MC Analysis | Why introducing a regulator for healthcare could be difficult

MC Analysis | Why introducing a regulator for healthcare could be difficult

Calls for a dedicated healthcare regulator have grown louder in recent months, driven largely by complaints from parts of the insurance industry about hospital pricing and billing practices. Yet the idea, often framed as a fix for alleged price discrimination against insurers and a tool to rein in runaway medical costs, could be far harder to implement than its proponents suggest.

A dedicated healthcare regulator could, proponents argue, provide a single, coherent framework to reduce arbitrary billing practices, improve transparency and stabilise insurer economics. But, sources told Moneycontrol, it could give rise to new layers of governance complexity and unintended market responses unless it is carefully designed and politically negotiated.

Moneycontrol was the first to report that the General Insurance Council and IRDAI had begun discussions with the government on setting up an independent healthcare regulator.

The recent clashes between AHPI and several insurers may have made the debate more urgent.

Several insurers, especially the ones focused on health risk, have been publicly arguing that an independent healthcare regulator could help standardise pricing, stop alleged over-charging and lower claims volatility that has hit their margins.

Most industry players say a regulator could set transparent tariff frameworks, oversee empanelment standards, and police practices that they say leave insured patients, and insurers, worse off.

Sources suggest that industry groups like the General Insurance Council, along with the Insurance Regulatory and Development Authority of India (IRDAI), are in continuous discussions with the government, though there has been little response from the government so far.

Emails seeking reponses from the Insurance Regulatory and Development Authority of India (IRDAI), the Department of Financial Services (DFS), and the Ministry of Health and Family Welfare regarding setting up of an exclusive healthcare regulator remained unanswered till of the time of publication.

What insurers mean by “pricing problems”
A central grievance from insurers, according to an earlier Moneycontrol report, is that hospitals allegedly charge different effective prices depending on whether a patient is insured or paying out-of-pocket.

In simple terms, insurers say hospitals itemise more, upgrade, or charge packages differently for insured cases, raising insurer payouts, while charging cash patients different (sometimes lower) negotiated retail prices.

Indian policymakers and IRDAI officials have also flagged patterns of inflated billing and differential pricing as causes of rising premiums, prompting discussions about tighter oversight of the national claims exchange and other levers to standardise transactions.

According to a Reuters report dated July 14, government and regulatory reviews have flagged instances of hospitals’ billing practices driving up premium inflation, leading to proposals for closer oversight of claims platforms. Health insurance costs, including hospitalisation, rose 24 percent in FY23 before easing to 14 percent in FY24, still higher than the 10-year average. Insurers say a dedicated healthcare regulator could set uniform rules on pricing, empanelment and claims to curb such practices.

State vs centre, the less spoken about political angle
A key technical hurdle to a single healthcare regulator may be Indian federalism, according to multiple sources close to the matter.

A senior executive at an insurance company said, “Public health is largely a State subject under the Constitution, even as the Centre runs programmes, funds certain schemes and sets national policy. Many levers relevant to healthcare such as medical education, hospital registration, licensing of facilities, land and municipal approvals for beds are controlled or heavily influenced by States.”

Echoing these views, another insurer added, “Any attempt to centralise pricing or hospital regulation may risk bumping against state powers and local political economies where hospitals, land use, and bed allocations are politically sensitive.”

Practically, this means even apparently technical levers (a common tariff schedule, or national empanelment standards) could become political flashpoints.

Sources said the industry is weighing three options: widening IRDAI’s mandate, setting up a new independent healthcare regulator, or giving greater powers to an existing ministry or authority. But without a clear signal from the central government, the proposal remains stalled.

AHPI and the hospital pushback: An escalating frontline
The industry flashpoints in 2025 - which has involved at least four major players so far, may make the problem concrete.

The Association of Healthcare Providers – India (AHPI), which represents 12,000 hospitals nationwide, spanning large private chains, mid-sized group hospitals and standalone facilities, has in recent months suspended cashless facilities for policyholders of several insurers, citing unpaid dues, delayed settlements, alleged arbitrary delistings and refusal to revise tariffs in line with medical inflation.

The list of insurers AHPI has publicly alleged includes large names such as Niva Bupa, Care, Bajaj Allianz and most recently Star Health, with notices, ultimatums and local suspension actions.

On the ground this may play out painfully for patients.
When hospitals suspend cashless arrangements with a particular insurer, insured patients may be required to pay up front and submit for reimbursement later, which is an outcome both sides claim to avoid but which becomes leverage in negotiations.

The General Insurance Council (GIC) has pushed back against AHPI actions, warning that unilateral suspension of cashless services risks harming policyholders and could be anti-competitive.

Moneycontrol had earlier explained how cashless, empanelment and tariff negotiation works.