Health insurance funds ignore laws and refuse to reimburse mental illness treatment costs

It’s the first of a part in two series on why health insurance companies refuse to reimburse the cost of treating mental illness, despite laws and guidelines from insurance regulators saying they must treat mental illness equally with any other physical illness.

“I purchased a health insurance policy from a well-known insurance agency in 2014,” says V Naresh, 73 (name changed upon request). “In January 2020, my 39-year-old son, who was diagnosed with a psychiatric illness, was admitted to rehab for 25 days. In March 2020, I filed a claim for around Rs. 2.75 lakh for the treatment but it was rejected”. The reason given by the insurer was “Permanent exclusion”.

Naresh’s story is not an isolated story. There are many others whose claims for someone living with mental illness have been ignored by insurance companies. The other commonly cited reason is “substandard existence”.

In addition, insurance companies rarely give the reason for the refusal in writing. “Insurance companies are usually reluctant to give anything in writing,” Naresh said. “Whether it is Star Health Insurance, Care Health or any other company, the reason is mostly communicated verbally. Never in writing.

Sometimes insurers simply stop responding to these customers. “Phone calls, emails or face-to-face meetings with these clients would be ignored,” says Gaurav Kumar Bansal, a Supreme Court attorney.

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Gaurav had filed a PIL in 2020 (still under study)), wondering why insurance companies have not included the cost of mental illness in medical insurance despite the Mental Health Act of 2017 (MHCA) which put mental illness on a par with physical illness . (see box below)

Law vs reality

“Under article 21, it is a fundamental right of a person to insure themselves and if they are deprived of insurance due to mental illness, it is a shame,” adds Gaurav. “In international platforms, India has pledged to provide health insurance for mental illnesses. Insurance companies that do not cover mental illness are violating Section 21(4) of the Mental Health Care Act 2017 and India’s Insurance Regulatory Development Authority (IRDA) Circular Number 128 dated August 16, 2018.”

According to the Mental Health Act 2017, section 21(4), “each insurer must provide mental insurance for the treatment of mental illness on the same basis as is available for the treatment of physical illness.

Health insurance companies can, in fact, be sued under section 109 of the Mental Health Act 2017 for failing to comply with section 21(4).

The IRDA had issued circulars in 2018 and 2020 to include mental illness in insurance coverage. But the insurance companies did not comply. “The flyers have put people with mental illness on par with any other disease, like diabetes or heart disease etc,” says Vijay Nallawala, founder of Bipolarindia and co-founder of the Mental Health Support Foundation.

“Subsequently, the IRDA also published guidelines. But insurers demanded time to develop policies on various illnesses,” adds Nallawala. “They said they didn’t have adequate data on how this policy was written, which is mainly premium claims. They said they needed time to develop a sustainable business model.

Insurance companies ignore IRDA guidelines

But even four years after the IRDA circular, insurance companies are not providing health insurance to people with mental illness.

Insurance company managers and sales agents are mostly unaware of the MHCA, 2017 and IRDA guidelines. On September 30, 2019, the IRDA issued guidelines prohibiting the exclusion of “mental illness, stress or psychological disorders, behavioral and neurodevelopmental disorders” from health insurance policies. Despite this, only a handful of insurers have complied with the guidelines. The agents selling the policies ignore the changes.

To cross-check the reality on the ground, I spoke to a sales agent from a primary health insurance company, Star Health, as a customer. When I asked him if insurance could be taken out for a young person with a mental health problem, he immediately refused.

When I persisted to find out the reason for the denial, he gave the call to his manager. The answer from the other side was, “If it’s brain-related, then it would be included in the ‘permanent exclusion.’ Only the underwriter can approve the policy. And if the underwriter finds that there is a high risk, then they will be rejected, but if the risk is low, then there will be a waiting period of three years.

When I briefed them on the MHCA, 2017 and IRDA guidelines, I was told to complete the proposal form and wait for the underwriter’s comments. “As long as the insurer has not given its opinion, we will not cash the check. This relief that I can bring from my side,” the manager said.

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“Medical care is a fundamental right of every citizen under Article 21, which, read with Article 15, prohibits any form of discrimination,” reiterates lawyer Gaurav Bansal. “Insurance companies are bound to obey the law of the land.”

Gaurav has reported many such issues in court. “My petition is before the Supreme Court and the Supreme Court has sent notices to the agencies as well as the Department of Social Justice and the Department of Health and Family Welfare,” Gaurav says.

Insurance Company Claims

“To a certain extent, the scenario has changed, at least on paper. Insurance agencies say they provide health insurance to people with mental illness for more than 300 products. But when it comes to practice, I see a lot of gaps, and a lot of people have shared their experiences of discrimination with me and in several mental health groups. I try to take charge of their files, pro bono”, explains Gaurav.

The IRDA has granted numerous extensions to insurance companies to design new products in accordance with their guidelines. “The last extension was given on April 1^st, 2020”, emphasizes Vijay Nallawala. “But policy proposals are always rejected when there is a disclosure of mental health issues. Why is that ?”

According to Gaurav Bansal, nearly 50% of hospitalization requests are rejected. “To avoid rejection, caregivers often hide mental illness,” he says.

People buy insurance policies expecting financial support during a medical emergency. But when claims are rejected, the economic structure of families collapses. “Insurance companies are solely responsible for this,” adds Nallawala.

V Naresh, carer of her son, faced several difficulties trying to switch between insurance providers and braving health issues in her own 73-year-old body. “We spent a lot of money on medical bills, and my health also started to deteriorate,” Naresh explains. “My wife is 70 now and I also have to take care of her. Due to financial difficulties, we keep moving from place to place.

He has rented out his spacious house and lives in smaller rented accommodation to support his son’s treatment. “Insurance companies fail to realize the lifelong impact on caregivers and families by rejecting our claims,” Naresh laments. “They and the people who represent them should support us more.”

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