By ANIRUD
anirud.live@gmail.com
The Chairman of the Insurance Regulatory and Development Authority of India (IRDAI), Mr Ajay Seth, recently expressed a significant concern regarding a key regulatory void in the nation’s health insurance ecosystem, drawing attention to the bumpy ties between healthcare service providers and insurance entities. This gap — the absence of oversight over hospitals — creates a fundamental imbalance in their commercial relationship with insurers.
The principle that access to necessary medical care should be a fundamental human right, not merely a commodity dependent on wealth, is currently being undermined by this fractured system. When regulatory gaps allow commercial interests to dictate patient outcomes, the result is a massive equity deficit, trapping families in debt cycles.
While insurers operate under strict regulation, hospitals often act outside this control. This friction was validated by a government and IRDAI analysis confirming that hospitals are indeed inflating treatment costs and overcharging patients, particularly those with higher insurance covers.
This commercial tug-of-war is deeply worrying. Some hospitals typically raise costs annually by 12 to 14 percent. Costs are projected to worsen, as India’s healthcare expenses are set to rise by 13 percent in 2025 (exceeding the global average of 10 percent, according to reports). Such a trend forces insurers to hike premiums, making coverage less affordable. The lack of standardised procedure costs turns hospitals into arbitrary pricing centres, further damaging the financial stability of ordinary citizens.
The patient is caught in the middle through higher policy costs and risks of partial claim settlements. This double whammy hits patients hardest, impacting the average policyholder who faces stress and anguish when claims are delayed or only partially settled.
Patient inconvenience includes avoidable delays in discharge, sometimes waiting hours for final claim approvals, and facing pressure for cash deposits even with a cashless policy.
Constant financial uncertainty is fundamentally eroding the social contract of health coverage. Urgent regulatory intervention is now a mandatory step to restore faith and ensure basic human dignity during medical crises.
The scale of consumer discontent is reflected in official figures: The Insurance Ombudsman received 53,230 complaints in FY 2024 alone, with a substantial 54 percent pertaining specifically to the health insurance sector.
Compounding this, India’s health-insurance penetration remains low — a 2025 Lancet study revealed that 70 percent of Indians do not have health insurance. This market struggle is evidenced by the annual growth in health insurance premium income slowing sharply to 9 percent in 2024-25, down from over 20 percent a year ago, as fewer policies are renewed. Escalating unaffordability represents a national health security risk, pushing treatment out of reach for the aspiring middle class, and highlighting the urgent need for price discovery mechanisms in the health sector.
This crisis has compelled the government to initiate structural reforms to rein in costs and improve transparency. To address this systemic imbalance, the government plans to bring the existing National Health Claims Exchange (NHCX) — a key digital platform — under the joint supervision of the Finance Ministry and IRDAI.
The move signals a recognition that government oversight is necessary to ensure fair pricing. Strict oversight is intended to improve the collective bargaining power of insurance companies and enforce greater standardisation in billing and claims processing. This move is a critical first step towards enforcing equity, ensuring the final hospital bill reflects actual medical necessity, rather than the maximum amount an insured patient can afford.
For long-term improvement, hospital management must look into structural challenges such as the need for transparency in hospital billing and a fair grievance redressal system for patients. These measures include clearly defining ‘reasonable and customary’ charges.
Looking beyond India, successful models in developed countries implement systems that introduce standardisation and central pricing. European nations, for example, widely use mechanisms like Diagnosis-Related Groups (DRGs). Under the DRG system, the hospital receives a fixed, predetermined fee for a specific diagnostic group. This structure incentivises hospitals to be efficient and avoid unnecessary procedures, translating into more predictable costs for insurers.
In Germany, for instance, this system is highly effective, allowing government-backed sickness funds to wield strong, consolidated bargaining power against hospitals.
The success of the DRG model lies in introducing financial accountability and equity into the payment mechanism. Centralised regulation provides a powerful blueprint for India to transform its market from one based on profit maximisation to one focused on transparent, sustainable patient care.
Achieving this required systemic reform necessitates the full commitment to the principle that Health is a Right, Not a Privilege. By addressing the fundamental regulatory imbalance, adopting lessons from global best practices, and enforcing strict supervision over billing via platforms like NHCX, the Indian health insurance ecosystem will achieve the equilibrium needed to protect patients and promote long-term financial stability.
Ultimately, this process is designed to narrow the gap between affordability and access, thereby making universal basic health coverage — where access is not determined by income — a fully attainable goal.
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