Why AYUSH claims keep getting rejected despite new insurance rules

To his surprise, the insurance claim was rejected. The insurer stated: “As per submitted documents, the patient was admitted primarily for diagnostic and evaluation purposes only," which doesn’t meet the criteria for in-patient treatment under most policies.

Vanak has since submitted a doctor’s justification stating that IPD or in-patient care was medically necessary in his case. However, the claim remains unresolved. “They’re still refusing even though the hospital is NABH-accredited," he added. His experience reflects a growing problem with AYUSH insurance claims: a gap between regulatory intent and ground-level execution.

What the rules say

In January 2024, the Insurance Regulatory and Development Authority of India (Irdai) directed that all health insurance policies must cover AYUSH—Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy—treatments at par with allopathy. Earlier, policies often came with exclusions or sub-limits for AYUSH, which were to be removed.

Insurers have also been instructed to establish controls and standard operating procedures (SOPs) to: a) empanel AYUSH hospitals and day-care centres; b) include appropriate clauses in agreements with such hospitals; c) ensure standard treatment protocols; and d) detect and manage fraud or misuse.

Despite the guidelines, some policies retain certain exclusions. Star Health’s comprehensive plan, for instance, has excludes yoga and naturopathy, while Niva Bupa’s ReAssure 2.0 policy also excludes yoga treatments.

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Steep rejection rates

Even with rising demand, claim rejections remain high. “We spoke to a couple of AYUSH hospitals, and they said at least 70% of insurance claims get rejected," said Shilpa Arora, co-founder and COO of Insurance Samadhan, a grievance redressal platform.

Mumbai-based chartered accountant Mayank Gosar had a similar experience. His parents, both diabetic and facing digestive issues, underwent 7–8 days of AYUSH treatment at a NABH-accredited hospital.

“There was substantial improvement. They had panchakarma and detox therapies, full-body acupressure, abdomen and neck packs, hydrotherapy, and other Ayurvedic procedures," Gosar added.

However, the insurance claim for his mother was rejected on the grounds that the hospitalisation was not medically necessary, despite the nature of the treatment.

“The doctor clearly mentioned in the justification letter that hospitalisation was medically required," Gosar said. In his father’s case, the insurer repeatedly asked for the same documents but hasn’t processed the claim in over a year. He has now approached the Insurance Ombudsman.

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Some manage to get approvals after extended follow-ups. Faridabad-based Bhairav Vashishth initially saw his claim denied when his daughter underwent treatment for morphea, a rare skin condition. After repeated clarifications and a doctor’s letter, the insurer finally approved a cashless claim. “It took several rounds, but it eventually came through," he said.

What insurers say

Insurers maintain that AYUSH claims are treated like any other standard policy terms. “We have observed a sharp increase in AYUSH claims. In fact, between FY24 and FY25, claim count rose by over 30%, and payouts went up by around 48%," Bhaskar Nerurkar, head – health administration team, Bajaj Allianz, said.

“For the same condition, the medical management strategy of AYUSH could be different from conventional medicine and therefore the decision of who needs in-patient treatment may be different. We see this understanding not fully baked in especially at the ground level. Consequently, we see genuine patients facing claims rejection despite giving all necessary diagnostic documents and treatment plans," said Sreejith Edamana, COO, Apollo AyurVAID.

Over 80% of its urban patients have health insurance. “Claims process must be seamless. Industry discussions are underway," he said. “Some insurers ask for discounts based on outdated CGHS (Central Government Health Scheme) rates that haven’t been revised since 2016. That creates a financial strain for hospitals, patients and even insurers."

What patients should know

Before opting for AYUSH treatment, policyholders must check if the hospital is both NABH-accredited and part of the insurer’s network. Admission must be based on prior consultation and a documented diagnosis from a recognised AYUSH practitioner.

“You can’t just walk into an AYUSH centre and get admitted. There needs to be medical justification, backed by diagnostic reports," said Bhabatosh Mishra, COO at Niva Bupa.

Hospitals must also meet certain criteria: at least five in-patient beds, 24x7 availability of qualified AYUSH practitioners, and dedicated therapy sections. Mishra also cautioned against wellness resorts that market themselves as retreat centres while offering medical treatments. “Some AYUSH hospitals are listed on travel aggregator platforms offering packages including a pleasant stay. If you are treating ailments, how can you project yourself as a hotel?" he asked.

Treatment vs prevention

Another common misunderstanding is the difference between preventive and curative care. “Insurance covers treatment for disease, accident, or infection—not preventive care like managing blood sugar or BP without a formal diagnosis," said Nerurkar.

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Paperwork inconsistencies also cause trouble. “Even if a qualified doctor supervises treatment, if internal records mention someone else, that’s enough for the claim to be rejected," Arora added.

What needs fixing

As AYUSH gains wider acceptance, the need for coordination between insurers and hospitals has become more urgent. Standardised treatment packages, transparent billing, and proper documentation can help reduce rejections and make cashless claims more feasible.

Surprisingly, India’s own flagship health insurance scheme—Ayushman Bharat Pradhan Mantri-Jan Arogya Yojana (AB-PMJAY)—still does not cover AYUSH treatments, despite the government’s push to promote traditional systems of medicine.

For patients and their families, navigating AYUSH claims can still be an uphill task. Until stronger processes and greater standardisation are in place, they will need to be extra cautious—checking policy inclusions, maintaining thorough documentation, and being prepared to challenge rejections where necessary.

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