Is mental illness treatment covered by health insurance — and what if the claim is refused?

The Mental Healthcare Act, 2017 requires every insurer to provide medical insurance for treatment of mental illness on the same basis as for physical illness, and IRDAI's 2024 health master circular tells insurers to offer products in line with that Act. Whether a particular claim is payable still depends on your policy's terms, applied the same way as for a physical illness. If a psychiatric admission was refused, ask which clause was used and whether it would apply to a physical illness in the same circumstances.

If a claim for psychiatric treatment is refused, the law gives you a specific point to check: whether the policy has been applied as it would be to a physical illness.^[1]

What the law says

Section 21(4) of the Mental Healthcare Act, 2017 says every insurer shall make provision for medical insurance for treatment of mental illness on the same basis as is available for treatment of physical illness.^[1]

IRDAI's health master circular tells insurers to offer products in accordance with the Mental Healthcare Act, and requires general and health insurers to offer a specific cover for persons with mental illness in compliance with section 21(4).^[2]

What 'the same basis' does and does not mean

Parity is about the basis of cover: the terms that apply to treatment of a physical illness should apply to treatment of a mental illness too. The policy's ordinary conditions, such as waiting periods, the definition of hospitalisation and exclusions written into the policy, can still apply, as they would to a physical illness. And an insurer can rely only on exclusions that are actually written into the policy document.^{[1, 3]}

Checks for a refused psychiatric claim

1. 1

   Read the reason and the clause

   A rejection must refer to the specific policy terms it relies on. Note exactly which clause was used.^[2]

2. 2

   Compare with physical illness

   Ask whether the same clause would apply to an admission for a physical illness in the same circumstances. A term that applies only to mental illness is the point to raise.^[1]

3. 3

   Separate substance use from other diagnoses

   One insurer's wording excludes treatment for alcoholism, drug or substance abuse and its consequences. If your diagnosis was a different mental illness, make sure the case papers say so clearly.^[4]

4. 4

   Check the hospitalisation rules

   Check how your policy's definitions of hospitalisation and day care apply to the admission; see short hospital stays.

5. 5

   Get the psychiatrist's account

   A letter on why admission was needed can answer a medical-necessity objection; see medical-necessity rejections.

Where to raise it

Start with a written complaint to the insurer's grievance officer, quoting section 21(4). If the insurer rejects it, replies unsatisfactorily or does not reply within one month of receiving it, a partial or total repudiation of a health claim is among the grounds the Insurance Ombudsman can hear.^{[1, 5]}

ClaimAssure is an independent private platform. It is not an insurer, IRDAI, Bima Bharosa or the Insurance Ombudsman, it never files anything on your behalf, and it cannot promise any outcome. What it does is read your documents and show you what they say.

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