India’s health insurance ricochet

It is a fishing contest like no other, with you (the customer) being the intended catch. To reel you in, the fisherman offers carrots, promises and special bargains, all dipped in sugar and honey to make for a very sweet lure. When the time comes to give you the promised succour, the fisherman’s tone and countenance back-track. His story turns into a devious red herring, a smokescreen that Greek fable-spinner Aesop would have been proud of.

Let’s cut short the parallels and get to the point, one where we speak of pain, heartache and financial misery. Let’s talk of Indian healthcare and insurance. The numbers below prove that most promises made by this industry space are only in the headline, with the real story saying something different. It is akin to the words of a marketing superpower, which lacks in true delivery at a crucial time. Health insurers promise, advertise and shout from the rooftops – mostly with a forked tongue. When claims are filed by policy-holders, these same insurers shamelessly wash their hands off the entire matter.

A 2024 survey conducted by Marsh McLennan India and Mpower underlines this startling state of affairs. Surveying 100,000 respondents across 327 districts, the survey paints a bleak picture – 43 per cent of all health insurance claims face disputes, either through outright rejection or complicated part-payment schemes. The reasons offered by insurers are craftily worded to sound legal and valid – they range from ‘non-disclosure’ to ‘pre-existing illnesses and conditions’ and on to ‘policy lapse’. The outcome is universal – as often as not, the claim is denied, leaving in its wake a disillusioned consumer whose personal or family illness plays havoc with finances as healthcare costs hit the stratosphere.

A Very Murky Reality

India’s health insurance ecosystem is in urgent need of an overhaul. On the surface, it appears to be expanding, offering wider coverage, slick sales pitches and growing outreach. The reality is murkier. For crores of Indians who believe they have taken a responsible step by purchasing health insurance, the moment of truth – filing a claim – is often when the system turns its back on them. As more of India begins to rely on health insurance, there is a crying need for transparency and simpler terminology in health insurance policies.

A directive from the industry watchdog, Insurance Regulatory and Development Authority of India (IRDAI) – “process cashless claims within an hour” – stands in stark contrast to the real on-ground situation. Another burning issue raised is the lack of transparent Web-based communication systems for processing of claims. The IRDAI says an insurance provider should be notified real-time about each process and development, but hospitals allow only conventional means of communications such as mails and calls. In all, 83 per cent of respondents said IRDAI should enforce 100-per cent Web-based claims processing systems providing real-time updates. This is sought to cull out ambiguity and reduce dependence on hospital intermediaries for claim status updates. The present system takes the human element out of the picture, forcing people to speak to machines, typically using a keypad or keyboard. More often than not, this worsens an already frustrating experience.

In a survey conducted by LocalCircles, 30,366 policy-owners responded on claim settlement timelines – 21 per cent said discharge from the hospital after claim settlement took 24-48 hours; 12 per cent said 12-24 hours; 14 per cent 9-12 hours; and 12 per cent said six to nine hours. Only 8 per cent said the claim was processed instantly. Among private sector companies, the highest ratio of claim settlement in 2023-24 was by HDFC Ergo (94.32 per cent), while the lowest was by Bajaj Allianz (73.38 per cent), according to a report by the Insurance Brokers Association of India.

Banks Fleece You Too

Over the last few years, a new trend witnessed is the nexus of health insurance companies and top banks. High Net Worth Individuals (HNIs) are targeted by health insurance providers through banks. During the selling process, they are promised quick and easy claims by a known, friendly banker. When a claim is filed, the customer finds himself running from pillar to post, around the proverbial tree. Passed over by everyone, the customer approaches his friendly banker, who only mumbles his apologies and washes his hands off the matter. Holding a candle and a rejected claim application, the customer dials the insurance firm’s toll-free numbers, making call after desperate call – all for a legally-valid settlement that almost never comes through.

To the average Indian, buying health insurance signifies progress. It means financial protection in the face of rising healthcare costs. It reflects responsible planning. Unfortunately, that illusion comes crashing down when policy-holders actually try to use their insurance in times of hospitalization.

