What exactly is the Reasonable and Customary clause?

It is a policy limit where insurers pay only the average market rate for a treatment in your specific city.

Why did my insurer deduct 40% from my surgeon's fee?

If you stayed in a room above your policy limit, the insurer applies a proportionate deduction across most medical charges.

Does the room rent limit apply to ICU charges too?

No. IRDAI guidelines generally prevent insurers from applying proportionate deductions to ICU charges, medicines, and medical consumables.

What is the IRDAI 3-hour discharge rule?

Insurers must approve final discharge within 3 hours. If they delay, they must pay the hospital for any extra stay costs.

How can I challenge a deduction for 'excessive' charges?

Request the insurer's benchmark data and compare your bill with CGHS rates or other local hospital rate cards as proof.

What should I do if the insurer rejects my grievance?

Escalate your dispute to the Insurance Ombudsman or the IRDAI Bima Bharosa portal for a free, formal regulatory review.

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The Reasonable Cost Dispute: Fighting excessive hospital charges deductions

Your insurance didn't pay the full bill? Learn how the 'Reasonable and Customary' clause works and how to challenge unfair cuts.

4 min read

OneAssure Team

April 05, 2026

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Looking for the right plan? You don't have to guess. Let us compare the fine print for you and give you an unbiased recommendation.

Need advice tailored to you?

Looking for the right plan? You don't have to guess. Let us compare the fine print for you and give you an unbiased recommendation.

The shock of the partial settlement

You just got discharged. You are feeling better. Then the settlement letter arrives. Your hospital bill was ₹2,00,000. Your insurance company paid only ₹1,40,000. Where did the other ₹60,000 go? It is usually hidden behind a technical phrase. Insurers call it Reasonable and Customary (R&C) charges. It is their way of saying the hospital overcharged for the treatment. You are left to bridge the gap from your savings. It feels like a betrayal. It happens more often than you think.

Why the 'Reasonable' clause exists

Insurers use this clause as a ceiling. They look at what other hospitals in your city charge for the same surgery. If you go to a premium hospital in South Delhi that charges ₹1 lakh for a procedure that costs ₹60,000 elsewhere, the insurer might only pay the lower amount. They argue that they should not pay for luxury or inefficiency. While this protects the insurer from fraud, it often punishes honest policyholders who have no control over hospital billing during an emergency.

The room rent trap: A math disaster

This is the most common reason for a deduction. Many old policies have a room rent limit. Usually, it is 1% of your sum insured. If you have a ₹5 lakh policy, your limit is ₹5,000 per day. You pick a room for ₹8,000 because the ₹5,000 ones were full. You think you will just pay the ₹3,000 difference. You are wrong. This triggers a proportionate deduction.Hospitals often link their service costs to the room category. A doctor visit in a twin-sharing room might cost ₹1,000. The same doctor visit in a single private room might cost ₹2,000. Because you picked a room above your limit, the insurer will cut your entire bill proportionately. In this case, since you exceeded your limit by about 37%, they might cut 37% from your doctor fees, OT charges, and nursing costs. However, IRDAI rules state that ICU charges and medicines should not be reduced this way. Always check your itemized bill to see if the insurer wrongly applied cuts to these categories.

The 3-hour discharge rule

Hospitals often charge you for an extra half-day if you stay past noon. Usually, this delay happens because the insurance company takes forever to send the final approval. You should not pay for their slow process. A recent IRDAI Master Circular (June 2024) mandates that insurers must grant final authorization within three hours of the hospital's request. If they take longer, the insurer must bear any additional costs charged by the hospital for that delay. Use this rule to push back if you see extra room charges on your bill caused by a slow TPA.

How to fight back against unfair deductions

Do not accept a partial payment quietly. Start by asking for an itemized billing statement. This lists every single glove, mask, and tablet used. Often, hospitals add 'administrative charges' or 'service fees' that insurers never pay. If the insurer claims the charges are not 'reasonable,' ask them for their benchmark. They must prove that other similar hospitals in your area charge less.You can compare your bill against CGHS (Central Government Health Scheme) rates. These are standard rates set by the government. If your hospital's charges are close to these or other city standards, you have a strong case. Write a formal appeal to the Grievance Redressal Officer (GRO) of the insurance company. Be punchy. State facts. Attach your doctor's note explaining why the specific treatment was necessary. If the GRO does not resolve it within 30 days, escalate to the Bima Bharosa portal or the Insurance Ombudsman. The Ombudsman process is free for you and their decision is binding on the insurer.

Cashless vs Reimbursement

Reimbursement claims almost always face higher deductions. When you go for a cashless treatment at a network hospital, the rates are pre-negotiated. These are often called PPN or GIPSA rates for public sector insurers. The hospital is contractually bound to these prices. In a reimbursement claim, there is no such agreement. The hospital charges their 'rack rate' and the insurer applies the R&C clause. If you want a smooth experience, always aim for a cashless claim at a network hospital. It keeps the pricing dispute between the insurer and the hospital, not you.Check your policy for a 'No Room Rent Limit' feature. It is the best way to avoid the proportionate deduction nightmare. Understanding these fine-print details before you are wheeled into a hospital can save you lakhs. Stay informed. Stay protected.