Claim Pitfalls, Complaints and Official Sources
Health claim paid less than the hospital bill? How to read the settlement letter
Why Indian health insurers settle claims for less than the bill: non-payables, room-rent cuts, co-pay, sub-limits, customary charges. A full worked settlement and how to dispute it.
When an insurer pays less than the hospital bill, the settlement letter (or discharge authorisation) should list each deduction with a reason. The usual ones are non-payable items (consumables listed in the policy's annexure), proportionate deduction for a room above the room-rent limit, co-pay, sub-limits on named treatments, charges the insurer considers above reasonable and customary rates, and items outside the policy period or unrelated to the condition. Each deduction must rest on a clause in your wording. Work through the letter line by line against the wording: wrongly applied deductions, especially proportionate cuts on medicines, implants or diagnostics, can be challenged.
This guide is part of the overview of health insurance claim rejection reasons.
Deduction types and how to check them
| Deduction | Legitimate when | Check |
|---|---|---|
| Non-payables | Item is in the policy's list of non-payable items and you have no consumables cover | Compare each item with the annexure; IRDAI has standardised this list |
| Room-rent proportionate | Room above the limit and the hospital charges differently by room category | Not applicable to medicines, consumables that are payable, implants, devices and diagnostics |
| Co-pay | In your schedule or CIS for this situation (age, zone, network) | Applied to the admissible amount only |
| Sub-limit | Named in the wording for this treatment | Correct procedure and per-eye/per-joint basis |
| Reasonable and customary | Charge clearly above the usual rate for similar hospitals in the area | Ask for the basis; challenge if vague |
| Unrelated items | Treatment of an unrelated condition, or personal items | Check whether they were in fact related |
| Pre/post hospitalisation beyond the window | Bills outside the covered days | Check dates against the schedule |
Worked example: a full settlement letter
Illustrative. Policy: ₹5 lakh sum insured, room rent limit ₹6,000/day, 10% co-pay (zone mismatch), consumables not covered. Patient chose a ₹9,000/day room for 5 days. Total bill ₹3,62,000.
| Head | Billed | Insurer's working | Paid |
|---|---|---|---|
| Room rent (5 × ₹9,000) | ₹45,000 | Capped at ₹6,000/day | ₹30,000 |
| Surgeon, anaesthetist, OT | ₹1,20,000 | × 6,000/9,000 | ₹80,000 |
| Nursing and doctor visits | ₹24,000 | × 2/3 | ₹16,000 |
| Medicines | ₹62,000 | Not proportionate | ₹62,000 |
| Implant | ₹80,000 | Not proportionate | ₹80,000 |
| Diagnostics | ₹21,000 | Not proportionate | ₹21,000 |
| Consumables (non-payable) | ₹10,000 | Not payable | ₹0 |
| Subtotal | ₹3,62,000 | ₹2,89,000 | |
| Co-pay 10% | − ₹28,900 | ||
| Insurer pays | ₹2,60,100 | ||
| Patient pays | ₹1,01,900 |
Now suppose the letter had instead applied the 2/3 ratio to medicines, implant and diagnostics too: those ₹1,63,000 would become ₹1,08,667, a further cut of ₹54,333 (before co-pay). That would be inconsistent with IRDAI's rules on proportionate deduction and worth challenging.
How to challenge a deduction
- Ask for the itemised calculation if the letter shows only a total.
- Mark each deduction with the clause it relies on.
- Prepare a short table like the one above showing the deduction you accept and the one you dispute, with the reason.
- Write to the grievance officer within a reasonable time, attaching the policy page, the bill and the hospital's tariff (for room rent).
- Escalate to Bima Bharosa and then the Insurance Ombudsman if needed. See complaints and the Ombudsman.
Reasonable and customary charges
Insurers can limit payment to charges that are reasonable for that hospital category and area. A deduction on this ground should be explained: which charge, what the insurer considers customary and on what basis. If the hospital is in the insurer's network, the insurer has agreed tariffs with that hospital, and large "customary" deductions in a cashless claim are worth questioning with both the hospital and insurer.
Preventing the biggest deductions
- Choose a room within your limit, or a policy without a limit. See room-rent limits.
- Consider a consumables add-on if your premium allows; non-payables can be several percent of a bill.
- Know your co-pay and sub-limits in advance. See co-pay and sub-limits.
- File complete documents for reimbursement claims; see reimbursement documents.
Use the co-pay calculator to check the co-pay line of your letter.
Frequently asked questions
Can I ask the hospital to waive non-payable items?
You can ask; some hospitals adjust or bundle items. This is between you and the hospital; the insurer pays according to the wording.
Is GST on the hospital bill payable by the insurer?
GST charged by the hospital on payable items (for example on certain room rents above a threshold) is generally treated as part of that item's cost. If GST was deducted on an admissible item, ask why.
The letter says "as per policy terms". Is that enough?
No. Ask for the specific clause and the calculation. The insurer must explain deductions.
Sources and where to check
- IRDAI — guidelines on standardisation of exclusions, non-payable items and proportionate deduction
- Bima Bharosa — register a complaint
- Council for Insurance Ombudsmen — escalation for claims up to ₹50 lakh
