Daybreak - What happens when hospitals and insurers stop talking

Episode Date: November 4, 2025

When your insurance card suddenly stops working, it is not just a glitch. It is the symptom of a deeper crisis in Indian healthcare. Hospitals say insurers have failed to update reimbursement rates despite medical inflation. Insurers say hospitals are inflating bills and resisting standardization. Millions of policyholders are caught between them, forced to pay out of pocket for care they thought was covered. How did India’s healthcare system end up in this deadlock. And who really decides what your treatment is worth?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Imagine a person standing at a hospital billing counter. Their family member has just come out of surgery and the nurse says, you can claim this under insurance.

So they hand over their cashless card. You know, the one that they've been paying premiums for every single year. But instead of a swipe, they get a shrug. Cashless is suspended so you'll have to pay now and claim later. In that moment, the promise of insurance, the one thing meant to protect them in a crisis, feels like it has suddenly vanished. Now, imagine that same scene playing out for millions of people across India.

Because it is. Over the last couple of months, some of the biggest private hospitals, Max, Manipal, Medanta, and the country's largest insurers, Star Health, Niva Bupa, Tata AIG, have been quietly cutting each other off. Cashless services have been suspended and policyholders are caught mid-treatment. Each side is blaming the other. Hospitals say that insurers have not updated rates for years, even though medical insurance. inflation is hitting 13%. And insurers are saying that hospitals are overbilling and refusing to standardize.

And while the two sides trade these accusations, 550 million Indians, which is basically every third person with the health insurance, are left wondering who is really looking out for them. But behind the polite press releases and technical terms lies a much deeper question. one that might redefine health care in India altogether. What happens when the system built to make treatment affordable can no longer afford itself? Welcome to Daybreak, a business podcast from the Ken. I'm your host Nick Das Sharma and I don't chase the new cycle.

Instead, every day of the week, my colleague Rachel Vargis and I will come to you with one business story that is worth understanding and worth your time. Let's rewind to how this all started. In September, Star Health, which is India's biggest standalone health insurer, pulled cashless services from several major hospitals in North India. And their complaint was big hospitals were demanding rate hikes that exceeded inflation. A Star Health executive pointed to hospitals like Max wanting major revisions, which were far higher than the 13% rise in medical inflation. Meanwhile, the insurer was pressuring smaller hospitals to reduce.

their rates. And that was the last draw. Girdhar Ghiani, who is the Director General of the Association of Healthcare Providers of India or AHPI, called it unacceptable. He said tariffs are supposed to increase with inflation, not decrease. So AHPI demanded Starr restore cashless services immediately. And this was not an isolated flare-up. In August and September, Neva Bupa and Tata AIG suspended cashless treatment at max hospitals, which is a network of 22 centres across North India. And earlier in February, care health halted services at 12 max hospitals in Delhi NCR.

So, as expected, hospitals retaliated to. 15,000 of them under AHPI suspended cashless access for Bajajaliance policyholders. Each side was basically flexing their power. Each suspension meant policyholders, were paying out of pocket, defeating the very purpose of insurance. Eventually, AHBI reached temporary compromises with star, Bajajan care. But these were bandages, not cures.

So, in October, both sides were expected to meet again. And the goal, a white paper, a guiding document, to bring structure into this chaotic relationship. But this deadlock did not appear overnight. For smaller hospitals, it's been a slow bleed. Many have been working with outdated insurance rates for years, some unchanged since 2011. Meanwhile, surgery costs have tripled since 2016. Cataract, appendectomy, cancer are all up by around 300%. Larger hospital chains like Max and Medanta have more leverage.

But even they are being paid 2021 to 2022 rates. As one Max executive told the ken, our net profit is around 10% and most of that goes back into robotics and expansion. We are just keeping up with inflation. So hospitals argue that they are fighting for survival and insurers insist that they are fighting against excess. And that is where the battle lines are drawn. But here's the thing. On the insurer's side, things don't look very rosy either. More on this in the next segment.

You see, expenses for insurers are rising faster than the premiums that they collect. In the financial year 2025, for example, the combined ratio, which is the total expenses versus total premiums, hit 102%, which was up from 94% the year before. Anything above 100 means that they are losing money. Basically, hospitalization costs are up, health. insurance payouts are up, about 30% over the last three years. And commissions, which is the chunk paid to agents, can be as high as 45% of the premiums. Even after renewal, they hover around 10 to 20% plus special bonuses. So insurers are trapped. Hospitals demand 20 to 25% hikes, intermediaries take their shares and margins basically vanish. To recover, insurers have started

reducing claim payouts or cutting part of hospital bills that they call inflated. Hospitals naturally accuse them of unfair deductions. Insurers hit back. You are charging 120 rupees for a pair of gloves when a whole box costs 80 rupees only. Hospitals respond, every person who touches a patient needs new gloves and that is the cost of infection control. So you see, it is endless and it is circular. In September, the National Medical Commission stepped in with 157 standard treatment workflows across 28 specialties hoping to create uniformity.

Hospitals called it a good start, but impractical. One size does not fit all, said one executive. You can't run a hospital like a factory line. There are no national categories for hospitals, no government standards that differentiate based on size infrastructure or technology. The National Accordition Board for Hospitals now says that it is developing a ranking system to fix this, something that it calls a pressure relief map. So, in the October meeting, the General Insurance Council was planning to present a common empanlement kit, meaning if a hospital is approved by one insurer, it is automatically recognized by all.

That could end the endless back and forth on rates. But before any of that, insurers need to fix their own management. hands. Only 55 to 65% of premium income in India actually goes into the risk pool, which is the shared fund used to pay claims. Globally, that figure is closer to 87%. And with the new GST rules preventing insurers from claiming tax credits on commissions, they have started cutting agent payouts by 18%. Obviously, agents are not happy and they are already pivoting to other insurance products. So, as hospitals push for higher tariffs and insurers try to keep losses and checks, the tension keeps rising. Today's temporary compromise could be tomorrow's new suspension.

Because this is not just about a business dispute. It is a system tearing at its seams. And for the 550 million Indians caught in the middle, the real question remains. When the next medical emergency hits, will your insurance card still work? Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted and produced by my colleague, Snitha Sharma, and edited by Rajiv CN.