For years, health insurers in India have faced an uncomfortable question: Why do hospitals charge more just because someone has insurance?

Turns out, that’s not just a rhetorical complaint. The General Insurance Council (GIC) and the Insurance Regulatory and Development Authority of India (IRDAI) are now formally in discussions with the central government to set up an independent healthcare regulator. A move that could redefine how hospitals operate and how health insurance premiums are determined in the country.

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Why Do We Need an Independent Healthcare Regulator?

At the heart of this proposal lies a simple problem: pricing opacity. Hospitals routinely bill insured patients significantly more than those paying out of pocket. A procedure that costs ₹50,000 in cash could end up being billed at ₹1.5 lakh when routed through insurance. This has led to inflated claim amounts, artificial inflation in treatment costs, and a cascading effect on health insurance premiums.

And the problem is, insurers have little control over these costs. Unlike insurance companies, which are tightly regulated by IRDAI, there is currently no formal oversight body for healthcare providers. This imbalance has allowed pricing discrepancies and fraudulent billing practices to thrive unchecked.

According to GIC officials, this dual pricing model, where hospitals effectively operate two price lists depending on who pays, has led to an alarming rise in claims. And since IRDAI imposes a ceiling on how much insurers can hike premiums annually, the mismatch is unsustainable. Medical inflation, as estimated by the ACKO Health Index, stands at 14%, outpacing general inflation by a wide margin.

What About GIPSA and PPN?

At this point, you may be wondering: Don’t insurers already have some control over hospital pricing through GIPSA and Preferred Provider networks?

Yes, but those mechanisms are limited in both reach and enforcement.

GIPSA, or the General Insurance Public Sector Association, is a consortium of public sector general insurers. Through this body, insurers negotiate packaged rates with hospitals for a set of common procedures. Hospitals that agree to these rates become part of the Preferred Provider Network (PPN).

So far, so good. But there are several limitations:

    • Scope: The PPN system largely applies to policyholders of public sector insurers. If you have a private health insurance plan, you’re likely outside the PPN framework.
    • Coverage: Not all hospitals are part of the PPN, and not all procedures are covered under standard package rates.
    • Enforceability: Even in PPN hospitals, pricing disputes and inflated billing continue due to poor enforcement mechanisms. There’s no central authority to penalize non-compliance.

Now contrast this with what a dedicated healthcare regulator could offer.

This regulator wouldn’t be limited to public insurers. It could apply uniform pricing norms across all hospitals, for all insurers, public and private alike. It could mandate standard rates for common procedures and penalize hospitals for deviating from these rates unless there’s a medically justified reason. It could also create a central registry of hospitals, procedures, costs, and complaint records, making pricing far more transparent to the public.

In short, where GIPSA and PPN are opt-in arrangements with limited scope, an independent regulator would be mandatory, structured, and universal.

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What Would This New Regulator Do?

The proposal is still under discussion, but the idea is to create a regulator for healthcare on the lines of SEBI for capital markets or RBI for banking. This independent authority would ideally:

    • Set pricing guidelines for common medical procedures
    • Standardise hospital billing practices
    • Create dispute redressal mechanisms between hospitals, insurers, and patients
    • Monitor fraud and upcoding practices that inflate claim volumes
    • Introduce audit requirements for hospitals dealing with insured patients

This could introduce much-needed transparency and accountability in a system where insurers currently foot the bill but have no say in how the bill is made.

Ditto’s Take

“This is long overdue. Imagine buying a phone where the price depends on whether you're paying by card or cash, and the card option costs 3X more. Insured patients are routinely overcharged, which means your premium isn't just covering your risk, but also the hospital’s inefficiency.

From an insurance advisor’s perspective, this affects everything. We have occasionally seen cases rejected or partially settled because insurers contest inflated charges. And policyholders, who assumed they were fully covered, end up disappointed. An independent healthcare regulator could help level the playing field. It won’t fix everything overnight, but it can set the rules everyone has to play by. That’s what this space has been missing.” - Senior Advisor, Ditto Insurance

What Happens Next?

While no timeline has been announced, the fact that IRDAI and the GIC are jointly pushing for this regulator and that it's being discussed at the ministerial level suggests serious momentum. For insurers, this represents an opportunity for cost control. For policyholders, it's a step toward predictable, fair hospital billing. And for the healthcare system as a whole, it might introduce the kind of institutional accountability that has long been missing.

Whether it gets approved, how it’s implemented, and whether hospitals push back are battles yet to come. But for now, the proposal has been made. And it’s a conversation long overdue.

But at the end of the day, health insurance is still worth it. A single hospitalisation can wipe out years of savings, and unless you’re one of the very few who can comfortably self-insure, a ₹10,000 annual premium to protect against a ₹10 lakh medical bill is a trade you want to make.

And the good news is that awareness is growing, regulation is catching up, and insurers are becoming more transparent. If proposals like this healthcare regulator actually go through, the health insurance ecosystem will only get stronger and fairer in the years ahead.

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