In India, prior to the enactment of the Mental Healthcare Act 2017 (MHCA), health insurance for the treatment of mental health conditions had been a distant dream. In the absence of legal regulations, it had been standard practice for insurance companies to exclude mental health conditions from insurance coverage through standardized exclusion clauses in health insurance policies. The MHCA’s enforcement has finally challenged this status quo by recognizing a statutory right to medical insurance for treatment of mental illness – a first in India’s health jurisprudence. The MHCA is a legislation enacted in compliance with India’s obligations under the United Nations Convention on the Rights of Persons with Disabilities (‘CRPD’) – the international gold standard for protecting and fulfilling the rights of persons with disabilities including persons with mental health conditions. Section 21 (4) of the Act mandates all insurance companies to provide medical insurance for the treatment of mental illness on the same basis as for physical illness. What this means is that insurance companies can no longer exclude treatment of mental illness from the coverage provided to physical illnesses.

While the law is now categorically clear about the obligation of insurance companies, the question remains whether the latter is implementing the law in letter and spirit. On 16th August 2018, India’s insurance regulator- the Insurance Regulatory & Development Authority of India (‘IRDAI’) issued a circular (‘2018 circular’) directing all insurance companies to comply with Section 21 (4) with “immediate effect”. Despite this official circular, discriminatory practices continue unabated by insurance companies compounded by a lack of adequate regulation by the IRDAI. In the recent past, individuals have approached Courts for redressal of their grievances. In the next section, we examine one such case wherein the Delhi High Court delivered a landmark judgment on the liability of insurance companies and the IRDAI.

Recently, the Delhi High Court delivered its judgment Shikha Nischal v. National Insurance Company Limited & Another in a writ petition concerning a woman who had been denied health insurance for treatment of her mental health condition. The petitioner had purchased a National Mediclaim Policy from the National Insurance Company Limited (‘NIC’) on 29th May 2020 for a sum assured of Rs. 3,95,000 valid for one year. A few days later, she was diagnosed with schizoaffective disorder and was hospitalized incurring expenses to an amount of Rs. 5,54,636. When she submitted her insurance claim to recover the expenses, NIC rejected the same citing an exclusion clause from the policy which stated that no coverage would be provided in relation to ‘Psychiatric disorder, intentional self-inflicted injury. Aggrieved, the Petitioner filed a complaint with the Insurance Ombudsman on grounds that NIC was violating Section 21 (4) of the MHCA. The Ombudsman passed an order against the petitioner and in favor of NIC stating that she was bound by the terms of the policy and its exclusion clause. She then filed a writ petition in the Delhi High Court challenging the order and NIC’s decision to reject her claim. 

Ironically, NIC during the court hearings didn’t dispute the fact that Section 21 (4) of the MHCA requires that health insurance be provided for mental illnesses in the same manner as physical illnesses. Instead, NIC’s contention relied on the IRDAI’s Guidelines on Product Filing in Health Insurance Business (‘2016 Guidelines’) which prescribe that the maximum period within which a new product approved by IRDAI can be commercially launched is six months, beyond which, the insurance company has to re-seek the IRDAI’s approval. It was NIC’s contention that the IRDAI had approved its product covering mental illnesses on 27th March 2020 and the product had been launched within six months on 1st July 2020. Since the petitioner had renewed her Mediclaim policy before the launch of the new product she was bound by its exclusion clauses. The Delhi High Court rejected NIC’s contention on grounds that the 2016 Guidelines could not be interpreted to postpone the implementation of the Act which was in force since 2018. The guidelines had to be interpreted in light of the MHCA which was in force when the petitioner purchased the Mediclaim policy and sought reimbursement. Interestingly, soon after the writ petition was filed, the IRDAI directed NIC to pay the petitioner’s claim and submit a report on the status of pending claims, stating in its letter to NIC that the latter had violated Section 21 (4) of the MHCA. In an indictment of IRDAI’s role in the present case, the Delhi High Court observed that the IRDAI’s lack of monitoring over insurance companies was a dereliction of its statutory duty to fully supervise and ensure that Section 21 (4) was implemented by all the insurance companies. 

