'Insurers spend large portion of premium towards overheads like commissions leaving little for claims,' says AHPI’s Girdhar Gyani

Edited excerpts:

From a hospital perspective, what is working well and what is not in India’s health insurance ecosystem?

What is working well is that India’s health insurance penetration has been quite steady. A growing number of people are now covered under health insurance policies. The adoption of digital platforms and automated processes has also contributed to improved efficiency in claim submissions, which has significantly reduced paperwork, manual effort, and processing time for both hospitals and patients. Having said that, several persistent challenges continue to plague India’s health insurance ecosystem.

One major issue is the delay in revising tariffs by insurance companies and frequent demands for tariff reductions, which threaten the viability of hospitals and compromise patient safety and quality of care. Another concern is the arbitrary withdrawal of cashless services from hospitals to pressurise them into accepting insurer-dictated tariffs. This often leads to patient distress, as people who expect cashless treatment are suddenly forced to make out-of-pocket payments. Hospitals also face deductions from bills at the time of settlement, even after final authorisation, which creates unnecessary financial strain.

There is also blatant interference in the clinical decisions of doctors, often with the benefit of hindsight, raising questions over the use of medicines, implants, consumables, and even the length of a patient’s stay in the hospital. Insurers show reluctance to pay for new technologies such as robotic surgeries or advanced drugs like immunotherapy, even when these are covered under the insurance policy.

In addition, long delays in authorising patient bills frequently result in delayed discharges, adding to the stress of both patients and healthcare providers. Finally, a low incurred claim ratio remains a serious issue. Insurers spend a large portion of the premium collected on overheads such as agent commissions, marketing, and administrative expenses, leaving very little for actual claim payments.

Do you think cashless hospitalisation is becoming more accessible, or are there still significant gaps?

Cashless hospitalisation has become more widely available but there are significant gaps in availability and consistency of cashless service. Many hospitals continue to face issues with delayed pre-authorisations, frequent denials, and a lack of clear, standardised empanelment terms. In some cases, insurers arbitrarily withdraw cashless services over commercial disputes, further restricting access. Smaller hospitals, newly established facilities, and hospitals in semi-urban or rural areas often struggle to get empanelled, leaving large patient populations without access to cashless benefits where they are most needed.

AHPI has alleged that empanelment of new hospitals is being slowed down or denied. Why do you think insurers resist empanelling more hospitals?

IRDAI has mandated that cashless services be made available to largest possible pool of policyholders. Thus, it is imperative that new hospitals be empanelled with insurers to be able to provide cashless services to communities around the hospital. Insurers resist empanelling new hospitals because they fear that their claim size may go up. This happens because the new hospitals are usually equipped with latest technology which sometimes is little more expensive.

When insurers suspend cashless services, what kind of immediate disruption does this cause for patients? How does it impact their treatment, financial planning, and overall hospital experience?

From a hospital’s perspective, the arbitrary suspension of cashless services by insurers creates immediate and significant disruption for patients. Patients who have purchased insurance policies expecting cashless treatment at their hospital of choice are suddenly forced to arrange out-of-pocket payments. This leads to financial distress and an added emotional burden on patients and their families. Hospitals are left to manage frustrated and irate customers. The overall patient experience suffers and the hospital’s reputation also gets impacted.

How will such disputes over tariffs or claims be resolved, going forward?

Trust needs to be built between insurers and healthcare providers. This can be done only through continuous dialogue, which would also help better appreciation of each other’s businesses, leading to a healthier healthcare ecosystem.

Do you think India needs a dedicated healthcare regulator, separate from IRDAI and existing health authorities?

Yes. We do need a body which is able to work with the hospitals, insurers and other stakeholders who can ensure smooth working in the interest of all concerned.

What are the biggest challenges hospitals face today in delivering affordable and quality care?

One of the biggest challenges hospitals face today in delivering affordable and quality care is the persistent cost inflation, which has consistently ranged between 7–8 percent annually. The largest contributor to this rise is manpower costs, followed by increasing expenses for drugs and consumables, utilities, rent and med-tech costs.

A key issue compounding this challenge is the refusal of insurance companies to revise tariff rates in line with these escalating costs. In some cases, tariff have not been revised for 7–8 years, straining viability of hospitals. This approach is untenable and places an unfair and unsustainable burden on hospitals, which risks forcing providers to cut corners—ultimately compromising patient safety, quality of care, and clinical outcomes.

For years, AHPI has advocated for periodic reviews of tariffs linked to medical inflation, a globally accepted and standard practice. Rather than engaging constructively, some insurers continue to push for downward tariff revisions, disregarding the viability of healthcare providers.

What is AHPI’s position on rising healthcare costs and how can they be controlled without compromising quality?

Rising healthcare costs are driven by multiple factors, including a rising manpower costs, increasing input costs of drugs and medicines, investments in advanced treatment modalities, and adoption of cutting-edge technology. However, cost control must not come at the expense of patient safety and quality of care.

India continues to be the least expensive healthcare destination in the world, attracting patients from hundreds of countries from all over the world. AHPI advocates for regular, transparent tariff revisions based on objective healthcare inflation indices, which reflect the true cost of service delivery.

It also encourages the adoption of technology to improve operational efficiency and reduce unnecessary costs. Evidence-based treatment protocols and improved process standardisation are key to ensuring that healthcare remains affordable without compromising on clinical outcomes.

In your view, what should regulators focus on to make health insurance more effective for patients?

Regulators should focus on encouraging innovative products and pricing structures that can enable greater insurance penetration, while also closely monitoring the underwriting practices of insurers. Equally important is ensuring quick pre-authorisation at the time of admission and guaranteeing timely settlement of claims without undue difficulties or denials. Greater digitisation and adoption of new technologies can further streamline processes, while tighter oversight of insurance ratios is necessary to promote more efficient operations among insurers.