Many policyholders assume that once they have insurance, every hospital bill will be fully reimbursed. In reality, claim rejections and deductions are common due to policy conditions like room rent limits, exclusions, waiting periods, and documentation gaps.
Industry-level claim settlement ratios for health insurance typically range between 85%–95%, but that does not mean 100% bill payout. Even settled claims often involve partial deductions due to sub-limits or non-payable items.
Understanding the structure of your policy before hospitalization prevents unpleasant financial surprises.
Step 1: Check Room Rent Limit Carefully
Room rent cap is one of the biggest reasons for claim deduction. Many policies specify:
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₹5,000 per day room limit
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1% of sum insured per day
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No cap (in higher-end policies)
If your policy has a ₹5,000 per day cap and you choose a ₹10,000 room, insurers may proportionately reduce all associated charges.
Example:
| Room Rent Allowed | Room Rent Chosen | Deduction Impact |
|---|---|---|
| ₹5,000 | ₹10,000 | Up to 50% proportional deduction on total bill |
This means even doctor fees and ICU charges can be cut proportionately.
Step 2: Confirm Waiting Period Conditions
Most policies have waiting periods for:
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Pre-existing diseases (2–4 years)
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Specific treatments like hernia, cataract (1–2 years)
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Maternity benefits (2–3 years)
If treatment falls within waiting period, claim may be rejected entirely.
Here is a simplified overview:
| Coverage Type | Typical Waiting Period |
|---|---|
| Pre-existing disease | 2–4 years |
| Specific illness | 1–2 years |
| Maternity | 2–3 years |
| Accidental hospitalization | Immediate |
Always verify waiting period status before planned treatment.
Step 3: Choose Network Hospital for Cashless Claim
Cashless claims are processed directly between hospital and insurer. Non-network hospitals require reimbursement, increasing paperwork and risk of disputes.
Before admission:
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Verify hospital empanelment
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Confirm TPA details
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Ensure policy number and ID card are available
Cashless approval reduces upfront payment burden.
Step 4: Pre-Authorization Is Critical
For planned hospitalization, pre-authorization must be submitted to insurer before treatment begins. Hospitals usually assist with this.
Without pre-authorization, insurer may process claim as reimbursement and scrutinize documents more strictly.
Emergency cases allow post-admission notification within specified timeframe (often 24–48 hours).
Step 5: Understand Non-Payable Items
Certain expenses are commonly excluded:
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Registration charges
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Consumables like gloves, masks (unless covered by rider)
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Food charges for attendants
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Cosmetic procedures
Example breakdown:
| Expense Item | Coverage Status |
|---|---|
| Surgery charges | Covered |
| Doctor fees | Covered |
| Medical consumables | Often excluded |
| Attendant food | Not covered |
These small exclusions add up.
Step 6: Maintain Complete Documentation
For reimbursement claims, you need:
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Discharge summary
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Final hospital bill
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Payment receipts
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Prescriptions
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Diagnostic reports
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Claim form
Incomplete documentation is a common reason for delay.
Step 7: Check Sum Insured Adequacy
Medical inflation in India averages between 10%–15% annually. A ₹5 lakh cover may be insufficient for major surgeries in metro cities.
Example approximate treatment costs:
| Procedure | Metro City Cost Range |
|---|---|
| Angioplasty | ₹2–4 lakh |
| Knee replacement | ₹3–5 lakh |
| Cancer treatment (initial cycle) | ₹5–10 lakh |
If sum insured is too low, co-payment from personal savings becomes necessary.
Step 8: Understand Co-Payment Clause
Some policies impose co-pay, meaning you pay a percentage of bill.
| Co-Pay Percentage | Your Share on ₹4 Lakh Bill |
|---|---|
| 10% | ₹40,000 |
| 20% | ₹80,000 |
| 30% | ₹1,20,000 |
Senior citizen plans often have higher co-pay requirements.
Step 9: Inform Insurer Within Time Limit
Failure to inform insurer within prescribed time can complicate claims.
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Planned admission: Notify before hospitalization
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Emergency: Inform within 24–48 hours
Delay in communication may lead to additional scrutiny.
How to Reduce Claim Rejection Risk
Before hospitalization:
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Review policy wording annually
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Increase sum insured if needed
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Choose room within allowed category
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Confirm waiting period completion
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Ensure premiums are paid without break
Small compliance steps significantly improve payout chances.
Conclusion
Health insurance works effectively only when policyholders understand terms before hospitalization. Room rent caps, waiting periods, co-pay clauses, and documentation gaps are the biggest reasons for claim deductions.
Proactive review and careful hospital selection reduce out-of-pocket expenses. Insurance is not just about buying a policy. It is about using it correctly.
FAQs
Why do insurers deduct from hospital bills?
Deductions happen due to room rent caps, non-payable items, co-pay clauses, or exceeding sum insured.
Is cashless always better than reimbursement?
Yes, cashless reduces paperwork and upfront payment burden if hospital is in network.
Can claim be rejected for pre-existing disease?
Yes, if treatment occurs during waiting period and disease was declared earlier.
Should I increase my health insurance cover?
If treatment costs in your city exceed your current cover significantly, increasing sum insured is advisable.