How to decode your health insurance claim settlement letter

This is a Mint Premium article gifted to you. Subscribe to enjoy similar stories.

Chennai-based Vijaya Kawar was hospitalized at an insurer’s network hospital for 61 days, with the total bill eventually reaching ₹ 2.11 crore. Kawar had health insurance cover of ₹ 3.25 crore, comprising a ₹ 1 crore base sum insured and the balance through bonus and booster benefits. Yet the insurer approved only ₹ 85 lakh.

Of the ₹ 2.11 crore bill, ₹ 1.26 crore was deducted under various heads, including ₹ 10.43 lakh as a memorandum of understanding (MoU) discount, ₹ 28.39 lakh towards reasonable and customary (R&C) charges and ₹ 87.50 lakh on the grounds that there was no active line of treatment.

“The patient's initial discharge got delayed by four days due to repeated queries and follow-ups, even though all replies had been submitted. During the delayed period, the patient’s condition unfortunately deteriorated again. Fresh infections and complications developed and hospitalization had to continue. The first final bill was worth ₹ 1.63 crore. With the delay, it reached ₹ 2.11 crore, but the approved amount remained ₹ 85 lakh both times. They only increased deductions under the same heads,” said Punit Kochar, an insurance consultant who sold the policy to Kawar.

As the disputed amount exceeded ₹ 50 lakh, Kawar could not approach the Insurance Ombudsman , whose jurisdiction is limited to complaints involving compensation of up to ₹ 50 lakh. Kawar is in the process of approaching the consumer court.

Claim settlement letters can contain deductions that leave policyholders bewildered. Understanding what these terms mean, and challenging deductions that are unclear, can help consumers better understand how their claim has been assessed.

R&C charges refer to the insurer paying only what it considers a standard charge for a particular treatment in a given locality. Any amount above that benchmark may be disallowed. Such deductions are more common in non-network hospitals and reimbursement claims, where charges have not been negotiated between the hospital and insurer. But they can also arise in cashless claims, particularly high-value ones, as in Kawar’s case.

“Having a large sum insured does not necessarily guarantee full claim coverage. Insurers often rely on the R&C clause to limit claim payouts,” said insurance consultant Akshay Bansal.

While the dispute is primarily between the hospital and insurer , the policyholder may ultimately have to bear the balance. Industry experts advise asking the hospital for a detailed, itemized bill.

“Wherever possible, get a written explanation of the charges. For specialized treatment, you can also ask the treating doctor or hospital whether the charges are standard or not,” said Neeraj Khushalani, founder of InsureSmart.

Policyholders should also ask the insurer to explain the benchmark or data used to determine that a particular charge was unreasonable. “It will help them present their case better if the dispute reaches the Ombudsman or consumer court,” he added.

An MoU discount is a reduction in hospital charges agreed between the hospital and insurer under a memorandum of understanding.