Why was my health insurance claim paid less than the bill?

Why was my health insurance claim paid less than the bill?

Your claim was most likely paid less because your policy allows the insurer to deduct certain costs, and every rupee deducted should trace back to a clause in the policy. These are the common reasons:

• Non-payable items. Gloves, masks, admission kits, attendant food and other non-medical items are usually refused. See non-payable items.
• A room above your limit. If you stayed in a room costlier than your room rent limit, many policies cut the room rent and the doctor, surgeon, nursing and OT charges in the same ratio. This is proportionate deduction, and it is often the biggest single cut.
• Sub-limits. A cap on a treatment or a bill head, such as cataract surgery or ambulance charges, limits the payout however large the bill. See sub-limits.
• Co-payment. A percentage of each admissible claim that you bear, often for senior citizens or for treatment in certain cities or hospitals. See co-payment.
• Deductible. Top-up and super top-up plans pay only above a fixed amount. See top-up vs super top-up.
• “Reasonable and customary” charges. Many policies pay only charges in line with what is usual for that treatment in that area, so part of a high fee can be disallowed.
• A waiting period or exclusion on part of the treatment. If one procedure falls under a waiting period or a listed exclusion, only that part may be refused.
• Missing papers. A pharmacy bill without a prescription, or an implant without its invoice, is often held back until you send it.
• Not enough sum insured left. If earlier claims used most of the cover this policy year, only the balance is paid. A restoration benefit, if you have one, usually can’t top up the claim that used up the cover.

Example: how a ₹1.75 lakh bill became a ₹1.29 lakh payout

Example. Your policy has a ₹5 lakh sum insured, a room rent limit of 1% of the sum insured per day (₹5,000), a 10% co-payment on every claim and an ambulance sub-limit of ₹2,000 per hospitalisation. You stay 4 days in a ₹6,250 room for surgery. The payable ratio for room-linked charges is 5,000 ÷ 6,250 = 80%.

The co-payment then applies to the ₹1,43,000 that survived the other deductions. Step by step:

You pay ₹46,300, about 26% of the bill. Only ₹5,000 of that is the room rent difference (₹1,250 a day for 4 days). The proportionate cut on the fees is ₹20,000, four times as much, and the co-payment adds ₹14,300.

The example follows a common wording in which medicines, consumables, implants and diagnostics aren’t cut in proportion. IRDAI’s June 2020 norms required that; they were superseded in May 2024, but many policies still follow them. It also assumes the hospital charges different fees by room category. Your own wording decides the order of deductions and which charges count as “associated medical expenses”.

How to read your claim settlement letter line by line

Read the settlement letter by matching every deduction to a reason, and every reason to a clause in your policy. Layouts differ between insurers and TPAs, but most letters or attached sheets contain the same pieces.

1. Check the three totals. Amount claimed, amount deducted (or “disallowed”) and amount paid. The claimed amount should match your final bill plus any pre- and post-hospitalisation bills you sent.
2. Get the itemised deduction sheet. If the letter shows only a total, ask the insurer or TPA for the bill-wise deduction breakup. The 2024 Master Circular requires full details of any partial disallowance, with reference to specific policy terms.
3. Sort each deduction by reason. Typical labels are “non-payable”, “proportionate deduction” or “excess room rent”, “sub-limit”, “co-pay”, “not related to the ailment”, “in excess of reasonable charges” and “documents not submitted”.
4. Find the clause. Look up each cited clause in your policy wording, schedule and Customer Information Sheet. A reason with no clause behind it is worth questioning.
5. Redo the arithmetic. Check that the proportionate ratio uses the eligible room rent in your schedule, that it was applied only to the charges your policy defines as associated medical expenses, and that the co-pay used the right percentage on the right base.
6. Separate fixable cuts from permanent ones. A missing prescription or invoice can be supplied. A sub-limit or co-pay usually can’t be argued away if the clause clearly applies.

Which deductions can you challenge?

You can challenge any deduction that your policy wording doesn’t support, or that was calculated wrongly. These are the ones most worth checking:

How to dispute a deduction

Dispute it in writing with the insurer first, then escalate if the reply doesn’t fix it.

1. Write to the insurer’s grievance cell. Quote the claim number. List each disputed deduction with its amount, the reason given and why it is wrong, and attach the evidence. Insurers must resolve grievances within 14 days, and their reply must give you the Insurance Ombudsman’s contact details.
2. Register it on Bima Bharosa if needed. IRDAI’s Bima Bharosa portal (or the toll-free number 155255) records your complaint against the insurer and lets you track it.
3. Go to the Insurance Ombudsman. If the insurer rejects your complaint, doesn’t reply within one month, or you’re unhappy with its reply, you can complain to the Insurance Ombudsman. It is free, hears partial settlements, and takes complaints within one year for amounts up to ₹50 lakh.

The full escalation ladder, with an outline for an appeal letter, is in the guide to what to do when a claim is rejected. If the cut happened at a cashless discharge, see cashless claim denied or partly approved.

Does a high claim settlement ratio mean you’ll be paid in full?

No. A claim settlement ratio counts how many claims an insurer settled; it doesn’t show how much of each bill was paid. Two insurers with the same ratio can pay very different amounts on the same bill, because the payout depends on each policy’s room rent limit, co-pay and sub-limits. Partial payment is common: in the LocalCircles survey reported by Business Today, about a third of respondents who had claimed in the previous three years said their claim was only partly approved.

What to check in your policy

1. Policy schedule: the room rent limit or room category, the co-payment percentage, any deductible, and sub-limits printed next to the sum insured.
2. Customer Information Sheet: the summary of sub-limits, co-pays, deductibles and “Room / ICU charges” limits.
3. Definitions: search the PDF for “associated medical expenses”, “proportionate”, “reasonable and customary” and “admissible claim amount”.
4. Annexures: search for “non-medical”, “non-payable”, “consumables” or “List I”. This is the list of items the policy won’t pay.
5. Benefits table: search for “sub-limit”, “up to”, “maximum of” and “per hospitalisation”.
6. Co-payment clause: search “co-pay” and note when it applies (age, city, network or non-network hospital).
7. Grievance section: the grievance cell’s email and the Grievance Redressal Officer’s contact details.

Where people get caught out

• Accepting a single total. Without the itemised deduction sheet you can’t see whether a ratio or co-pay was applied to the wrong charges.
• Thinking the room rent difference is the whole cost. In the example it was ₹5,000 of a ₹46,300 shortfall.
• Not sending the missing paper. Cuts for a missing prescription or invoice are among the easiest to reverse, but only if you send the document.
• Arguing fairness instead of clauses. An appeal that quotes the policy definition and shows the arithmetic is much harder to dismiss.
• Skipping the insurer and going straight to the Ombudsman. The Ombudsman can only hear you after you have complained to the insurer in writing.
• Waiting too long. The one-year window for the Ombudsman runs from the insurer’s decision, not from your discharge date.