Health Insurance Claim Rejections on the Rise: What Policy Holders Need to Know

In a recent survey conducted by LocalCircles, over 50 percent of health insurance policyholders reported facing complete or partial rejection of claims in the last three years. The most common causes of disputes include 'unreasonable' hospital charges, non-disclosure of pre-existing diseases, and partial settlement due to room rent sub-limits.

The Insurance Ombudsman annual report for 2023-24 reveals that 95 percent of health insurance complaints pertain to partial or complete rejection of claims. The most notable cause of disputes is the 'reasonable and customary charges' clause in insurance policies, which often leads to ambiguity and heartburn for policyholders.

"This clause is ambiguous and can lead to a lack of clarity among customers regarding the amount of claim under Cataract treatment," said the Insurance Ombudsman annual report. "Customers should be educated on the terms and conditions of the policy. Insurers should adopt a uniform practice in settling the amount of claim under Cataract treatment.

The most significant issue with this clause is that it leaves room for hospitals to charge high rates, which can vary depending on a patient's overall health condition, hospital location, and category of hospital.

"Pre-existing conditions are another common bone of contention," said Policybazaar.com's recent study. "Around 25 percent of claims are rejected due to non-disclosure of lifestyle conditions such as diabetes and hypertension."

To address these disputes, the Insurance Regulatory and Development Authority (IRDAI) has regulated new health insurance guidelines, which include a waiting period for pre-existing illnesses up to three years.

However, consumers need to be transparent about their health conditions at the time of buying insurance. Policyholders who conceal their health condition may face policy cancellations or rejection of claims in the future.

So, how can you deal with claim rejections due to reasonability clause?

If you are unhappy with your insurance company's decision on your claim, you can approach the insurance ombudsman offices for resolution. The Insurance Ombudsman annual report states that policyholders do not need to pay any charges to escalate their complaint.

The ombudsman will pass an 'award' within three months from the date of receipt of all documents and other information from the aggrieved policyholder, resolving disputes through mediation, if possible, or a binding decision in cases where mediation is not applicable.