By Hansika Kapoor and Surbhit Ahuja
IRDAI’s circular to introduce mental health insurance (MHI) products is one of the most significant moves in the insurance industry in recent times. From an insurer’s perspective, the launch of any new product line involves taking considerable risk, arising primarily on account of the uncertainties related to underwriting, pricing, administering the policy, and claim settlement.
Further, any new product comes with substantial costs for the insurance company. These include IT and system design costs, training costs for salespersons, underwriters, administrative staff, as well as claim assessors. Concerns regarding empanelment of hospitals, coordination with State Mental Health Authorities, establishment of due processes, standardisation of procedures, and availability of mental health professionals are all to be addressed along with the introduction of MHI.
According to the latest statistics released by the World Health Organisation, the mental health workforce in India is scant, with 0.29 psychiatrists, 0.07 psychologists, and 0.80 mental health nurses per 100,000 individuals. The current prevalence estimate of mental illness in India is 10.6%, or 10,600 out of 100,000 people.
To translate the above statistics, India only has 1 psychiatrist for every 37,000 people that currently experience some form of mental health concern. The availability of psychologists is even scarcer.
This gives an indication of the rising disease burden of mental health in India as well as the severe scarcity of mental health professionals. Therefore, a major practical concern is regarding the empanelment of appropriate and adequate inpatient and outpatient facilities to provide MHI.
Further, India only has about 800 inpatient care facilities – including state mental hospitals, psychiatric units in general hospitals, forensic inpatient units, and residential care facilities. If only inpatient treatment (hospitalisation) cover is included within MHI, there is a risk of over-hospitalisation for common mental disorders. This has the potential to further stress an already over-burdened system.
Although official estimates of waiting periods for accessibility to mental healthcare are unavailable for India, it can be extrapolated that latencies are expected due to the low ratio of mental health professionals to the general population. Moreover, physical accessibility to mental health centres is also problematic, given that the majority of the Indian population resides in rural areas, with limited access to psychiatric infrastructure. Alternatives like community psychiatry and training of community mental health workers may help ease the burden of service delivery in a preventative manner.
Another key roadblock to the provision of MHI will be the stigma and discrimination associated with mental illnesses. These are likely to restrict the marketability and demand of the products only to the socially progressive sections of society. However, it is hoped that the introduction of MHI would align the interests of the government, state bodies, and the insurance industry to create more awareness regarding mental illnesses.
Having outlined various practical hurdles in the implementation of MHI in India, we propose a few possible ways in which MHI can take shape:
1. Inpatient (Hospitalisation) Cover only: This satisfies the literal translation of the IRDAI directive to “make provision for medical insurance for treatment of mental illness on the same basis as is available for treatment of physical illness”, and would probably be the least complex approach for insurers among the other options to be discussed. However, this has shortcomings in that it leaves out a significant majority of the population requiring MHI (as the treatments of majority of mental illnesses do not require hospitalisation).
2. Inpatient (Hospitalisation) Cover only, but with OPD coverage for comorbid conditions: Certain mental conditions have high comorbidity (i.e., occur simultaneously) with physical conditions. For instance, the prevalence of major depression is significantly high in patients suffering from cancer, tuberculosis, and other acute and chronic illnesses. Including such coverage could be seen as a valuable addition by policyholders, and is likely to increase the marketability of the product. As insurance companies would already have the required data on the prevalence of these comorbid physical conditions, the pricing of the new MHI product would be subject to fewer risks.
If the product is marketed in the above-suggested ways, it is likely to be offered as an add-on feature, rather than being sold as a standalone product. This will reduce anti-selection (i.e., the increased tendency of high-risk individuals to purchase insurance), and will lower costs.
3. Inpatient as well as OPD cover: The most comprehensive coverage that can be offered to policyholders would be to cover inpatient as well as OPD care. OPD costs for physical illnesses are generally not covered under insurance. However, given the nature of mental health disorders, OPD cover can offer significant advantages. This is because majority of mental health treatment is carried out through pharmacological and psychological therapy – both of which could cause a significant financial burden to the policyholder due to their higher consultation costs and the mid- to long-term maintenance treatment period.
However, the pricing and design of these products are likely to pose significant challenges to insurers. Insurers will also need to have a robust claim underwriting and claim settlement procedure in place to allow for the higher frequency of claims; these products will also be significantly costlier. Given the high possibility of anti-selection, it is likely that this product could initially only be made available for groups. Group insurance with mandatory participation will minimise the possibility of adverse selection: for instance, providing MHI to each employee of a company under the company’s health insurance plan. The product could also feature a policy deductible, which will reduce costs, and further lower the possibility of anti-selection. Incorporating a provision for profit-sharing between the insurer and the group can allow the former to include conservative margins in the pricing without a loss in marketability. This will be of particular benefit in the early years of the product’s introduction since the experience with claims will be limited. Once the insurer has gathered sufficient claims experience, more competitive group products can be offered.
Similar retail products can also be offered. However, success in the retail market would depend on the perceived importance that the customer places on benefits covered in relation to its costs (which would be higher than the first two options discussed above).
Mental Health Insurance has the potential to expedite the implementation of all other mental health reforms by making access to mental health services financially feasible. However, mental health insurance is a complicated piece of machinery, not only because of the considerations discussed above, but also because of the insurance industry’s relative inexperience in offering MHI products. It is hoped that the aforementioned considerations will assist in providing direction to key decision-makers and stakeholders.
(Hansika Kapoor is a practicing clinical psychologist and research author, Department of Psychology, at Monk Prayogshala, Mumbai, and Surbhit Ahuja is an actuarial analyst)