Among the most shocking revelations is that even those who meticulously file documentation, follow protocol and maintain continuity in premium payments are often denied settlements on flimsy and technical grounds. Such denials are cloaked in legalese so dense that even lawyers need hours to interpret them. More often than not, customers throw up their hands in despair – most contracts are written in near-indecipherable language, with complicated legalese thrown in for good measure.

A senior citizen in Lucknow, who had been paying his premiums to a reputed insurer for five years, was denied coverage during his emergency hospitalisation. The reason cited was “non-disclosure of a pre-existing metabolic anomaly”. What was this anomaly, you ask? Well, it was mild hypertension (high blood pressure, if you will), never treated with medication and thus not flagged by the selling agent. The claim, amounting to just Rs 1.2 lakh, was denied in totality.

Lost in Transmission

As ground reality shows, the spirit of regulation has been lost in transmission. Hospitals typically demand upfront payments. Insurers often revert to emails or phone calls instead of setting up user-friendly, web-based portals that allow real-time claim tracking. An entrepreneur in Bengaluru recalls: “When they sold the policy, they did it online in just 20 minutes. When my father had to be admitted for surgery, everything had to suddenly be verified physically. It took four days to get approval. We had to pay Rs 3.5 lakh out-of-pocket first.”

If life doesn’t throw a googly called ‘Mental Illness’ your way, then your health insurance will. Look at this – despite a Supreme Court ruling and IRDAI directives mandating that insurers must cover mental health on par with physical ailments, implementation remains all but non-existent. Policy documents mention ‘mental health’ only as an afterthought. When claims are made for psychiatric consultations or hospitalisation for mental health reasons, most are rejected citing “non-standardised treatment” or “lack of institutional backing”. Mind you, this is not merely a policy gap, it is a violation of legal orders. But who can or will take health insurance firms to court for a prolonged legal battle?

That brings us to the human cost. For every claim that is denied, there’s a deeper but untold human story of despair, desperation and irreversible loss. Take the case of a 34-year-old techie in Hyderabad, Parveen, who was involved in a bike accident. With multiple surgeries and a hospital bill of Rs 5 lakh, he filed a claim as per his Rs 10-lakh policy. The insurer refused to process the claim, citing “delay in informing”. Parveen’s family had informed the insurer two days after the accident, and this delay was caused only because the insured was fighting for his life in the Intensive Care Unit of a hospital. After multiple escalations, the insurer offered to settle only Rs 90,000. The rest was “inadmissible”.

In India, the average middle-class family spends as much as 60 per cent of its annual income on health expenses in the event of a serious illness or accident. For many, the hope of reimbursement is the only thing standing between them and financial ruin. When that hope too is dashed, the aftermath is bigger than economic; it is emotional, psychological, a devastation on multiple counts.

What Needs to Change?

Reform. We need reform in India’s health insurance sector, urgently. Interventions that could change the playing field are policies written in simple and comprehensible words and terms; the creation of a unified portal that is mandatory for all insurers, allowing claimants to track the real-time status of applications; disclosure of what’s covered and what’s not; reasons for denial of any claim and stringent penalties if the said rejection is found to be fraudulent or mischievous; attachment of banks to claims so that they cannot duck from their accountability when claims are filed; and clear provisions for mental health coverage.

It is time to wake up and shrug off the lethargy. After all, the expansion of our nation’s health insurance coverage – both in the private and public sectors – was envisioned as a step toward ‘Universal Health Coverage’. Instead of alleviating financial distress, however, this has ended up exacerbating the issue. The penetration of insurance has grown, but trust in insurance companies has eroded drastically. The government, regulators, insurers, hospitals and intermediaries need to collectively rebuild that trust.

Health insurance has been reduced to being a profit-making venture, which is a mental disease in itself. A country where medical costs can decide whether a family stays afloat or sinks into a generational cycle of debt cannot afford to ignore this grievous issue any longer – anything less than dependable and trusted health insurance would be a betrayal of the very people the system claims to protect.

