Constituent policy

How the 5% GST on Hospital Room Rent Will Affect Your Insurance Policy

The recent decision by the GST Board to levy 5% GST on rent for hospital rooms costing more than Rs 5,000 per day raises doubts in the minds of health insurance policyholders as the cost of hospitalization has become more expensive. Will insurance policyholders have to bear the burden of the GST increase? Can it lead to an increase in premium rates for policyholders?

Sudha Reddy, Head of Health and Travel at Digit Insurance, says: “The implementation of the Goods and Services Tax (GST) on room rent is already adding to skyrocketing healthcare costs in the country. . However, customers need not worry. In the event of a claim for reimbursement, the GST paid will be reimbursed by the insurer. For cashless claims, insurers will have to pay GST and the same can be claimed by the insurance company. We are waiting for more clarity on the input tax credit.

Reddy adds: “The move further underscores the importance of health insurance. We expect more customers to understand the impact of rising medical costs on their finances. The application of the GST should encourage more people to take the plunge and take out adequate health coverage. For insurers, this could lead to an increase in the size of claims, which may need to be approached differently in the future. Since GST is being implemented across the country, insurers will need to deliberate similarly with PTAs and hospitals to arrive at a solution that works for all stakeholders. If insurers are unable to reclaim the GST paid, this could result in a slight increase in premiums.

Satish Gidugu, CEO and full-time director of Medi Assist, says, “It’s a component-level impact. Patients who need isolation or more care are those who tend to use single rooms in the top 10-15 cities. A single room then easily crosses Rs 5,000. And so basically in these hospitalizations we would expect to see an additional 5% impact on the room rent component which would typically be around 25-30% of the bill total depending on the type of procedure. So on that they will pay 5% more GST. »

The important part to note is that in the case of insurance, other associated hospital expenses such as ICU (intensive care unit) charges or doctors’ fees could also be reduced proportionally. This means that there are many hospital charges associated with the room, and if the approved limit is exceeded, an insured may have to bear the differential amount, not only for the room rent, but also for d ‘other expenses.

“So that extra 5% can impact all other expenses, even if the hospital doesn’t charge for extra insurance,” Gidugu says.

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