CASHLESS HEALTH INSURANCE DOES NOT MEAN ZERO EXPENSE. KNOW THE GAPS

A health-insurance policy can provide much-needed financial support during a medical emergency. But having a policy does not always mean that a family is fully protected.

A Rs 5 lakh policy may have looked adequate when it was bought several years ago. Today, the same cover may not stretch as far, especially if the policyholder lives in a metro and prefers private hospitals. Even when the hospital offers cashless treatment, the patient may still have to pay for expenses that fall outside the policy.

The problem is not limited to rising hospital bills. Policyholders also need to consider room-rent limits, co-payments, deductibles, exclusions and sub-limits. These conditions can reduce the amount paid by the insurer.

Medical costs are rising

Healthcare costs in India have increased sharply in recent years. A report submitted to the Securities and Exchange Board of India cites Frost & Sullivan estimates showing average healthcare inflation of 10.8% between 2018 and 2024. The estimate includes annual healthcare inflation of 14% in 2024.

This means that a treatment costing Rs 5 lakh several years ago could become considerably more expensive over time.

For policyholders, the lesson is simple. Health insurance should not be treated as a one-time purchase. The adequacy of the cover needs to be reviewed as medical costs, family circumstances and healthcare needs change.

Rohan Goel, Business Head of Health Insurance at Policybazaar, says policyholders should review their health cover at least once every two to three years. They should review it sooner if there is a major change in income, family size, location or medical needs.

“Rather than increasing the base cover every year, consumers can also consider super top-up covers as a cost-efficient way of adding a larger financial cushion,” Goel says.

A super top-up policy can be useful for people who want higher protection but find a very large base policy expensive. However, its deductible and other conditions must be understood before purchase.

Is Rs 5 lakh or Rs 10 lakh enough?

There is no single cover amount that will be adequate for every person or family.

A Rs 5 lakh or Rs 10 lakh policy can provide a useful starting point. But the right amount depends on the policyholder’s age, health, family size, city and preferred hospitals.

For an individual, Goel says Rs 10 lakh can be a reasonable starting point in many cases. Families may need a higher level of protection because several members share the same pool under a family-floater policy.

This distinction is important. A Rs 10 lakh family floater does not provide Rs 10 lakh separately to every member. The entire family draws from the same sum insured.

The location of treatment also matters. The cost of hospitalisation in a metro and a smaller city can be very different. A policyholder who wants access to large private hospitals may need a higher cover than someone who mainly uses government hospitals or lower-cost facilities.

The better approach is to assess the likely cost of treatment in the city where the family lives. Policyholders should also consider whether their cover needs to account for ageing parents, children, existing medical conditions and the loss of employer-provided insurance after a job change.

More people are insured, but are they adequately protected?

India has made progress in expanding health-insurance coverage.

The National Statistical Office’s 80th Round health survey found that, 47.4% of rural residents and 44.3% of urban residents were covered under some health-insurance or financing scheme. In 2017–18, the corresponding figures were much lower at 14.1% in rural areas and 19.1% in urban areas.

The rise in coverage is encouraging. But it does not automatically mean that every insured person has sufficient financial protection.

A person may have a policy but still face a large bill because the sum insured is low or because the policy has restrictive conditions. The policy may also exclude certain treatments or impose limits on specific expenses.

Goel says the next step should be to focus not only on increasing the number of insured people but also on improving the quality and adequacy of their protection.

“Consumers need to understand what their policy actually covers, how much the sum insured is, whether there are co-payments or sub-limits, and what expenses may remain outside the policy,” he says.

Cashless does not mean completely free

Many policyholders assume that cashless hospitalisation means they will not have to pay anything. That is not always the case.

The Insurance Regulatory and Development Authority of India (Irdai) says that expenses beyond the limits or sub-limits allowed under a policy, as well as expenses not covered by the policy, have to be paid by the policyholder. Cashless treatment is generally available only at eligible network hospitals.

For example, a policy may have a limit on the room category that the patient can choose. If the patient opts for a more expensive room, the insurer may apply proportionate deductions to certain hospitalisation expenses.

Goel explains that a policyholder may also have to pay because of co-payment, deductibles, exclusions, disease-wise sub-limits, room-rent restrictions and non-medical expenses.

There is no standard percentage that can be applied to every claim, he says. The amount paid by the policyholder will depend on the terms of the specific policy and the nature of the treatment.

IRDAI defines co-payment as the portion of an admissible claim that the policyholder must bear. A deductible is an amount that the policyholder must pay before the insurer’s liability begins. A sub-limit is a pre-defined limit on a particular treatment, service or expense.

How a hospital bill can exceed the policy payment

Consider a patient who has a Rs 5 lakh policy but is admitted to a hospital where the room rent is higher than the permitted limit.

The insurer may not simply pay the entire bill up to Rs 5 lakh. Depending on the policy wording, proportionate deductions may apply to associated expenses. The patient may also have to pay for items excluded under the policy, such as certain consumables or administrative charges.

A co-payment clause can add another burden. If the policy requires the patient to bear 20% of the admissible claim, the patient must pay that share even if the treatment is otherwise covered.

The actual out-of-pocket amount will therefore depend on the bill, the policy’s limits and the expenses that are admissible. It would be misleading to say that every insured patient pays a fixed percentage of the hospital bill.

What policyholders should check before renewal

Before renewing or increasing health insurance, policyholders should review the following:

Current sum insured: Is it enough for treatment in the city where the family lives?

Family-floater structure: Is one sum insured being shared by several family members?

Room-rent and ICU limits: Can choosing a higher room category trigger proportionate deductions?

Co-payment: What percentage of the admissible claim must the policyholder pay?

Deductible: How much must be paid before the policy starts paying?

Sub-limits: Are there separate limits for procedures such as cataract treatment or certain surgeries?

Exclusions: Which treatments, services or expenses are not covered?

Non-medical expenses: Are consumables and other hospital charges payable by the patient?

Network hospitals: Can the policyholder access preferred hospitals through the cashless facility?

Super top-up option: Can additional protection be obtained at a reasonable premium?

The larger point is that the number printed on a health-insurance policy is only one part of the protection it offers. A policy is adequate only when its sum insured, coverage conditions and hospital network are suitable for the policyholder’s actual healthcare needs.

Disclaimer: This story is for general information only. The examples and expert views are intended to help readers understand health-insurance coverage and are not a substitute for professional financial or insurance advice. Policy terms, exclusions, limits and claim payments vary across insurers and products. Readers should carefully check their policy documents and consult the insurer or a qualified adviser before making any decision.

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2026-09-14T12:32:09Z