Health Insurance May Become Unviable In 3-5 Years Without Medical Inflation Control

Achieving profitability in health insurance involves aligning premium growth more directly to medical inflation rather than trends in the overall inflation.

“Medical costs in India have shown a persistent high 'medical trend' (double-digit in many surveys), driven by technology, input costs, and provider market dynamics,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).

Health insurance policies could become financially unviable within the next three to five years if medical inflation continues at double-digit levels and claim costs keep rising faster than premium growth. This imbalance makes it increasingly difficult for insurers to sustain products without incurring significant losses. To prevent this outcome, the government, hospitals, insurers, and policymakers must act collectively and urgently.

“If medical inflation continues with double-digit rates, margins will tighten, and products may slowly erode in sustainability without meaningful structural reform and prudent cost accountability throughout the healthcare system,” says Sarita Joshi, head of health and life insurance, Probus.

Health Regulator Could Ensure Fair Pricing And Treatment Standards

A dedicated health regulator would obtain the authority to develop a standardized treatment protocol, create a uniform pricing structure, and mandate transparent billing. It would have the power to act both quickly to arbitrate disputes, audit the hospital's record for compliance evidence, and publish cost benchmarks in 30-day intervals for several services.

With those responsibilities, the health regulator could decrease unpredictability regarding claims, streamline the planning of claims between hospitals and insurers, and be more predictable and trustworthy for patients seeking treatment. In this way, the health regulator could provide a level of consistency across the systems and ensure pricing and treatment standards were fair and transparent for everyone involved.

“A fast-track tariff and claims ombuds for network disputes to prevent abrupt cashless suspensions that harm patients is also required. Recent insurer–hospital impasses show why this is needed,” says Bharindwal.

Regulations Seek Fair And Consistent Medical Pricing

Rising hospital costs are often a result of financial setups that tend to facilitate revenue growth. “For example, rising volumes of procedures, more frequent use of tests and diagnostic services, and increased charges per hospital admission add up to the total indicator of rising medical expenses,” says Joshi.

Each of these trends is seen within various hospital types and making it more complicated to appropriately connect insurance premiums with actual healthcare costs. Without measures of internal compliance to allow a universal dock for pricing variation, claims situations can become unpredictable.

Proposed regulations aim to enhance transparency and fairness in hospital billing by standardizing treatment codes, tariff structures, and disclosures. “Hospitals will be required to maintain consistent surgical, diagnostic, and room tariff schedules for each category of patient, insured and non-insured, based on the specific ailment or treatment,” says Joshi.

It is also important to note that a Memorandum of Understanding (MoU) is signed between hospitals and insurers, and based on this MoU, the tariff rates are bifurcated accordingly. Through regular audits and mandatory disclosures, this framework seeks to minimize disputes, promote clarity in billing, and ensure equitable pricing for both insured and uninsured patients.

India needs both vibrant private provision and strong consumer protection. A dedicated health-pricing/standards authority, complementary to Irdai, can stabilize tariffs, reduce disputes, and make cashless truly predictable.

“The goal is not to cap innovation, but to standardize the predictable (packages, pathways, data) while rewarding quality and outcomes. That is how we protect insured and uninsured citizens alike, keep premiums affordable, and sustain the insurance flywheel for “Insurance for All by 2047,” says Bharindwal.