The trouble with health insurance room rent sub-limits

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Health insurance room rent sub-limits must be clearly understood before purchasing a health cover else it can hut real bad. In this post, I describe my experience with my mother’s ear surgery and lessons on health insurance sub-limits – the disadvantages and advantages if any.

What is a health insurance room rent sub-limit?

This essentially means that the cost of the daily room rent and daily ICU rent and associated expenses will be capped at 1% of sum insured (room rent) and 2% of the sum insured (ICU rent). The problem is that the following charges depend on the room and ICU rent -extract from United India Gold policy wordings

  • Nursing Care, RMO charges, IV Fluids/Blood Transfusion/Injection administration charges and similar expenses. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialists Fees.
  • Anaesthetist, Blood, Oxygen, Operation Theatre Charges, surgical appliances, Medicines & Drugs, Dialysis, Chemotherapy, Radiotherapy, cost of Artificial Limbs, cost of prosthetic devices implanted during surgical procedure like Pacemaker, orthopaedic implants, infra cardiac valve replacements, vascular stents, relevant laboratory diagnostic tests, X-ray and such similar expenses that are medically necessary

That is practically everything else (aside from medicines and implants)!! So my guess is that if we choose a room that is 25% more expensive than the allowed sub-limit, anywhere between 25%-40% of the total eligible expenses will not be paid! This is clearly a problem, but are there are advantages? Is there a workaround? Let us consider that after I narrate my recent experience.

The trouble with health insurance room rent sub-limits

My mother’s ear surgery

My mother had ear microsurgery on Dec 26th 2018 (ears boxed on boxing day!). What was supposed to be a minor removal of infection and growth and eardrum reconstruction turned out to be major surgery and close shave for her as the infection was much more extensive than revealed by the CT scan!

As I recently explained in this video: Why health insurance alone is not enough, you need money too

we were referred to a super specialist in a non-network dedicated ENT hospital (MERF). The cost quoted was Rs. 91K for a 24-hour hospital stay that I could get reimbursed from United India. It turned out to be a 2.5-day hospital stay and the final bill. Rs. 98K (not too bad from the estimate and advance paid)

The hospital only had two types of room. A single room costing Rs. 5,500 a day and twin sharing room (I assume for half the cost). I was given the Rs. 91 K package and I knew there was only one kind of single room and did not want anything else. So I bothered to find out about the daily rent only when the final bill was cleared.

My mother has a 5.5L base policy and a super top of 15L and 5L deductible also from United India. So 1% of 5.5L will be exactly Rs. 5,500 a day and there is no problem in getting the full claim (assuming all other paperwork etc is in order). So what is the problem?

There are two issues.

  1. I got away with it this time. The policy is in its 12th year and United will no longer increase the base cover (from 5.5L).
  2. Hospital room rents  (among other costs) are increasing all the time and the next time, I pretty sure the room rent limit will be breached unless there is a wide range of single rooms to choose from.

This is the essential problem I wanted to convey. Hospitals are essentially part of the hospitality business now and are busy targetting patients from outside the state or outside the country.

This means, they make the rooms attractive, have a welcome kit (toiletries et. al) with all rooms air-conditioned. This means that there is no choice and the cost of even the basic single room (if there is one such category) is quite high breaching the 1% limit of small health covers (5L is borderline small-medium).

For 11 years and four hospitalizations, I could comfortably manage with a health cover with sub-limits only because the cover increased by about Rs. 50K each year. So the price of health care inflation was priced into the premium (in addition to age-related expenses). Now, even that increase is not possible for at least my mother. Meaning next time (I hope there will not be one, but ..) I will not be so lucky.

The other problem is, even though I, my wife, son also have an individual base and floater super-top-up covers, we may be forced to increase the base cover to keep up with medical inflation. So the benefit of having a super-top up is in way eroded.

The pro and con of health cover with sub-limits

I have earlier pointed out that policy with sub-limits is not so bad as long the as the base cover is “high enough”. This experience warrants that I rethink my stance, although there are some caveats.

All PSU health insurers will so go public. This means that the shareholders will demand better profitability. So on the one hand, the base cover limit of 10 lakh may increase and sub-limits removed or restriction reduced, on the other hand, claim settlement may not be as smooth.

Sub-limits in a health policy reduce the cost, but unless the cover itself is high, this benefit will soon be lost. In my case, there was a decade-long good run and in a sense, the sub-limits are justified but going forward, that is not going to be the case, especially if the cost increase due to poor profitability.

Opting for a policy with no sub-limits comes with its own disadvantages. New private players who lay down the red carpet when you sign up, may not be as friendly when you apply for a claim. Older private players are constantly tightening application norms, front-loading premiums even for normal applications and permanently exclusions pre-existing diseases (which is silly from the buyers’ point of view).

So while sub-limits admittedly have issues, the grass on other side is not as green as one would think – as sales guys and online aggregators would portray.

The bigger problem, however, is that the health industry is changing faster than the insurance industry. Old hospitals are taken over by bigger players to form “group of hospitals”. The less expensive traditional hospitals are re-branding themselves to keep pace with corporate players. The end result: the patients pay more.

Thus keeping this in mind, I think a policy with sub-limits is no longer a viable alternative for those can afford to pay a bit more considering that we need health insurance for “life”. That is, it is a long-term commitment.

What should I do?

Buy as large a health cover as possible and as early as possible. This could be a base cover + super top up.

If you can afford such a cover with no sub-limits, go for it, but remember to read and understand the policy wordings documents aka terms and conditions document (not the brochure). See an example: Apollo Munich Optima Restore Benefit vs Max Bupa Re-fill Benefit

If you cannot afford a large cover with no sub-limits, then the options could be (1) policy with sub-limits or (2) policy without sub-limits but 10% co-payment option. This means you pay 10% of the cost and the insurer 90%.

I wonder if losing out 10% of the cost is cheaper than losing out on part of the claim because of a breach in the sub-limit. I would wager that it is. However, I have no data to back this so do not take my word for it.

If you are a pig-headed person like me trusting PSU players more than privates to actually come good when there is a claim, then you will have to live with its shortcomings. I certainly will have to. That is why I will not stop investing for my retirement and son’s education goals although I do not have to any more. The extra corpus will be useful to handle situations like a breach of sub-limit or later in life for home-care. See: Why we all need a corpus for medical expenses and how to build it

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. Respected sir,
    Thank you for so sharing real experience. Get well soon for your mother.
    I am considering private players for my questions.
    1) as per my understanding, higher SA is better than SA + super top up with deductible if one can afford?

    2) w.r.t T&C,
    and permanent exclusion, is no ventilation support is important thing to consider? Most of prove players have exclusion like artificial life maintanence, when ask several time, nono of them come with a clear answer for ventilation equipment to art. Life. M.

    If possible request you to share your thoughts plz.

    Ref. Maxbupa ,religare, Cigna ttk.


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