Reasonable And Customary Clause In Health Insurance

Suppose, Lila bought a health cover of Rs. 8 lakhs from a top health insurance provider. She has been diagnosed with gynecologic cancer and has to undergo hysterectomy. Since she has invested in a health insurance plan with great coverage, she doesn’t compare prices and goes ahead with a luxury hospital offering the treatment at a very high price After the surgery, the total hospital bill amounts to Rs. 1.59 lakhs, but her insurance company pays only Rs. 1 lakh, citing reasons of “reasonable and customary clause”.

So what are these three little words that deprived her of a complete reimbursement, even after having bought a high cover product? Let’s see.

Reasonable And Customary Charges

In India, there is no regulation that places a limit on how much a hospital can charge for a particular service. Therefore, theoretically, a hospital can charge any amount they please for a treatment. To protect themselves from having to pay unreasonable and excessive hospital bills, insurance companies have ‘Reasonable and Customary Clause’ in their policies. It is the amount of money that your health insurer determines as the acceptable range of payment for a specific health-related service or medical procedure.

How Does It Work?

An insurer will gather data and look at the average fee that similar grade health providers in a given area are charging for a specific medical service. They will then base the reasonable and customary fee on that amount. Regardless of how much the medical bill amounts to, the insurer won't pay more than the reasonable and customary fee for that particular service.

These fees vary across insurers and locations. If your hospital charges significantly more than other similar grade hospitals in that same geographical area for a particular treatment, the insurer can refuse to pay the overcharged amount. They will pay only the standard rates charged by similarly graded hospitals in the same area, under the reasonable and customary clause.

Let's assume that Mohima incurs Rs.3 lakh of costs for angioplasty in her hometown. However, after data collection and research, her insurance company determines that there is overbilling, since the reasonable and customary cost of this procedure in several similar grade hospitals in her area is Rs. 1 lakh. In this case, the insurer will base its reimbursement on Rs. 1 Lakh, and Mohima will be responsible for paying the rest, i.e., Rs. 2 lakh.

How Can You Protect Yourself From The Reasonable And Customary Clause?

It’s natural for you to be in a dilemma while opting for health insurance. There is no guarantee that buying a product with a high cover will ensure full reimbursement of your claim. However, there are a few ways you can save yourself from deductions on account of the Reasonable and Customary clause.

In case of a planned treatment, check the charges of the hospital before getting admitted. Depending on the type of room you select, the hospital will give you an estimate of the charges that will apply. You can then compare the charges with similar grade hospitals.

A difference of only 10-20% is acceptable. You can go for your desired hospital. But if the difference is much higher - like around 40-60% - then you have the following choices -

• Negotiate And Work It Out With The First Hospital

  Talk to the management and ask for a revision in the estimate. Let them know about the standard charges for similar hospitals nearby. If they don’t negotiate and you still want to get treated there, you will have to be prepared to pay the balance out of your own pocket.

• Consider An Alternate, More Reasonable Hospital Of A Similar Grade

  After comparing the hospital rates, you will find alternate ones that provide the same treatment at much more reasonable rates. If you are comfortable with any of them, go for it!

Suppose, you are planning to undergo a surgical treatment in Fortis Medical Centre, Kolkata. Before getting admitted, you should compare the charges for your treatment with a hospital in a similar geographic location, with an equivalent grade, for example - AMRI Hospital, Kolkata. If you find out that Fortis Medical Centre is overbilling and charging way more than AMRI Hospital, you could either ask Fortis to revise its estimates, or get admitted to AMRI for the surgery.

As important as it is to invest in Health Insurance in today’s age of rising chronic cases and medical inflation, it is equally important to choose your hospital wisely. You don’t always need a fancy hospital, but a good one that will truly take care of you. Check with doctors, do your research, and take estimates. Just like the Reasonable and Customary clauses protect insurers from paying unreasonable expenses, a planned hospitalisation will save you from hospitals that overcharge, and find you the best treatment at good costs.