Why cashless health insurance does not always mean zero out-of-pocket costs

Cashless health insurance allows an insurer to settle eligible hospitalisation expenses directly with a network hospital, reducing the need for policyholders to arrange the entire bill upfront. However, patients may still have to pay some expenses themselves, depending on the policy terms, claim approval and the final hospital bill.

The distinction is between the mode of settlement and the extent of coverage.

Vineet Gupta, Head – Product Development at ManipalCigna Health Insurance, a standalone health insurance company, said the term “cashless” can create an expectation of zero out-of-pocket payment, even though the extent of coverage continues to be governed by the policy.

Why can a cashless claim still involve payment?

A hospital bill can include expenses that are covered by the policy and others that are not admissible. Policyholders may have to bear costs arising from co-payments, deductibles, room-rent restrictions, treatment-specific sub-limits, exclusions, waiting periods or an exhausted sum insured.

Non-payable expenses may also add to the amount they owe.

Anand Roy, Member of the Executive Committee, General Insurance Council, and MD and CEO of Star Health Insurance,  an Indian health insurance company, said the hospital bill can contain both payable and non-payable components. The customer has to pay the balance that is not covered under the policy.

For instance, if a hospital bill is ₹2 lakh and the insurer approves ₹1.6 lakh after assessing the expenses against the policy terms, the patient would have to pay the remaining ₹40,000. This is an illustration; the actual amount depends on the policy and claim assessment.

Does cashless approval guarantee the final settlement?

No. Pre-authorisation is an initial assessment of the proposed treatment based on the information available to the insurer. The final payable amount is determined after the actual treatment and complete bill are reviewed against the policy terms.

Krishnan Ramachandran, Member of the Executive Committee, General Insurance Council, and MD and CEO of Niva Bupa, a standalone health insurance company, said insurers should clearly communicate three figures to customers: the total hospital bill, the amount payable by the insurer and the amount the patient must pay. Any difference should be explained in simple language.

This distinction matters because the final bill may include expenses that were not covered in the initial approval or that require further assessment.

What should consumers clarify before admission?

For planned hospitalisation, policyholders should check whether the hospital offers cashless treatment under their policy and whether the proposed treatment is covered. They should also ask about applicable waiting periods, exclusions, co-payments, deductibles, room-rent limits, treatment-specific sub-limits and the remaining sum insured.

Gupta said consumers should establish which expenses may need to be paid personally and understand the policy conditions before hospitalisation. He also noted that some hospitals may ask for a deposit even under cashless treatment; customers should clarify the terms and conditions governing any refund.

Pankaj Shukla, CEO of QubeHealth-Pay, an Indian healthcare-focused fintech and payments platform, said insurers should provide an itemised estimate at the pre-authorisation stage, showing the approved amount, likely deductions and the patient’s expected contribution.

He said consumers should ask three questions before admission: what is approved, what is excluded, and what will they have to pay at discharge.

Cashless health insurance can reduce the need to arrange the entire hospital bill upfront, but it does not remove the need to understand the policy.

Checking coverage and likely deductions before admission can help policyholders prepare for expenses that may remain their responsibility.