Reasonable and Customary Charges Explained in Health Insurance

Neil : Dude, there's this deduction in my reimbursement under the head Reasonable and Customary charges, what the **** are these?

Nicky : IRDA defines Reasonable and Customary charges as ones incurred on services or… 

Neil cutting Nicky midway : Oh come on man Nicky, do you really think, I would have come to you without googling this ****? That is insulting. 

 Nicky : Sorry, my bad dude - Job Hazard. Most people do come to us without any groundwork, but my bad, sorry!!! 

Anyway, let me try and explain it to you by an example. 

Corporate Hospitals like Apollo or Fortis might charge you around ? 50,000 for a Cataract procedure in Delhi, while a standalone facility might perform the same procedure for somewhere around ? 40,000 in Delhi, and mind you, the same Dr. Sharma could be operating on you in either of the facilities. 

If the Insurer keeps paying costs at the Hospitals discretion, it might go bankrupt. 

Kaboom - Reasonable & Customary Charges. 

The Insurers have access to ****loads of data dated back to about 1000 years ?? 

Based on this data, they arrive at an optimum cost for a Cataract procedure in a Tier I city like Delhi, say ? 45,000. Mind you, optimum isn't an objective term, what might be optimum for you, could be an exaggerated expense for the Insurer. Optimum for the Insurer is a cost that can statistically accommodate a Cataract surgery in a Tier I city. 

So now, the Insurer will not pay anything beyond ? 45,000 for the Cataract procedure in Delhi.

That is the macro view for a procedure/ surgery. The same costing logic trickles down to all individual heads i.e. costs like Nursing charges, Anesthetist charges, cotton used, etc. 

Simply put, IRDA gives Insurers some leeway to cap their liability on some heads. In the absence of an appropriate check mechanism for regulation of hospitals, this is one roundabout manner in which Insurers manage claim costs.

Come to think of it, it is also in the best interest of the Insured because

She is saved of the haggling at the Hospital. 

Even if the Insurer does agree to foot Reasonable and Customary charges for you, they will factor this cost in the renewal premium. 

Neil : So is there any way I can avoid these "Reasonable & Customary Charges"? 

Nicky : Of course, you can, here's how

Avoid getting Hospitalized (*chuckles but stops after seeing the expression on Neils face) - Dude, one of the core principles of insurance is to have one but act like you don't. Anyway… 

The other way is to use the Cashless facility whenever possible. The Insurer has already negotiated Reasonable & Customary Charges on your behalf.

Stay vigilant about all the charges during hospitalization.

Neil : How do you know all of this Nicky? 

Nicky : I follow my man @Susheel Agarwal on LinkedIn.