Cashless health insurance claims: What policyholders can do when hospitals and insurers clash over bills, approvals, and deductions

An IV (intravenous) infusion set with a trade price of Rs.11.05 but carrying an MRP (maximum retail price) of Rs.325—a whopping markup of 2,841%. A syringe with an MRP of Rs.57.2, but procured for just Rs.6.75. A survey of hospital consumables conducted by the Maharashtra Food and Drug Administration (FDA) flagged this gap recently.

FDA Commissioner Tukaram Mundhe’s recent post on microblogging site X (formerly, Twitter) highlighting this issue has, once again, put the spotlight on hospital pricing practices and the costs patients can end up bearing. The state FDA has called for a review of these findings and clear guidelines on the permissible gap between trade procurement price and declared MRP.


His post has ignited a fierce debate among hospital officials, doctors, insurers, and indeed, patients on overcharging and lack of transparency on the part of hospitals. Doctors and hospitals, on their part, flagged insurers’ approach of questioning the necessity of treatment and making arbitrary deductions from claim amounts.

“Selective examples of price differentials between procurement prices and patient billing prices should not be used to suggest systemic collusion between hospitals and manufacturers. Hospitals do not determine the MRP printed on medicines and medical products, and suggesting that such pricing reflects an understanding or collusion between hospitals and manufacturers, would be an inaccurate representation of how the pricing chain operates,” Association of Healthcare Providers of India (AHPI) said in a statement.

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Meanwhile, insurers see Mundhe’s post as proof of what they have been saying all along. “A margin of 2,500%+ is sheer profiteering. While Mundhe’s post is about consumables, it vindicates insurers’ long-standing contention that hospitals tend to inflate bills and are not transparent about billing practices, leading to disputes around cashless claims. Insurers are not asking for lower prices, or a say in the treatment decisions, but the push is for reasonable charges, transparency and greater accountability,” says Nilesh Sathe, former member, Insurance Regulatory and Development Authority of India (IRDAI) and Independent Director, Tata-AIA Life Insurance.

“Most major hospitals require patients to purchase medications exclusively from their in-house pharmacies, preventing them from buying the same drugs outside at significant discounts. They typically justify this restrictive practice by raising concerns over medicine authenticity or cold chain integrity, even when the alternatives come from reputed chains willing to guarantee proper storage. Ultimately, by denying patient policyholders the freedom to choose, such policies force consumers to pay unnecessarily high costs,” adds Prashant Mhatre, All-India President, General Insurance Agents’ Federation Integrated (GIAFI).

Hospitals, on the other hand, contend that healthcare cannot be treated as a uniform, one-size-fits-all service. “The cost of treatment can vary depending on the patient’s clinical condition, complexity of the procedure, consumables, implants, and duration of stay, among other factors,” says Dr Girdhar Gyani, Director-General, AHPI. Most charges for insured patients are already predefined in agreed tariffs, he says. His contention is that most hospital chains have pre-agreed tariffs and packages, particularly for insured patients. “Disputes can, however, arise when insurers do not agree with certain charges or interpret the agreed tariff differently,” he says.

On consumables, some doctors say they would not object to any action on the high margins. “Margins of over 2,500% are extremely high. There should be transparency in pricing. If the government imposes caps on consumables’ margins, doctors would not object,” says Dr Sudhir Naik, Trustee and past President, Association of Medical Consultants. He points out that the problem largely concerns corporate chains with in-house pharmacies, and that doctors have no control over hospital practices.

Disputes and distress

Charges over inflated bills and opaque pricing are one part of the problem. The insurer-hospital friction flares up often. In July 2026, the General Insurance Council is sued an advisory on hospital admissions for fever recommending outpatient care for un complicated fever and infectious diseases, with hospitalisation reserved for cases of medical necessity, such as persistent high fever, dehydration and organ dysfunction. Hospitals feared insurers would use it to deny cashless approvals. The GI Council clarified that the advisory was non-binding and did not override doctors’ clinical judgment.

This followed the 2025 standoff over cashless tariffs, when hospitals and insurers suspended cashless facilities against each other, leaving patients in the lurch. In August this year, a parliamentary standing committee on health flagged that treatment costs at private hospitals can be up to ten times higher than in government hospitals. It recommended capping private hospital room rents in metropolitan cities at the average tariffs of nearby three-star hotels.

