Mental health insurance problems continue: 5 things to check before buying a cover

Time of India

19-05-2025

There has been a 30-50% rise in mental health-related claims in the past 2-3 years, claims a recent study by Policybazaar (see graphic). 'We've also seen a 41% year-on-year growth in
mental health insurance
searches in 2025,' says Siddharth Singhal, Head of Health Insurance, Policybazaar.
The surge is corroborated by Bhaskar Nerurkar, Head, Health Administration Team, Bajaj Allianz General Insurance: 'We've seen a steady increase in
mental health
related claims, with a CAGR of about 33% from 2021-22 to 2024-25. In the last year alone, there was a 23% rise in such claims over the previous year.'
These figures seem reassuring in the face of grim societal stigma and the fact that 10.6% of adults in India suffer from mental disorders and the lifetime prevalence of mental disorders is 13.7%, as per the National Mental Health Survey 2015-16 by NIMHANS.
However, Anuradha Sriram, Chief Actuarial Officer, Aditya Birla Health Insurance, strikes a discordant note. 'While awareness and conversation around mental health have increased in recent years, we have not observed a significant rise in mental health related hospitalisation claims,' she says. This is because most treatments for mental health continue to be outpatient-based, which are generally not captured in the scope of hospitalisation plans, she explains.
The in-patient focus of most plans is only one of the several problems faced by people seeking mental health covers despite the
insurance
regulator's proactive approach in widening the scope of coverage.
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Irdai guidelines
Though the Mental Healthcare Act, 2017, was enforced in May 2018, Irdai was forced to issue circulars in August 2018 and then again in October 2022, requesting compliance by insurers and removal of mental illnesses from their list of exclusions. The guidelines stated that mental illnesses had to be treated at par with physical illnesses when it came to providing coverage.
While insurers eventually started offering mental health coverage in their plans by the end of 2022, in February 2023, Irdai was again forced to issue a circular to 'mandatorily launch and immediately offer' an 'appropriate product' and a 'specific cover' for persons with mental illnesses, disabilities and HIV/AIDS, which translated to a standardised, standalone cover.
A crucial inclusion was the need to put in place a 'Board-approved underwriting policy that ensures no proposal is denied'. This meant the insurers could not refuse a cover to a person with pre-existing mental disorders.
Problems in getting coverage
Today, all general and standalone health insurers do abide by the Mental Healthcare Act, 2017, and include mental illnesses in their health plans. 'We offer mental health coverage as part of our
health insurance
plans in alignment with Irdai guidelines. The plans typically cover hospitalisation expenses arising from mental illnesses, including depression, anxiety, bipolar disorder and schizophrenia,' says Priya Deshmukh, Head, Health Product, Operations & Services, ICICI Lombard. Other insurers too cover mental illnesses under their comprehensive plans.
In-patient, not OPD plans: The problem with most such covers is that these are indemnity plans that only cover hospitalisation or in-patient expenses, whereas most mental disorders require periodic doctor consultations, therapies, counselling, medication and psychiatric evaluations, which are out-patient features. Policybazaar data shows that conditions like anxiety (30-35%) and depression (25-30%) are the top reasons for claims, which are usually managed through out-patient care rather than inpatient admission.
5 questions to ask before buying a mental health plan
Without these features and benefits, the insurance policy may not be of much use to you.
1. Does it have a pre-existing disease waiting period?
If the applicant already suffers from a mental illness, buying a plan may be a challenge, depending on the severity of the disorder. In all probability, he will have to clear the waiting period for pre-existing diseases, which is 2-3 years for most insurers, before he can be covered for the disorder.
2. Does it offer OPD benefit?
Doctor consultations and medication are an integral part of mental health treatments, which can only be covered by a plan with an OPD feature. So, if OPD benefit is missing, either as a part of the base cover or as an optional feature, the plan won't be of much use to you.
3. Does it cover therapy & counselling?
Even if the OPD benefit is included in the plan, not all insurers offer all the features that are crucial for mental health treatments, such as therapy, counselling and psychiatric evaluations, which can be very expensive. Make sure these are a part of the cover.
4. Is your therapist or health care centre in the network?
Most insurers require the treatment to be conducted by a qualified practitioner in a recognised institute, hospital or clinic that falls in its network. If these don't fulfill the insurer requirements, you will not be able to make a claim.
5. Is your illness covered?
You will need to ensure that your particular mental illness is included in the plan. The disorders usually covered by insurers include anxiety, depression, bipolar disorder, schizophrenia, PTSD and dementia. If the illness is not covered, there's no point buying the cover.
Agrees Sriram: 'Our flagship products are hospitalisation-focused indemnity plans, covering in-patient treatment for mental health conditions. However, many mental health treatments, like therapy or consultations, are outpatient in nature and are not covered under the base plan.'
'OPD coverage is crucial even as an addon because a plan that only covers hospitalisation may not suffice for real-world needs,' says Singhal. So, either the policy buyer needs to find a plan that has an in-built OPD feature, or buy an OPD rider along with the base cover, both of which require additional expense due to higher premiums that these entail.
Underwriting hurdles:
For people with existing mental conditions, especially with a high degree of severity, it can be difficult to buy a plan despite Irdai specifying that insurers cannot refuse it.
'While Irdai has mandated insurers to cover mental health conditions, underwriting still applies. This means that individuals with a known history of mental illness may face medical assessments, loading on premiums, or specific exclusions,' says Deshmukh. This could mean either expensive plans, limits on coverage, or long waiting periods, usually between two and three years, and sometimes even rejection for severe disorders.
Network practitioners:
Since the treatment for many mental illnesses requires therapy and counselling, many people pick private therapists or clinics, which may not be in the insurer networks or empanelled. Besides, correct diagnosis and effective therapy can often mean sifting through various doctors and counsellors before finding the right one that suits the patient, and not every such practitioner may be a part of the insurer network.
Standardised plans:
Many general and standalone health insurance companies offer a standardised plan that provides a cover of `4-5 lakh and includes mental illnesses among other disabilities and disorders. This standardised plan is an affordable base plan with similar offerings across insurers, but is available under different names and varying premiums, which is typically low. However, since it is not a comprehensive plan and offers low coverage, it means the policyholders would need to pad it up, besides buying another cover for other illnesses as well.
What to look for in a plan
'Consumers should look for comprehensive plans that include mental health as part of their base coverage and evaluate whether the insurer offers any additional riders/add-ons that support out-patient care or wellness programs,' says Sriram.
Agrees Nerurkar. 'It's advisable to consider whether the policy offers OPD benefits for consultations, therapy sessions, and medication. Some plans also provide wellness programs or teleconsultation services, which can be highly valuable for ongoing support. Transparency regarding waiting periods, exclusions (like illnesses related to substance abuse), and pre-existing condition disclosures is critical to ensuring seamless claims later,' he says.
One should also check whether the insurer has a strong hospital network with the required facilities. 'Ensure that the insurer's network hospitals include facilities offering psychiatric services and that these are accessible in your area,' says Deshmukh.