What does reasonable and customary charge in health insurance mean?

Reasonable and customary charges in health insurance mean that the cost of treatment take by the insured should be within the reasonable limit. The reasonable limit is determined by the geographical area the hospital is in and the standard charges other hospitals with similar facilities charge for the treatment. Essentially the clause of “reasonable and customary charge” in health insurance ensures that the health insurance company would cover the cost of treatment within a limit as benchmarked against hospitals in a city.

Why reasonable and customary charge is important in health insurance?

All health insurance policies have this clause under which they mention that they will not cover charges which are not reasonable and customary. Let’s understand the practical implication of this clause with an example:

Mr. A undergoes cataract surgery in City X. The hospital charges Mr. A Rs. 1 Lac for the cataract treatment. But other hospitals in City X with similar standard charge Rs. 40,000 for cataract surgery. In this case, the health insurance company would cover the treatment only up to Rs. 40,000 under the reasonable and customary charge clause.

As is evident from the above example, reasonable and customary charge is very important clause in health insurance. And while getting treated one must do due diligence regarding the treatment cost being charged by the hospital.

Important points to remember:

1. In cashless facilities, the charges are negotiated between the insurance company and hospital, and you need not worry about reasonable and customary charges in normal circumstances.
2. For reimbursement claims, always check if the hospital is overcharging since it might lead to out of pocket expense.