Cashless services and disputes

Caught in the tussle are patient-policyholders who largely have no say in the discussions. They bear the brunt through tedious cashless approval processes, delayed discharges, and deductions from the claim value (that is, partial payout of the claimed amount). According to Insurance Samadhan, a firm that helps aggrieved policyholders resolve complaints, disputes over treatment and length of stay now account for close to 20% of the cases it registers.

Delhi-based Parminder Kohli’s 68-year old father needs regular dialysis. “During a recent session, besides having to wait for six hours for the insurer’s cashless approval, we also had to fund 25-30% of the bill out of our own pocket. The insurer did not offer any clarity on this deducted amount at the time of discharge and has not reverted with details even now,” he says. This, despite IRDAI’s 2024 directive that insurers decide on cashless pre-authorisation within an hour, and on final approval within three hours of receiving the discharge bill.

Then comes the question of whether the hospitalisation was needed at all. Recently, Jaipur-based Imamuddin Khan rushed his wife to a hospital for food poisoning. He first called the insurer, a leading standalone health insurer, which directed him to a network hospital, where doctors recommended admission. “I had spoken to their TPA (third-party administrator) after reaching the hospital. However, the company then rejected the claim, saying that the hospitalisation was not necessary,” he says. Khan is still pursuing the matter with the company’s grievance redressal cell.

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Hospitals say such calls must rest with doctors. “The clinical decision of what is medically appropriate for an individual patient should remain with the treating doctor,” says Dr Gyani.

As Khan and Kohli’s cases show, the distrust between the two critical pillars of the healthcare system eventually impacts the patient-policyholders.

When Colonel (retired) Sandeep Gulati’s daughter was admitted to a top-tier Noida hospital for treatment of urinary tract infection (UTI), the private general insurer initially issued the pre-authorisation or initial approval for the treatment. Then it withdrew the approval, saying that the treatment was for a pre-existing disease. “That was not the case at all. Her pre-existing condition was related to a rod in her leg, which had to be inserted after she met with an accident,” says Gulati. The hospital wrote to the insurer explaining that the two conditions were not related, but the insurer would not accept even the treating doctor’s word.

Finally, by the time the approval came through after three rejections and multiple back-and-forth calls, Gulati had already paid the bill of `1.72 lakh out of pocket. The reimbursement that followed left out `50,000 he had deposited with the hospital. “We are still pursuing our complaint for refund of that amount,” explains Gulati.

Delays can hurt as much as rejections. Insurance consultant Mayank Gosar recounts a case where his client had to be admitted for angioplasty at a large Mumbai hospital. Complications stretched his stay and the insurer raised several queries. “The family received the cashless preauthorisation only on day four, and the patient was discharged on day five. In the interim, since the approval had not been received, the hospital asked the family to arrange 50% of the expected bill amount as a deposit. For a family dealing with an emergency cardiac condition, this created significant financial and mental anxiety, when they have purchased a health policy expecting cashless treatment,” he explains. Insurers need clearly defined, time-bound processes for emergency cashless approvals, he says. “This will ensure that genuine medical scrutiny does not turn into financial uncertainty for the patients.”

Reaching insurance officials who can take calls is a key challenge for families in such situations. “The staff manning call centres is often not equipped to handle such complaints from policyholders. They need someone to handhold them at a time when they or their loved ones are going through a tough time due to the treatment. Insurance companies should look to ease their concerns instead of making them go through endless loops,” says Puneet Oberoi, Founder, Finwise Services, a Delhi-based insurance and financial advisory firm.

Claims also get stuck or trimmed for reasons such as non-disclosure of pre-existing diseases, waiting periods, documentation gaps and admission only for diagnostics. “For deductions from the claim (leading to partial payout) amount, one common reason is proportionate deductions due to choice of room with rent higher than the eligible limit mentioned in the policy. Likewise, cost of consumables such as gloves, masks and syringes are often excluded from coverage (unless you have purchased a consumables cover), resulting in lower settlement,” says Shilpa Arora, Co-founder and Chief Operating Officer, Insurance Samadhan.

