Getting hospitalized is stressful enough; finding out later your claim was denied or reduced adds insult to injury. One common justification given by insurers for why they won’t pay more is a clause that’s commonly referred to as “reasonable and customary” — it’s even enshrined in the past tenses of both those words — which sounds all kinds of technical but carries very real financial implications for policyholders. We help people & organisations understand how policy wordings, billing and insurer practices work every day at Centrico Insurance Repository Limited (CIRL).

What insurance companies mean by ‘reasonable and customary’

Insurers use the term to compare billed amounts with internal or third-party benchmarks for similar treatments in a given city or category of hospital. If your bill exceeds the insurer’s benchmark, it may cap how much it pays at the benchmark level. For instance, if a hospital bills ₹80,000 for a procedure that your insurance company thinks is customary at ₹60,000, it might pay only ₹60,000 – and you are on the hook for the rest.

That result often seems unjust because there is no universally transparent reference price, hospitals charge differently depending on their infrastructure and workforce specialization, and patients hardly call the shots when it comes to billing in an emergency. The result: many policyholders are suddenly exposed to surprise out of pocket payments for care that was necessary and medically appropriate.

A health insurance buying checklist you need to employ

When considering plans, refer to this brief checklist to minimize surprises down the line. We focus on documentation and clarity – the things that count when claims are adjudicated.

• Make sure that you also read the policy sub-limits and exclusions

Blame it on the fine print: Room rent capping, ICU charge limits, surgery package caps day care procedure limits and consumables are among the items to look for. Sub-limits are the No. 1 cause of surprise shortfalls.

• Verify the list of network hospitals and their reimbursement rules.

If you are a cashless treatment preference, make sure to check the hospitals enrolled with your insurer. If you opt for an out-of-network hospital, make sure to verify the reimbursement insurance.

• Understand co-payments and deductibles

Understand whether the plan uses co-payment percentages or fixed amounts, and how they are applied — one time, per hospitalisation or year.

• Compare pricing benchmarks where available

If a health insurer offers a list of rates for common procedures, or what is called a price matrix, compare those numbers with what you’d expect to pay at the hospitals where you would most likely be treated. This is a critical step in any comparison of health insurance policies.

• Confirm portability and renewal conditions

Lifetime renewability is a feature on most but not all individual health insurance plans, and you should check waiting period resets when switching insurers.

• Confirm and trust coverage for you most common medical procedures and pre-existing conditions

Look out for waiting periods and specified limits on chronic illnesses and major surgeries.

• Check the Redress and escalation procedure

This should include deadlines for the insurer to respond, and the process involved in escalating your complaint e.g. to grievance officers or the Ombudsman. Save your contacts in your records.

• Comparison of Affordability and Premium Payments

Compare premiums versus monthly, and options for premium payments. Learn how missed payments impact your coverage and whether there are grace periods.

• Verify access to your online policy and account

Check if you can manage your insurance policy online – being able to view and submit claims or checking status as it happens will cut any red tape when time is of the essence.

• Document everything

Maintain electronic copies (PDFs) of these policy wordings, endorsements, previous claim correspondence and Premium payment receipt for Health insurance.

Choosing the best health insurance plan

But finding the right plan is about more than just selecting the cheapest premium. Use this framework:

• Begin with your risk profile: family size, ages, medical history and the probability of needing specialised care.
• Make use of the health insurance policy comparison tools to narrow down plans in line with your requirements and do away with ones having such sub-limits.
• Embrace plans with defined, published schedules, or those that will explain what their cost benchmarking is based on — lack of transparency increases the likelihood for post claim disputes.
• And find out if the insurer’s pricing and claims philosophy is written down in endorsements or circulars; look for plans that promise transparency in writing.
• If you can, talk to an impartial advisor or use repository services of the pattern of CIRL to keep your policy documents, claim letters and premium receipts at one place in case of dispute.

This approach answers the question how to choose the best health insurance plan by focusing on predictability and documentary evidence rather than marketing claims.

If a claim is reduced citing “reasonable and customary” – immediate steps

1. Ask for a written explanation: Ask the insurer for its methodology of comparison and data on which it based customary rates.
2. Collect hospital justification: Request that the hospital billing department and treating doctor offer a clinical and financial reason for why items were above the benchmark established by the insurer.
3. Check your policy wording: Check that the insurance policy sub-limit or capping clause has been introduced and properly applied if one is included.
4. File a formal grievance: Make use of the insurer’s Grievance Redressal Officer channel and substantiate with necessary documents. Note statutory response deadlines.
5. Escalate if required: If the grievance results are not satisfactory, you may be able to go to the Insurance Ombudsman — timing and process differ by region. Ombudsman’s remedies are final in many cases so be well prepared.

At CIRL we stress the importance every step should be written down: questions, receipts, complaint numbers and dates – it’s all meat for your case.

Why expert assistance is necessary before you Ombudsman File

• In many jurisdictional regulations some appellate procedures are definitive at the Ombudsman stage. Expertise helps in three ways:
• A medical record and billing expert will review the records, find the flaws in the insurer’s technical argument and help focus arguments.
• More precise allegations lead to internal settling or technical reconsideration and a lesser chance of losing one shot against the ombudsman.
• Experts make sure you have the necessary documentary trail and that statutory timelines are met.

CIRL provides secure policy storage and retrieval and can assist policyholders and intermediaries in organising documents needed for strong grievance submissions.

FAQs

What does “reasonable and customary” mean in a health insurance claim?

It is the insurer’s yardstick for what it considers to be an average charge for a specific treatment in a region. If a claim is filed in excess of this base point, the rate may be reduced.

Am I able to challenge a reduced claim under this clause?

Yes. Approach the insurer’s Grievance Redressal Officer and if they do not resolve it, take it further to the Insurance Ombudsman of your state within statutory time posts. Documentation is crucial.

How can I avoid disputes?

Follow this health insurance buying checklist Take a look at sub-limits: Preferred hospital lists and renewal terms Keep a copy of Health insurance premium payment, purchase acknowledgement and policy documents. Use online insurance policies management applications for immediate access wherever available.

What should I look for before buying Any health insurance?

Check reference from things to check before buying health insurance section above: sub-limits, capping, waiting period, networks, co-pay and renewability.

How can I compare plans easily?

Has a comparison of health insurance policy with real claim conditions (room rent, ICU, surgery packages). Don’t rely solely on premium in making decisions; verify service and claims processes.

Final word

Deciding on a health insurance policy and keeping that decision in good order is part financial planning, part document discipline. The health insurance buying checklist the checklist comes first use the list of best coverage options, for terms with clarity: no ambiguity clauses verify and simplify them keep records of insurance premium Payment as NEFT so that claim is not declined at later stage because they are lost Internet channels are there etc. Centrico Insurance Repository Limited (CIRL) was created to enable you keep and serve to claim documentation which really matters when claims are disputed. If want help organizing your policies or have a gripe to develop, get some guidance and secure policy storage from CIRL’s support staff.