India’s health insurance sector has been jolted in recent weeks as the Association of Healthcare Providers of India (AHPI), which represents more than 15,000 hospitals and healthcare institutions, clashed with leading insurers over tariffs, claim settlements and cashless services. At the heart of the conflict lies a fundamental dispute: hospitals say tariffs have not been revised in years despite spiralling medical costs, while insurers argue they face inflated billing and unsustainable rates.
AHPI escalated matters by issuing warning letters to several insurers, including Bajaj Allianz General Insurance, Care Health Insurance and Star Health & Allied Insurance. It accused them of refusing to update tariffs in line with medical inflation, making arbitrary deductions from bills and even rejecting claims after final approvals.
In August, Bajaj Allianz faced the prospect of suspension of cashless services at AHPI hospitals, though negotiations prevented disruption. In September, Star Health policyholders found themselves on edge after AHPI announced a suspension of cashless facilities from 22nd September. Following emergency talks, the suspension was withdrawn, and services will be reinstated on 10 October 2025. Both parties agreed to resolve tariff issues by 31 October 2025, failing which another round of suspensions has been threatened.
Dr Girdhar J Gyani, director general of AHPI, has repeatedly stressed that the Association’s measures are not aimed at patients but are intended to bring insurers to the negotiating table. “Cashless suspensions place an unfair financial and emotional burden on patients. But hospitals cannot continue to operate at outdated rates fixed as far back as 2017 or 2019,” he told
Mint, calling for tariffs to be revised at least once every three years.
Insurers, however, maintain that AHPI’s warnings are arbitrary and one-sided. The general insurance council (GIC), which represents both general and standalone health insurers, criticised AHPI’s actions as 'unwarranted'.
Insurers argue that hospitals have already raised rates steeply during and after the Covid-19 pandemic and that treatment costs at top private hospitals are rising by 15%–20% annually, well above inflation. They also point to stark disparities in billing, with insured patients often charged higher than walk-in customers, and to instances of hospitals allegedly inflating costs.
One insurer pointed to price discrepancies: “If an appendectomy costs Rs30,000–Rs40,000 in a good hospital, and another charges over Rs1 lakh for the same procedure, how can we justify those rates?”
For patients, the battle has created fresh anxiety. Cashless hospitalisation—a facility that allows policyholders to receive treatment without paying upfront—has become a cornerstone of health insurance. But sudden suspensions leave patients scrambling to arrange money and later claim reimbursement, undermining the very premise of their insurance coverage.
The strain between insurers and hospitals has been simmering for years, but has intensified since COVID-19. Hospitals complain of low government-mandated tariffs under schemes such as Ayushman Bharat and Central government health scheme (CGHS), forcing them to rely on private insurance patients for cross-subsidisation. Insurers, meanwhile, face mounting claims and rising loss ratios, prompting them to resist further tariff hikes.
AHPI has accused insurers of acting collectively to drive down reimbursement rates by suspending empanelments or cashless facilities. “If insurers cartelise, hospitals can also join hands to protect their interests,” Dr Gyani warned, citing suspensions of large hospital chains, including Max and Manipal, by some insurers.
On the other hand, insurers argue that hospitals, too, are flexing their collective muscle under AHPI to force upward tariff revisions across the board. “Many rate agreements are due for renewal in October. Hospitals are making noise now to prevent downward revisions and ensure only increases are considered,” a spokesperson for a health insurance company told
Economic Times (ET).
Amid the stand-off, both sides acknowledge the need for greater standardisation. Insurers cite the absence of uniform billing formats and treatment packages, while hospitals note that different cost structures make rigid uniformity impractical. The Union government has asked the bureau of Indian standards (BIS) to work on a common billing template, while the quality council of India (QCI) is grading hospitals to align categorisation with tariffs.
AHPI has gone a step further, urging the government to establish a dedicated hospital regulator on the lines of the insurance regulatory and development authority of India (IRDAI). Such a body, Dr Gyani argued, could ensure scientific costing, periodic tariff revisions and transparent oversight, creating a balance between patient interests, hospital viability and insurer sustainability.
Ironically, these disputes come even as IRDAI is championing a goal of 100% cashless hospitalisation across the country. The regulator has mandated insurers to expand empanelment and ensure seamless cashless access for policyholders. Yet, the reality on the ground is one of growing mistrust between insurers and hospitals, leaving policyholders to bear the brunt.
In this matter, building trust is key. Hospitals want recognition of rising input costs—ranging from drugs and consumables to cutting-edge technologies and staff salaries. Insurers demand discipline in billing and uniform protocols to curb inflated costs. Unless both sides move towards constructive dialogue and compromise, patients will continue to be caught in the crossfire of tariff wars.
For now, a fragile truce has spared Star Health Insurance customers from immediate disruption. But with tariff negotiations still unresolved, and both sides unwilling to concede ground, India’s healthcare ecosystem faces the risk of recurring stand-offs.
Hospitals on one hand are becoming costlier. A normal patient once admitted has to pay heavily even for a stay of a few days. A lay man never understands how far the medicines prescribed by the hospitals are really required and how many of them are really given to the patient. There are many consumables for which the patient does not get any benefit from the insurer. Fees of visiting doctors, room rents, escalating all costs if patient opts for higher class and what not. Hospitals will argue saying ‘rising costs.’ Who can give proper justification?
Insurers on the other hand are busy working out how to raise n number of objections whenever a claim is received. Their weapons are ‘unreasonable charges’, co-relating some old disease as the cause of present illness, even method of operation.
The director general of AHPI claims that the association does not intend to aim patients. But what we are observing for years is that the ultimate victim is always the patient. The consumer affairs ministry and the ministry of health and family welfare should not sit tight lipped and must step in to bring them together for respectful and patient centric solution. Even IRDAI, Indian Medical Association and noted consumer organizations should be invited.