Hospitals vs health insurers: Round n, and counting

Late approvals, delayed discharge

New initiatives’ impact

Smaller nursing homes say that insurers often quote unviable rates on the promise of higher patient volumes, something a 15-30-bed hospital may neither need nor be able to handle. Instead, they want predictability and faster turnaround times for payouts after discharge. While insurers have presented their ‘cashless everywhere’ (cashless even at non-network hospitals subject to conditions) and common empanelment initiative as prospective game-changers, smaller hospitals say they are yet to see the benefits.

“Despite insurers launching the ‘cashless everywhere’ initiative two years ago, many smaller hospitals are still not empanelled. The cashless package rates are arrived at after negotiations between individual insurers and hospitals. However, the common empanelment framework forces smaller hospitals to accept the rates of the insurance company with steep discounts,” explains Dr Naik.

His suggestion for insurers wanting more smaller hospitals to come on board is to rely on their own reimbursement (where patient policyholders settle hospital bills out of pocket and the insurance company later reimburses the amount) claim data. “Cashless packages can be negotiated based on this data,” he says, adding that one of the reasons why patients go to corporate hospitals is the cashless facility. “If smaller hospitals are also empanelled, why will patients not go there? These hospitals are up to 50% cheaper than large corporate hospitals. The outgo will be lower for insurers as well as patients,” he says.

Less than hospitable experience?

Way forward

Insurers say the only way to rein in soaring medical inflation (10-12% a year, by some estimates) and keep premiums in check is through a transparent pricing mechanism. “Each and every element of the cost must be clearly spelt out in a comparable format. There is no doubt that doctors will decide the course of treatment. Insurers are not looking to dictate those terms,” says Segar Sampathkumar, former Director, Health, General Insurance Council. He suggests hospitals start by publishing rates and treatment protocols of, say, 75 common procedures where ICMR has issued guidelines. “If exceptions are to be made, the onus should be on hospitals to say why the deviation was warranted,” he says.

Sathe has a more radical proposal: “Hospitals are now commercial, not charitable, institutions. They cannot be allowed to profiteer and renounce all accountability. A healthcare regulator, government-imposed caps on pricing—and even nationalisation of hospitals in the interest of patients—is need of the hour in the interest of patients,” he says. Hospitals, meanwhile, want insurers to fix their processes, starting with faster, more automated pre-authorisations for planned procedures. “There should be greater predictability at the time of final settlement, with limited scope for raising new queries at discharge,” says Dr Gyani.

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Arora believes a centralised digital claims exchange can improve the claim experience. “Currently, every insurer or TPA operates on its own siloed portal, using different pre-authorisation formats, documentation checklists and billing rules. The lack of uniformity causes massive operational bottlenecks,” she says. But the National Health Claims Exchange (NHCX) has yet to take off, with each side blaming the other.

For now, hospitals and insurers are engaging through industry bodies such as the Federation of Indian Chambers of Commerce and Industry (FICCI), the Confederation of Indian Industry (CII) and NATHEALTH-Healthcare Federation of India. A grievance redressal framework between hospitals and insurers is also on the cards. “A key step has been the monthly roundtable with representatives from major hospital associations, insurers and industry bodies. We are also exploring a structured, neutral platform with balanced representation from both payers and providers. The GI Council has also proposed the creation of a medical advisory panel comprising experts from different specialities to provide clinical inputs whenever required,” said Dr S Prakash, CEO, Health Insurance Ecosystem and Strategic Partnerships, General Insurance Council, in an interview with ET Wealth last month.

Cashless claims, multiple challenges

Fight for your rights

Policyholders may not have a seat at the table, but they are not powerless. “A cashless rejection by a TPA is not the final rejection. Often, it means more documentation or verification is required,” says Arora. Ask for a written denial letter citing the policy clause. Then check with the insurer or TPA helpline whether a fresh doctor’s note or the missing papers can reverse the decision. If not, pay the hospital so treatment continues. Collect the discharge summary, itemised bills, lab reports, prescriptions and the denial letter, and file a reimbursement claim within the deadline in your policy. “Many claims denied get approved at the reimbursement stage once complete paperwork is reviewed,” she says. If that fails, escalate to the insurer’s grievance redressal officer, then the insurance ombudsman, and finally the consumer court.