Corporate Policy Design — Room Rent, Co-pay, Network Hospitals
The design terms that decide how much of a hospital bill a group health policy pays — the room-rent limit and proportionate deduction, co-pay, the hospital network and non-medical items — with the arithmetic for each.
What policy design means
Two group policies with the same sum insured can pay very different amounts on the same hospital bill. The reason is policy design: the set of terms that decide how much of a bill is admissible and how it is shared between insurer and member.
Three terms matter most: the room-rent limit, the co-pay and the hospital network. All are product features set by each policy, not regulatory figures, and they vary widely. Sub-limits, co-pay and similar conditions must be disclosed, including in the Customer Information Sheet each member receives.
Room rent and proportionate deduction
A room-rent limit caps the daily room charge the policy covers. It is stated as an amount per day or as a percentage of the sum insured. If the member chooses a room that costs more, the extra room charge is the member's.
Some policies go a step further and reduce other charges when a costlier room is chosen. Under a proportionate-deduction clause, the associated charges, such as the surgeon's fee, are paid in the same proportion that the eligible room rent bears to the actual room rent. This applies only where the policy contains such a clause; some group policies do not have one.
Co-pay
A co-pay is a percentage of the admissible claim that the member bears. The insurer pays the rest. It applies to each admissible claim, so the member shares in the cost every time the policy is used.
The percentage is whatever the policy states, and a policy may have no co-pay at all.
Network hospitals and non-medical items
The hospital network is the list of hospitals where cashless treatment is arranged, with the insurer settling the admissible bill directly. Elsewhere, where cashless is not arranged, the member usually pays the hospital and then submits the bills and documents to the insurer or its TPA for reimbursement. The claim is assessed under the same policy terms, and under the current rules a reimbursement claim is to be settled within 15 days of submission.
Not everything on a hospital bill is a medical expense. A surgeon's fee is a cost of treatment and is payable subject to the policy's limits. Items such as telephone, television and visitors' food are non-medical and commonly not payable, while some consumables are treated as part of room or procedure charges. The policy lists what is excluded.
Rules at a glance
A hospital outside the network
Illustration: Arjun is treated at a hospital that is not in his insurer's cashless network, and cashless treatment is not arranged. He pays the hospital at discharge and submits the bills and documents to the TPA. The claim is assessed under the same room-rent limit, co-pay and exclusions as a cashless claim would be, and the admissible amount is reimbursed to him.
Room rent, proportionate deduction and co-pay on one bill
- Assumptions of the example: the policy covers room rent up to ₹5,000 a day, has a proportionate-deduction clause that applies to the surgeon's fee, and has a 10% co-pay. The member stays 4 days in a room costing ₹10,000 a day, and the surgeon's fee is ₹2,00,000. To keep the arithmetic short, these are the only two items on the bill. All figures are made up for the example.
- Total bill: room ₹10,000 × 4 = ₹40,000, plus surgeon's fee ₹2,00,000 = ₹2,40,000.
- Room rent payable: ₹5,000 × 4 = ₹20,000.
- Proportion: eligible room rent ÷ actual room rent = ₹5,000 ÷ ₹10,000 = 50%.
- Surgeon's fee payable: 50% of ₹2,00,000 = ₹1,00,000.
- Admissible claim: ₹20,000 + ₹1,00,000 = ₹1,20,000.
- Co-pay: 10% of ₹1,20,000 = ₹12,000. Insurer pays ₹1,20,000 − ₹12,000 = ₹1,08,000.
- Member bears: ₹2,40,000 − ₹1,08,000 = ₹1,32,000.
- Co-pay on its own, a separate case: with an admissible claim of ₹4,00,000 and a 10% co-pay, the member bears 10% of ₹4,00,000 = ₹40,000 and the insurer pays ₹4,00,000 − ₹40,000 = ₹3,60,000.
Result. On the ₹2,40,000 bill the insurer pays ₹1,08,000 and the member ₹1,32,000. Under a policy without a proportionate-deduction clause, the surgeon's fee would not have been reduced.
Key points
- Room-rent limits, co-pay and the hospital network are product features set by each policy, not regulatory figures.
- A room-rent limit caps the daily room charge covered, as an amount or as a percentage of the sum insured.
- Under a proportionate-deduction clause, associated charges are paid in the ratio of eligible room rent to actual room rent.
- A co-pay is a percentage of the admissible claim that the member bears.
- Outside the cashless network the member usually pays and claims reimbursement, which is to be settled within 15 days of submission.
- Sub-limits and co-pay must be disclosed, including in the Customer Information Sheet.
Common misunderstandings
- A room-rent limit does not only affect the room charge: where the policy has a proportionate-deduction clause, associated charges are reduced in the same proportion.
- A co-pay is not worked out on the hospital bill: it is a percentage of the admissible claim.
- Treatment outside the network is not uncovered: the member usually pays first and claims reimbursement under the same policy terms.
Questions people ask
Is the surgeon's fee a non-medical item?
No. It is a cost of treatment, so it is a medical expense, payable subject to the policy's limits.
Where can a member see the room-rent limit and co-pay?
In the Customer Information Sheet given to each member, which must disclose sub-limits, co-pay and similar conditions.
What this lesson relies on
- IRDAI Master Circular on Health Insurance Business (29 May 2024) — disclosure and the Customer Information Sheet
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024) — claim settlement timelines
- The master policy wording of the group product concerned (room-rent limit, proportionate deduction, co-pay and exclusions)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.