MC EXPLAINER Hospitals vs insurers: All you need to know about the ongoing tiff

So, what sparked the latest stand-off?

The AHPI, representing more than 20,000 private hospitals, raised concerns in its August 22 press release about the viability of the current cashless healthcare framework. The body argues that reimbursement rates set by insurers have remained largely static for years, even though medical inflation in India has risen between 8 percent and 14 percent annually. This mismatch means that hospitals are often forced to deliver treatments at rates that do not reflect actual costs, squeezing their margins and threatening their ability to provide quality care.

Beyond the issue of reimbursement rates, AHPI highlighted several operational pain points that compound the financial stress. These include slow pre-authorisation processes, which delay critical treatments, and prolonged discharge approvals, which lead to bed blockages and reduced patient throughput.

A viral social media post dated August 29 claimed Niva Bupa denied a Rs 61 lakh cashless claim despite a Rs 2.4 crore policy cover. The customer, Chandra Kumar Jain, shared documents and email exchanges, sparking outrage online.

On September 2, Niva Bupa issued a statement denying wrongdoing, saying that while an initial Rs 25 lakh pre-authorisation was approved, later requests to raise the limit to Rs 61-80 lakh were not sanctioned due to being “drastically different” from the original estimate. The insurer clarified that this did not mean the claim was rejected and that discussions with the customer were ongoing.

How was the stand-off resolved?

After an eight-day hiatus, Bajaj Allianz and AHPI met on August 28, agreeing to revise tariffs on a hospital-by-hospital basis and improve authorisation and discharge protocols. Cashless services were reinstated on August 30, but Care Health policyholders remain in limbo.

Meanwhile, Niva Bupa’s suspension continues to affect thousands, amplifying patient uncertainty. The cashless care crisis escalated further when soon after AHPI and Bajaj Allianz settled their impasse, Niva Bupa abruptly suspended cashless services at Max Hospitals nationwide, a move that caught policyholders off-guard and raised fresh alarms.

Meanwhile, AHPI’s earlier dispute over outdated tariffs and claim delays with Bajaj Allianz was resolved via hospital-level tariff reviews and process improvements, but policyholder uncertainty hasn’t ended with Care Health remaining on thin ice, with no formal rollback so far.

Would dedicated regulations solve the problem?

Unlike sectors such as telecom, electricity or banking, India does not have a dedicated healthcare regulator to standardise tariffs or resolve disputes between hospitals and insurers. While the Insurance Regulatory and Development Authority of India (IRDAI) oversees insurers and state health authorities monitor hospitals individually, no single body manages the intersection where both operate, the cashless healthcare ecosystem.

This absence means tariff negotiations are left to bilateral agreements, and when conflicts arise, there is no neutral authority to intervene swiftly. As a result, associations like AHPI resort to advisories and suspensions as leverage, while insurers push back through network delistings or capped tariffs.

Industry leaders, including Bajaj Allianz CEO Tapan Singhel, and CMD of General Insurance Corporation of India (GIC Re) Ramaswamy Narayanan have called for a healthcare regulator to prevent such disruptions.

Moneycontrol was the first to report that IRDAI and the General Insurance Council are reportedly in discussions with the government to launch an independent regulatory body for the healthcare sector, and create a dispute-resolution framework, but nothing concrete exists yet.

What is the impact on policyholders?

According to insurance experts, when cashless facilities are suspended, families are suddenly forced to arrange huge sums of money upfront, often in the range of several lakhs, just to ensure timely admission. “This situation defeats the core purpose of health insurance, which is meant to offer financial security and peace of mind during a medical emergency,” they said.

Even after paying out of pocket, patients face the additional burden of navigating lengthy reimbursement processes. Claim settlements can take several weeks or even months, and the process is often riddled with disputes and deductions.

Insurers frequently reject certain charges as “non-admissible,” according to experts, meaning that policyholders may only recover a fraction of their expenses despite holding high-value policies. This problem becomes even more severe in cases of critical care, such as cancer treatments, organ transplants, or cardiac surgeries, where bills can easily cross Rs 50 lakh.

Another major concern, experts pointed out, is the lack of patient protection when disputes arise between insurers and hospitals. At present, there is no clear mechanism to ensure continuity of cashless services during such conflicts. Patients have little recourse and are often caught in the crossfire between two stakeholders, bearing the financial brunt of these disputes.