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This is despite regulatory mandates that require parity between mental and physical health coverage.
While insurers have made progress since the Mental Healthcare Act, 2017 and IRDAI’s directive in 2018, challenges remain around awareness, access, and policy design—keeping much of the population underserved when it comes to mental healthcare support.
Coverage exists—but utilisation is low
Under current regulations, all health insurance providers are required to include mental health coverage in their offerings.
Rupinderjit Singh, Senior Vice President at ACKO Health, says, “As per IRDAI guidelines, mental health conditions are covered under all standard health insurance products, even for those who may already have such conditions.”
However, actual claim data tells a different story.
A large number of policyholders either do not know they’re covered or face hurdles in accessing the benefits.
According to Marsh McLennan’s findings, 42% of individuals are unaware of their coverage, and 83% of employers report minimal claims utilisation.
One key reason is the limitation around outpatient (OPD) services.
Most policies only cover inpatient treatments—hospitalisation-based care.
Yet, for mental health, the majority of treatments, including therapy and counselling, are outpatient-based. That’s where the real need lies.
Rakesh Jain, CEO of Reliance General Insurance, says that coverage tends to vary widely across insurers.
“Plans usually cover conditions like depression, anxiety, schizophrenia, and bipolar disorder when hospitalisation is involved,” he says.
However, unless OPD therapy sessions are clearly included, policyholders may end up paying from their own pocket.
Stigma and exclusions continue to be barriers
Beyond technical exclusions, stigma and social fear also deter people from seeking claims.
The Marsh report reveals that 48% of employees fear discrimination if they disclose mental health needs, and 21% struggle to find in-network providers.
Policy design also plays a role.
Most insurers exclude outpatient counselling, pre-existing mental health conditions (for a few years), and treatments related to substance abuse or self-harm.
“Mental health conditions arising from substance or alcohol abuse are often excluded due to complexities in causality,” notes Amitabh Jain, COO, Star Health and Allied Insurance.
Star Health, however, has fully integrated mental health coverage into its plans.
“We believe mental health is a critical part of overall well-being. Our policies cover a wide spectrum of psychiatric and psychosomatic conditions requiring hospitalisation,” Jain says.
Waiting periods, unclear terms add to confusion
Like physical ailments, mental health conditions may come with waiting periods—especially pre-existing ones.
“Some insurers have a waiting period of 2–4 years for mental health issues,” Rakesh Jain points out. “Moreover, psychiatric care often has lower sub-limits.”
Singh from ACKO clarifies that there’s no special waiting period for mental health conditions beyond the general one applied to all health issues in standard plans.
However, he admits that the industry still has “miles to go” when it comes to outpatient mental healthcare.
Claims process similar, but fewer cashless options
The process for filing mental health claims is broadly the same as for physical health issues—hospital bills, prescriptions, and medical reports need to be submitted. But the lack of OPD coverage and networked mental healthcare providers can lead to confusion or rejections.
According to Amitabh Jain, “At Star Health, our claims process upholds parity between mental and physical health treatments. Cashless facilities are available in network hospitals with pre-authorisation, while reimbursements work for others.”
Still, not all hospitals or clinics specialising in mental health are part of insurer networks, making cashless services harder to access.
The road ahead: More awareness, better products
Experts agree that India needs better-designed mental health insurance products that prioritise outpatient coverage, therapy support, and robust provider networks.
The Marsh report also calls for including rehabilitation and de-addiction centres in insurance networks and eliminating exclusions like self-inflicted injuries.
Sanjay Kedia, CEO, Marsh McLennan India, stated, “Despite legislative support, the insurance industry has failed to deliver meaningful mental health coverage. There’s an urgent need to remove exclusions and support outpatient mental health services.”