Can Insurers Deny Your Claim On The Grounds Of 'Unnecessary Hospitalisation?

When a Gujarat-based policyholder filed a reimbursement claim of Rs 19,400 for an emergency hospitalisation due to jaundice, he did not expect his insurance company to question whether the admission was required at all. Especially not when it happened at 1 AM, at a nearby hospital that did not offer cashless facilities.

The insured had all documents ready: bills, medical papers, doctor's advice, a written justification from a senior medical doctor stating admission was necessary, even a GPS timeline of his hospital visit. And yet, his insurer repeatedly rejected the claim stating that the treatment could have been done at home and "hospitalisation was not necessary."

In a viral LinkedIn post, Priyarajsinh Chavd shared the claim rejection story of his friend. Just like the case of any health insurance policy sale, Chavd shares when his friend bought his health plan via an online aggregator, he was promised zero hassles, best coverage and full support.

However, after the claim was rejected, the aggregator reportedly didn't step in and the insurer's local office said they couldn't help because the policy was bought online. His calls for redressal, to IRDAI (Insurance Regulatory and Development Authority of India) and the insurer's governance team, all led to the same outcome: claim rejected.

This was a claim for just Rs 19,400. Chavd pointedly asked in a social media post, "If a Rs 19,000 claim is not honoured, what happens when the claim is Rs 10 lakh or Rs 1 crore?"

The experience is not isolated. Several insurance experts and industry insiders have noted a worrying trend wherein insurers cite "unnecessary hospitalisation" as a reason to reject claims, especially smaller ones.

A widely shared LinkedIn post by an industry professional summed up the problem: "The attending doctor recommends hospitalisation based on the illness and the patient's condition. The insurer, however, overrules that saying admission was not needed. Who then is the impartial umpire here?"

The post struck a chord with many, including seasoned insurance professionals. Hari Radhakrishnan, an insurance broker and certified arbitrator, responded, "No one can define when a hospitalisation is needed; it is a judgement call made by the treating doctor. The problem is deeper: hospitals are incentivised to admit patients, while insurers are incentivised to reject borderline claims. The customer is stuck in the middle of this tug-of-war."

Srinivasan H., former Joint Executive President at Star Health, echoed this, stating, "Only the treating doctor can decide if hospitalisation is needed. Customers follow what doctors and hospitals suggest; they are not medical experts. Unless the insurer can prove fraud, rejecting on this ground is unacceptable." 

He further argued that a hospital regulator is needed to curb misuse by hospitals, not penalise policyholders.

Another user noted, "Tomorrow, will insurers reject a death claim saying the doctor did not treat the patient properly? Or wasn't hospitalisation warranted for the treatment provided? Where do we draw the line?"

All this boils down to one uncomfortable question: Who gets to decide what is a "necessary" hospitalisation? Is it the insurance company with a claim cost sheet to manage, or the doctor at the hospital attending to the patient in real time?

With health insurance now a key pillar of financial planning, such rejections, mainly when based on post-facto judgment, threaten to undermine public trust.

There is now a growing demand for better checks, clearer definitions, and perhaps, a neutral regulator for the healthcare sector, one that can fairly assess such situations without bias.

Until that happens, policyholders will continue to walk a tightrope, unsure whether their health crisis is valid "enough" to merit support from the very policy they paid for.