CUSTOMER SPEAK

Siddhartha Kamaria: Recently, my father’s claim was rejected citing a “pre-existing disease”. I decided to switch my insurance provider and applied to two companies, giving full disclosure about pre-existing illnesses. The result was unbelievable – both insurance firms rejected my application citing the ‘Pre-existing Disease’ clause and deducted medical costs from the premium amount I had paid before giving me a refund. This is a new scam being run by health insurance companies.

Arvind Kumar: In an era when the government should provide free healthcare, at least to those citizens who pay 45-50 per cent of their earnings in Income Tax, GST and VAT, our authorities are walking the other extreme. They are asking for a piece of the cut from health insurance premiums as well, charging 18 per cent GST. This is a criminal burden to be borne while buying medical insurance.

Devidas Bhobe: My friend’s widow has been running from pillar to post seeking a claim which has been held up by a top Mumbai-based ‘Navratna’. Post his retirement, the claim has been pending because the payment stub is missing from the application, even though detailed bills and all receipts have been provided, along with the Discharge Summary and other documents. My friend is gone. He gave his life to his company and his widow is being cheated out of lakhs of rupees she desperately needs to run her home. Health insurance firms will do anything to avoid settling claims; it is a racket where predatory corporates prey on the vulnerable. More often than not, the predators get away with it.

Mahavir Bhattad: Customers should buy health insurance during their healthy days and not after retirement. Mediclaim is a complicated product and should never be bought online. People should opt for cashless treatment only and avoid reimbursement options, unless and until it is a case of an accident case or emergency. If a claim is rejected or deductions are made, one should approach senior authorities, grievance officers, the ombudsman and consumer courts. Don’t leave any stone unturned.

Akhil Nambiar: Asking the Government to reduce taxes may not be the solution – we first need to ask insurance companies to provide lucid and clearly-written policies that highlight terms and conditions that matter at the time of filing a claim. Reduction in taxes will only provide temporary relief and lead to a new round of profiteering by insurance companies. Look at what hotels did with GST – they slashed room rates and increased the price of food and consumables.

Ringo S: Health insurance companies cannot make money in India honestly because our health situation is poor. From water to filariasis mosquitoes, there is a real problem that requires insurers to shell out payments for most policy-holders, and that can force them to shut down shop. It is because of this that insurers have a high rate of dropping policy-holders, fully or partially.

HOW DOES INDIA COMPARE?
Can India’s health insurance claim settlement system be compared to that in the US and Europe? Can India make the system more transparent, equitable and humane? Let’s find out.

The American healthcare system is often called the most advanced (and expensive) in the world. Unlike India or even Europe, the US model is driven by the private sector, with Government programs like Medicare and Medicaid covering the elderly and the economically vulnerable. In claim settlements, most American insurance companies are digitally mature, with hospitals handling claims directly with insurers. The insured receive an ‘Explanation of Benefits’ document outlining what was covered, what was denied, and why. Real-time digital tracking via portals and apps is the norm. That being said, the US system has pitfalls too, and claim denial rates are high. After all, it was increasing instances of “surprise billing” that led to the ‘No Surprises Act’ in 2022, protecting patients’ rights.

Europe presents a striking contrast, offering the ‘Gold Standard’ of health insurance claims. In most EU nations, healthcare is publicly-funded, either through taxes or social insurance schemes, and the state acts as both the insurer and provider, removing the need for complex claims processes. The process is seamless in Sweden, France, Germany and the UK. Patients rarely need to file claims. Healthcare providers are reimbursed directly by public health agencies. For those with private supplemental insurance (common in Germany and France), claims are submitted digitally and settled in just a few days. In Estonia and Finland, digital health cards, Cloud-based prescriptions and real-time approval make the process efficient and futuristic. Claim rejections are rare, and legal recourse swift. In Europe, insurance is not a gamble – it is virtually a guarantee.

The writer is a veteran journalist and communications specialist. He can be reached on narayanrajeev2006@gmail.com
Views expressed are personal