Aditya Sharma underwent angioplasty under cashless health insurance. His insurer had approved pre-authorisation of ₹3 lakh a day before admission. Yet the hospital asked him to pay an advance as part of its standard admission procedure.
The advance was adjusted against the final bill. A portion went towards expenses not covered by the insurer, while the balance was refunded. When Aditya was ready to leave the hospital, the discharge process took several hours due to a delay in the insurer’s approval.
The experience highlights something many policyholders may not realise until they are hospitalised: having cashless health insurance does not mean they will never have to arrange money at short notice.
Understanding the hospital bill
There are three sides to every hospital bill: what the hospital charges, what the insurer agrees to pay under the policy and what the patient eventually has to pay.
These amounts need not be the same. Treatment costs can vary between hospitals depending on the facilities, equipment, medical team and treatment requirements. The insurer, meanwhile, assesses the bill based on the policy terms and the expenses eligible for coverage.
A pre-authorisation is an approval for cashless treatment up to a specified amount. It does not mean that every item in the final bill will be covered. The final settlement depends on the treatment received, admissible expenses and applicable policy conditions.
This can leave patients uncertain about how much they will eventually have to pay. For planned procedures, it helps to ask the hospital for a cost estimate, understand the cashless process and check which expenses may have to be borne out of pocket.
Aditya’s experience illustrates this difference. The advance collected at admission was not the amount he ultimately had to bear. Part of it went towards expenses not covered by insurance, while the rest was refunded. What a family pays upfront and what it finally spends can be two very different amounts.
The gap between cover and cost
The sum insured is an important part of a health insurance policy, but it does not guarantee that every hospital expense will be covered.
Co-payments, deductibles, room-rent limits, sub-limits, non-payable items, waiting periods and exclusions can all affect the final amount payable by the insurer.
Consider a policy with a 10% co-payment. If eligible medical expenses amount to ₹3 lakh and the co-payment applies to the entire amount, the policyholder would have to bear ₹30,000, apart from any other applicable expenses.
This is why families need to plan for more than the sum insured. Some expenses may not be covered by insurance, while others may have to be paid upfront before the insurer settles the claim.
The Gap-and-Bridge Framework
A simple way to plan for these situations is to explore two funds: a Gap Fund and a Bridge Fund.
The Gap Fund is for expenses that the insurer is not expected to pay. These could include co-payments, deductibles and other uncovered costs.
The amount can be estimated by looking at the policy wording and the likely cost of treatment. Factor in the applicable co-payment, deductible and sub-limits. Add likely non-payable items and a contingency buffer. Ensure that the same expense is not counted twice.
The table illustrates how a family estimates expenses for a planned hospitalisation:
These figures are illustrative and not a standard recommendation. The actual amount will depend on the policy and treatment estimate.
The Bridge Fund serves a different purpose. It provides money to meet payments that have to be made upfront while the final insurance settlement or reimbursement is awaited.
Aditya’s advance is a good example of why the distinction between the two funds may not be obvious at the time of admission. Initially, the entire advance had to be arranged. Only when the final bill was settled did it become clear how much would go towards expenses not covered by insurance and how much would be refunded.
Families may not know this split when a hospital asks for an advance. They must be prepared to arrange the entire amount, even if only a portion eventually becomes an out-of-pocket expense.
To estimate the Bridge Fund, consider how much the hospital may ask for upfront and the maximum amount the family may have to pay at any one time before the insurer settles the bill. Also account for eligible pre- and post-hospitalisation expenses that may have to be paid first and claimed later. For planned procedures, the hospital’s cost estimate and payment requirements can serve as a useful starting point.
A credit card with a sufficiently high available limit can also provide additional flexibility when an immediate payment is needed. It provides access to money at short notice and can help bridge the gap until the insurance claim is settled or reimbursement is received. Along with an emergency reserve, it can offer additional financial flexibility.
The Gap Fund and Bridge Fund do not have to be kept in two separate bank accounts. They are simply two ways of looking at the same financial requirement. One accounts for what the family will ultimately spend. The other accounts for how much money it may need access to in the meantime.
Prepare before admission and at renewal
After his discharge, Aditya reached out to an insurance agent to understand what he could do differently in the future.
A hospitalisation can bring to light things about a policy that may not have been obvious when it was purchased. A conversation with an insurance professional can help a policyholder understand the cover better and identify areas that need attention.
There are a few things every family can do:
Understand the policy and cashless process. Read the Customer Information Sheet and full policy wording. Check co-payments, deductibles, room-rent limits, sub-limits, exclusions and pre- and post-hospitalisation benefits. Find out what pre-authorisation covers and whether the hospital collects an advance even under cashless treatment. Ask how the advance is adjusted against the final bill and when the balance, if any, is refunded.
Estimate both funds. Work out the likely expenses that insurance will not cover and the maximum amount the family may need to arrange temporarily. The policy terms and hospital estimates are good starting points.
Keep money accessible. Maintain an emergency reserve that can be used when required.
Plan for recovery. Hospital expenses do not always end at discharge. Budget for prescribed medicines, follow-up consultations and diagnostic tests. Check which of these qualify under the policy and for how long. Keep prescriptions, itemised bills, payment receipts and reports.
Review the cover at renewal. Medical needs and family circumstances change over time. Compare the coverage, exclusions, limits and premiums offered by different insurers. Assess riders and add-ons based on the additional protection they provide. Before switching insurers, consider waiting periods, existing medical conditions and continuity benefits. The lowest premium may not necessarily offer the most suitable cover.
An insurance agent can help explain the policy and the claims process. Periodic reviews can help ensure that the cover continues to meet the family’s evolving needs.
Insurance and preparedness go together
Health insurance protects a family’s wealth from the financial impact of a medical emergency. But having insurance and having money readily available are two different things.
Aditya’s experience is a reminder that being insured is only part of being prepared. Families also need money they can access immediately and a reserve for expenses that insurance may not cover.
A health insurance policy protects your wealth. A cash reserve ensures you have funds readily available when you need them most.
The author is a Qualified Personal Finance Professional (QPFP®)
Published on November 14, 2026
