Unreasonable Hospital Charges and Hidden Health Issues: Why Health Insurance Claims Often Get Rejected
Health insurance is supposed to provide a safety net during medical emergencies, but for many policyholders, it becomes a source of frustration. Claims denied due to “unreasonable” treatment charges or non-disclosure of pre-existing conditions are the most common culprits.
This friction often leaves policyholders, insurers, and hospitals at loggerheads. And when disputes go unresolved, policyholders are left with no choice but to turn to the insurance ombudsman.
The Alarming Rise in Health Insurance Complaints
Health insurance disputes have consistently outpaced grievances related to life and general insurance. In 2023-24, health insurance complaints shot up by 22%, from 25,873 in the previous year to 31,490. Compare this to life insurance grievances, which dipped by 18%, and general insurance disputes, which declined by 12%—and the numbers paint a stark picture.
A whopping 95% of these complaints relate to partial or complete claim rejections. Most of these disputes arise due to the ambiguous “reasonability clause” and the non-disclosure of pre-existing conditions.
Decoding the “Reasonability Clause”
Let’s start with the reasonability clause—a term that sounds straightforward but is anything but. This clause states that the charges for your treatment should be in line with the standard charges of your hospital and similar facilities in your area. Sounds fair, right?
The catch? There’s no clear, regulator-defined benchmark for what counts as reasonable. Insurers use their own databases to decide what they think a procedure should cost, but this often doesn’t align with the bills patients receive from hospitals.
For example, imagine you underwent a knee replacement at a corporate hospital in Delhi. Your insurer might determine ₹1.5 lakh is a reasonable charge, based on data from other hospitals. But your hospital billed you ₹2.2 lakh, citing specialized implants and a longer recovery period. Even if your doctor certified the charges, your insurer could reject part of your claim, leaving you to cover the gap.
This lack of transparency creates a grey area, causing confusion and disputes. Industry experts suggest that insurers should provide a clearer idea of what they consider reasonable costs for common treatments like angioplasty or surgery.
The Pre-Existing Conditions Dilemma
Another major stumbling block is the non-disclosure of pre-existing illnesses like diabetes or hypertension. A study by PolicyBazaar revealed that 25% of health insurance claims are rejected due to undisclosed pre-existing conditions.
Pre-existing conditions are any ailments or health issues you had before buying your insurance policy. Health insurance policies typically don’t cover these conditions immediately—they impose a waiting period of up to three years before you can make claims for related treatments.
Let’s say you have diabetes, but you don’t disclose it when buying a policy. A year later, you’re hospitalized for a diabetes-related complication. When you file a claim, your insurer rejects it, citing non-disclosure. Worse, your policy might get canceled altogether for breaching the terms, and if you’re on a family floater plan, your entire family could lose coverage.
How to Avoid Claim Rejections
1. Be Honest and Transparent: Always disclose your full medical history when purchasing a policy, even if it means paying a higher premium. For instance, don’t skip mentioning that “minor” back pain you treated two years ago—it might become relevant if you need spine surgery later.
2. Don’t Leave it to the Agent: Fill out your health insurance proposal form yourself. An agent might downplay or skip details to secure a quick sale, but this could backfire when you file a claim.
3. Understand the Policy: Ask your insurer about the scope of the reasonability clause. If you’re undergoing an expensive procedure, find out in advance what costs are likely to be covered.
4. Be Cautious When Porting Policies: When switching insurers, don’t assume your new provider will automatically access your medical history from your previous insurer. Re-disclose all relevant information to avoid surprises later.
What to Do if Your Claim is Rejected
If your claim is denied, don’t lose hope. First, challenge the rejection with your insurer, providing additional documents if needed. If that doesn’t work, escalate your complaint to the insurance ombudsman, a body set up specifically to resolve such disputes.
Health insurance can be your best ally in tough times, but only if you play by the rules. By understanding your policy and being upfront about your health, you can avoid many of the pitfalls that lead to claim rejections. Remember, a little effort upfront can save you a lot of heartache later.
