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Despite high premiums, insurers dodge claims

As illness and epidemics strike, and consumers increasingly face high costs of hospitalization and medical treatment, health insurance companies are increasingly dodging insurers’ claims. For the old and retired clinging to their health insurance covers, a rejection of a medical claim is often a death blow.

The situation is so bad that that Third Party Administrators (TPAs) – the outfits that vet and sanction claims for the insurance companies – are under instructions to hunt for technical and other reasons to reject as many claims as they can.

Sample these recent cases. B S Jaisimha filed a case in December 2021 before a Bengaluru consumer court alleging his claim for Rs 2.56 lakh in hospitalisation charges had been rejected unfairly by the Reliance General Insurance Company. Jaisimha was hospitalised after suffering several episodes of hematemesis (vomiting blood), but the company denied his claim as Jaisimha had a long history of alcoholism.

The court however ruled that alcohol consumption is a common lifestyle choice and does not automatically render people ineligible for health insurance. It went on to order a refund of the Rs 2.56 lakh hospital costs with 8% interest, along with penalties for deficient service.

More recently, as Kolkata battles with an epidemic of dengue, medical insurance claims of many patients have been rejected because the insurance companies opined they did not require hospital admission. This is despite several court rulings that the decision on whether hospitalisation is required rests solely with the treating doctor and not with the insurance company.

Countering the trend of insurers stepping into the shoes of the doctor, a recent decision by the Surat District Consumer Court rapped Star Health & Allied Insurance for rejecting Covid patient Amitkumar Goyal’s hospitalisation claim of Rs 86,250 with a one-liner ‘admission not required’. The insurance company was then ordered to pay the claim with 9% interest.

Serial offenders

Data emanating from the Insurance Regulatory & Development Authority (IRDAI) shows the rejection of claims by medical insurers is quite high, and hovers around 10%. However, the two companies that seem to have the worst track record – Care Health Insurance and Star Health – are under fire for a rejection rate of 13% and 17.2%, respectively for FY2022.

In terms of numbers, for FY2022, Star Health rejected as many as 3.12 lakh of the total 17.99 lakh claims by consumers; while Care Health rejected 72,903 of the 5.92 lakh claims. In addition, both companies had more than one lakh claims pending at the end of the period.

It is not that we don’t have a consumer redressal mechanism. The Insurance Regulatory and Development Authority (IRDA) Act, 1999, has set up an autonomous body to protect the interests of policyholders and to regulate and ensure the orderly growth of the insurance industry. The regulation process has a sophisticated fast-track redressal process where state-wise Ombudsmen receive and settle disputes in a timebound manner.

At a broader level, there is also the Consumer Protection Act, 2019 – an upgraded version of the 1986 act. Any ‘consumer’ of a goods or service who has issues with respect to quality, pricing and standards can seek compensation and penalties through the Consumer Redressal Commissions at the district or state level.

Casual rejections

That said, insurance companies take a calculated risk when they reject smaller claims. Thousands of claims of under Rs 50,000 do not go to the next stage of the ‘Ombudsman’ or the consumer courts purely because of the hassle and costs involved. Hidden ‘exclusions’ in the policy terms or failure to disclose health conditions at the time of buying a policy are used to reject claims.

For instance, Care Health rejected a claim of Rs 45,000 from a patient for an ‘intravitreal injection procedure’ at the Reliance HN Hospital, Mumbai for ‘age-related’ macular degeneration of the eyes. The grounds: eye degeneration is usually caused by diabetes which was an ‘excluded’ item in the policy. This is despite a hospital diagnosis that the patient’s condition had nothing to do with diabetes.

Forbes Advisor says there were 513 million Indians with a health or life insurance cover in 2021 or 37% of the population. With the introduction of government insurance schemes, this has lifted to about 70%, but 400 million today still have no access to health insurance. IRDAI data meanwhile shows it is a booming industry with the gross premium on health insurance collections more than doubling from Rs 20,096 crore in FY2015 to Rs 58,237 crore in FY2021.

At the same time, the biggest deterrent to universal insurance was the high premiums that continue to climb even as services are poor. A recent study by showed 43% of respondents who hadn’t purchased a health policy was because of the ‘high premium’, while 32% said they didn’t have sufficient funds. Despite all the recent talk by the government of making health insurance a universal cover, it still remains a distant dream.

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