Room Rent Limit in Group Health Insurance Policy

What is Room Rent Capping in Group Health Insurance Policy?

Room Rent Capping in a Group Health Insurance Plan is a limit on the cost of the hospital room that will be borne by the Insurance Company. Room Rent Limits are generally specified as a percentage of Sum Insured and are applicable on a per day basis. The Room Rent Limit in a Group Health Insurance Policy can be different for Normal and ICU Rooms as well. Insurance Companies usually have a capping of 1 or 2% of Sum Insured for Room Rents in their Group Health Insurance Policies.

For example: A Group Health Insurance Plan with a Room Rent Capping of 1% and 2 % of Sum Insured per day for Normal and ICU Rooms respectively will reimburse the Insured only upto a maximum Room Rent Limit of 1% and 2% of Sum Insured for Normal and ICU Rooms as specified in the plan. Any room rent expenses over and above the room rent capping limit will have to be borne by the Insured himself.
Another important point to note is that Group Mediclaim Policy for Employees also has a proportionate deduction clause which means that in case the room rent expenses exceed the room rent limit as specified in the Group Medical Insurance Policy, then all the other expenses will also be deducted on a pro-rata basis as the room rent expenses.

Hence, the room rent capping limit in a Group Health Insurance Policy not only impacts the reimbursement for the room rent incurred in the event of a hospitalisation, but also other hospitalisation expenses that are reimbursed by the GMC Policy.

The workings of room rent limit in a GMC Policy can be better explained by means of an example:
Consider an employee insured under a Group Health Insurance Policy with a Sum Insured of Rs2 lakhs and a Room Rent Capping of 1% of Sum Insured per day. The Insured Employee gets admitted in a hospital an incurs the following expenses for 5 days:

The employee’s Group Health Insurance Plan had a room rent capping limit of 1% of Sum Insured (Rs2 lakhs) per day, which meant that the employee was eligible to be reimbursed only Rs2,000 per day (1% of Sum Insured of Rs2 lakhs) towards room rent expenses under his GMC Policy.

However, his room rent expenses were Rs50,000 for 5 days, that is, Rs10,000 per day.

In such a case, the employee’s Group Medical Insurance Policy will reimburse only Rs2,000 per day towards room rent expenses while the additional expense of Rs8,000 per day will have to be borne by the Insured himself. Additionally, since the Group Medical Insurance Policy had a proportionate deduction clause, all the other expenses would also be paid on a pro rata basis as the room rent expenses

Reimbursed Expenses = Room rent limit / Actual Room rent = 2000/10000 = 20%

Hence in our above example, the insured employee will be reimbursed only 20% of all the expenses incurred and 80% of the incurred expenses will be deducted by the Group Health Insurance Company.

Hence the reimbursed amount in each category will look like this:

The total amount reimbursed will therefore be Rs36,000 which is determined by proportionate deduction clause in the GMC Policy. Hence, the Room Rent Capping Limit impacts not only the rent amount to be reimbursed but also the other medical costs.

How to choose the right Room Rent Limit for a Group Health Insurance Policy?
Choosing an adequate room rent limit under a Group Mediclaim Policy is extremely important as that will determine the deduction for all the other expenses incurred during hospitalisation. Inadequate Room Rent limits are one of the leading reasons for claims being settled for a lower amount.

The employer should be aware of the room rents in leading hospitals near the company and then choose an appropriate limit. Generally, hospitals in Tier-1 Cities and Metros charge between 8,000 to Rs15,000 towards room rent expenses while this figure is in the range of Rs5,000 to Rs10,000 in Tier-2 and Tier-3 cities.

Additionally, Room Rent Limit also depends on the Sum Insured of the Group Health Insurance Policy.

For Example, a Room Rent Capping of 2% of Sum Insured of Rs1 lakhs results in the employee being eligible to claim only Rs2,000 per day towards room rent expenses while if the Sum Insured is Rs5 lakhs, the employee becomes eligible to claim Rs10,000 per day towards room rent expenses.

All these factors should be kept in mind while choosing a room rent limit in a Group Mediclaim Policy for employees.

Get a Group Health Insurance Policy with No Room Rent Capping!

This article explains the importance of choosing appropriate Room Rent Limits in a GMC Policy. A low room rent limit might result in employees not being reimbursed adequately while a high room rent limit results in higher premiums. Hence, the employer needs to select the right room rent limit based on the kind of hospitals their employees visit and the Sum Insured amount.

Today, Group Health Insurance Policy for Small Businesses is an integral part of employee benefits and an excellent tool to attract talented employees.

Additionally, the features of Group Health Insurance Policy like Room Rent Capping, Co-Payment Clause in GMC Policy, Pre-Existing Disease Coverage and Waiting Periods can be customised to suit the requirements and the budget of the employers and employees. Additionally, there are multiple Tax Benefits of a Group Health Insurance Policy which make a GMC Policy a no-brainer for most organisations.

Qian is an experienced insurance broker for Group Health Insurance Policies and has partnerships with Top Group Health Insurance Companies in India. Our team can assure you of competitive Group Health Insurance Quotes with no Room Rent Capping and dedicated Claims Settlement. You can reach out to us via email at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.