued that once nobody checks the hospital bill, nobody keeps the price honest - and that is a real reason costs keep rising. The method for this series is simple: follow the incentive, not just the symptom.

Part 2 used that method to size your cover - not a round number, but your city’s real treatment cost. Part 3 asks a different question. Out of the number printed on your policy, how much do you actually get? This gap does not sit in one clause. It shows up in three places.

The number insurers publish is not the number that matters. Insurers report a Claim Settlement Ratio - how many claims they settle, not how much money they pay. A ₹2,000 claim paid in full and a ₹5 lakh claim paid at sixty percent both count as one “settled” claim. What actually matters to you is different: money paid, divided by money claimed. This is the number insurers rarely publish.

Your bill gets rewritten after you are admitted, not before. Most policies cap room rent at a fixed percentage of your sum insured. Pick a room above that cap, and insurers cut other charges too - the surgeon’s fee, the OT charge, the anesthetist’s fee - by the same percentage. Not just the room rent. This is called proportionate deduction, and which charges it applies to changes from insurer to insurer, so read the policy rather than assume. Cashless claims work the same way from a different angle. Hospitals and insurers agree on a package rate in advance. If your treatment costs more than that package, the insurer approves less than the actual bill - and you pay the difference in cash, at the counter, while your family is still worried about the patient.

Some of the bill was never covered at all. IRDAI keeps a standard list of items most policies simply do not pay for - gloves, syringes, PPE kits, admission charges, nursing charges. On an average hospital bill, this alone can be ten to fifteen percent of the total. Some policies also cap what they pay for specific treatments - cataract surgery, a cardiac procedure - no matter what the sum insured says. This is more common in older policies, PSU policies, and employer group covers than in newer private plans. Either way, none of it shows up when you compare sum insured on paper.

So the sum insured is not the full picture. The real answers sit in the non-payable items list, the sub-limit table, and the room-rent clause - the parts nobody reads before buying. Ask for these three things before you buy a policy, or before you need to claim: how much money the insurer actually pays out, not just how many claims it settles; the list of items it does not cover; and whether your preferred room falls inside or outside the rent limit.

3/7 - Rethinking Health Insurance