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How 5% GST on hospital room rent will impact your insurance policy

How 5% GST on hospital room rent will impact your insurance policy

If insurers are not able to claim the GST paid, it could result in a small rise in premiums, says Sudha Reddy of Digit Insurance.

5% GST on hospital room rent above Rs 5,000 5% GST on hospital room rent above Rs 5,000

The recent decision by the GST Council to levy 5 per cent GST on hospital room rent costing over Rs 5000 per day is raising doubts in the minds of health insurance policyholders, as the cost of hospitalisation has become more expensive. Will insurance policyholders have to bear the burden of increased GST? 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 Goods and Services Tax (GST) on room rent adds to the already skyrocketing healthcare costs in the country. However, customers have little to worry about. In case of reimbursement claims, the GST paid will be reimbursed by the insurer. For cashless claims, insurers will have to pay the GST and the same may be claimed by the insurance company. We are awaiting further clarity on input tax credit.”

Reddy adds, “The move further stresses upon the importance of health insurance. We expect more customers to understand the impact of rising medical costs on their finances. GST application should encourage more people to take the plunge and buy adequate health cover. For insurers, this could result in an increase in claims size which may need to be tackled differently going forward. Since GST is implemented across the country, insurers will have to deliberate on the same with TPAs and hospitals to arrive at a solution that suits all stakeholders. If insurers are not able to claim the GST paid, it could result in a small rise in premiums.”

Satish Gidugu, CEO and Whole Time Director, Medi Assist says, “It is a component level impact. Patients who need isolation or more care are the ones who tend to use single rooms right in the top 10-15 cities. A single room then easily crosses Rs 5,000. And so basically, in those hospitalisations, we expect to see a 5 per cent more hit to the patient on the room rent component which could typically be about 25 to 30 per cent of the whole bill depending on the kind of procedure. So on that, they will pay 5 per cent GST extra.”

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 proportionately reduced. This means that there are many hospital charges that are linked to the room and in case it exceeds the approved limit then an insured may have to bear the differential amount, not just for the room rent but also for other expenses.

“So that additional 5 per cent may make an impact on all of the other expenses, even though the hospital is not charging extra insurance,” says Gidugu.

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