State-owned insurance companies are planning to go for graded reduction in premiums on Mediclaim policies. By the end of this year, those below 45 years will have to pay around 20 per cent lower premium than now.

The reduction was expected to be lower in case of those over 45 years, insurance company executives said.

The General Insurer's (Public Sector) Association has circulated a reworked draft Mediclaim policy based on the recommendations of a committee headed by Oriental Insurance chairman and managing director S L Mohan.

The reduction in premium will, however, come with limits on room rents, consultation and nursing fees and medicine, diagnostic and surgical expenses.

The executives said room rents would be restricted to 1 per cent of the sum assured on a daily basis. This will mean those insured for Rs 500,000 can spend up to Rs 5,000 per day on room charges.

Room rents along with intensive care unit charges are proposed to be capped at 30 per cent of the sum assured. A Mediclaim customer can spend a maximum 40 per cent of the sum assured on consultation and surgery charges and the remaining 30 per cent on medicines and diagnostic expenses.

"Even the best hospitals in the country offer rooms at Rs 4,000-4,500 per day and the 1 per cent limit is sufficient," said an executive. The maximum sum assured is also being raised from Rs 500,000 a year to Rs 10 lakh (Rs 1 million).

The third party administrators assisting insurance companies have been asked to work out schedules of expenses on diagnostic tests and other expenses that may be incurred by a Mediclaim holder.

Executives said the sub-limits were being introduced as some customers were misusing hospitalisation facility and on average 60 per cent of the sum assured was being spent on room rents. This will mean a reversal to the system prevalent in the 1980s, when the Mediclaim policy included restrictions on spending.

Insurance company sources said restrictions would help in reducing misuses and underwriting losses and this benefit would be passed on to customers.