Finally, the Court held that NIC did not implement Section 21 (4) of the MHCA and was liable to pay the petitioner’s claim. Since NIC had already paid the petitioner’s claim of Rs. 3,95,000 in compliance with the IRDAI’s directions, the Court ordered NIC to pay an additional Rs. 25,000 to the petitioner as litigation costs for having to take recourse to litigation for her claim to be honored. The Court also held that all insurance companies were liable to give effect to Section 21(4) of the MHCA with effect from the date it came into force implying that all health insurance policies since this date would have to include mental illness irrespective of any considerations.

Section 21 (4) of the MHCA is based on the principle of parity which requires not only the removal of exclusion clauses but extends further to ensuring that there is no discrimination in the types of policies, coverage, and terms of insurance coverage provided both to mental and physical illnesses. In other words, parity implies that mere inclusion of mental illness is not enough, it should be in the same manner as ensured for physical illness. However, even though insurance companies are removing standardized exclusion clauses, we find that some insurance policies have differential coverage for mental illness such as longer waiting periods or lower provision of sum assured. For instance, the United Family Medicare Policy restricts the amount of claim for mental health conditions to 25% of the sum assured subject to a ceiling of Rs. 3,00,000. The Future Varishtha Bima Yojna has a waiting period of 48 months for mental health-related claims as against a waiting period of 12 months for pre-existing physical health conditions. Further, policies such as here also exclude ‘self-inflicted injuries’ or ‘attempted suicide’ from coverage even though Section 115 of the MHCA creates a presumption that a person attempting suicide is under severe stress and hence cannot be prosecuted under Section 309 of the Indian Penal Code, 1860. While these examples are representative of current practice among insurance companies, we also find that the IRDAIs’ Master Circular on Standardization of Health Insurance Products (2020) itself permits exclusion of treatment for “alcoholism, drug or substance abuse or any addictive condition and consequences thereof” from health insurance coverage even though addiction & substance abuse are considered as a mental illness under the MHCA.

The Delhi High Court is currently hearing another petition in the matter of Subhash Khandelwal v. Max Bupa Health Insurance Company Limited which is sub judice. In this case, the petitioner purchased an insurance policy from Max Bupa for an assured sum of Rs. 35 lakhs. The Petitioner contended that when he raised his claim in respect of mental illness, he was informed of a clause in the policy, restricting the sum assured to INR 50,000 with certain additional conditions which were contradictory to Section 21 (4) of the MHCA. The Court in its initial observations has noted that the impugned policy excludes a large number of mental conditions from full coverage of the policy. The Court has observed that this matter requires consideration as a large number of people stood affected by such policies and has issued notice to the IRDA to place on record the basis on which approval has been granted to policies. 

While the final outcome of this case is awaited, the Delhi High Court’s observations once again emphasize the crucial role played by the IRDAI in ensuring that insurance companies comply with the letter and spirit of Section 21 (4) of the MHCA. In this respect, the IRDAI must play an exemplary and proactive role by exercising its inherent powers under its supervisory jurisdiction to regulate the approval of insurance policies and hold insurance companies accountable for their legally mandated obligations, especially where they are contravening the MHCA’s provisions. This is without prejudice to the fact that under Section 109 of the MHCA, insurance companies and their representatives are liable to be prosecuted and should be held accountable for violating Section 21 (4) of the MHCA.  For approximately 197.3 million Indians living with mental health conditions, the legal right to health insurance for the treatment of mental illness is finally a reality. The onus is now on insurance companies to abide by their legal obligations to ensure that every individual has access to affordable mental healthcare without discrimination both in true letter and spirit of the law.

Arjun Kapoor is a lawyer and Research Fellow at the Centre for Mental Health Law & Policy, Indian Law Society, Pune, India. 

Sayali Mahashur is a Research Associate at the Centre for Mental Health Law & Policy, Indian Law Society, Pune, India. 

Suggested Citations: Arjun Kapoor and Sayali Mahashur, Right to Health Insurance: Ensuring Parity for Mental Illness in India, JURIST- Professional Commentary, June 18, 2021, https://www.jurist.org/commentary/2021/06/kapoor-mahashur-health-insurance-india/.

This article was prepared for publication by Vishwajeet Deshmukh Multimedia Director and Assistant Editor, JURIST Legal News and Commentary. Please direct any questions or comments to her at commentary@jurist.org