What Happened
- Rajya Sabha MP Swati Maliwal raised concerns in the Upper House about a "hospital-insurance nexus," alleging that health insurance claims worth approximately Rs 26,000 crore were rejected by insurance companies in FY 2023-24.
- She alleged that private hospitals systematically inflate medical bills based on a patient's insurance coverage, while insurers later reject claims on technical grounds, leaving patients — including families of the deceased — stranded with enormous unpaid bills.
- Cases were cited where hospitals refused to release deceased patients' bodies until bills were cleared, forcing families to sell valuables outside hospital premises.
- Under the government-run Ayushman Bharat PM-JAY scheme specifically, 3.56 lakh claims worth Rs 643 crore were rejected and 1,114 hospitals were de-empanelled for fraudulent activities as reported by states and UTs.
- The debate in Rajya Sabha reflects growing concerns about the financialisation of healthcare in India and the regulatory gaps in both the hospital sector and the health insurance industry.
Static Topic Bridges
Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY)
Launched on September 23, 2018 from Ranchi, Jharkhand, PM-JAY is the world's largest government-funded health assurance scheme. It provides health cover of Rs 5 lakh per family per year for secondary and tertiary care hospitalisation to approximately 55 crore beneficiaries (bottom 40% of the population), based on SECC 2011 data.
- Implementing body: National Health Authority (NHA) under Ministry of Health and Family Welfare
- Benefit: Rs 5 lakh/family/year; cashless and paperless treatment at empanelled hospitals; covers 1,949+ medical procedures across 27 specialties
- Funding: Fully government-funded; cost shared between Centre and States (60:40 for most states; 90:10 for NE and special category states)
- As of September 2024, extended to all citizens aged 70 years and above regardless of income
- Anti-fraud measures: National Anti-Fraud Unit (NAFU), AI-based fraud detection, de-empanelment of errant hospitals
- 3.56 lakh fraudulent claims (worth Rs 643 crore) rejected; 1,114 hospitals de-empanelled as of March 2026
Connection to this news: PM-JAY is designed precisely to protect poor families from catastrophic health expenditure. The rejection of 3.56 lakh claims and widespread hospital fraud demonstrate that implementation gaps persist even within the flagship government scheme, let alone private health insurance.
Health Insurance Regulation in India
Health insurance in India is regulated by the Insurance Regulatory and Development Authority of India (IRDAI), established under the IRDAI Act, 1999. General insurance companies and standalone health insurance companies (SHICs) underwrite health policies.
- IRDAI (Insurance Regulatory and Development Authority of India): statutory body, set up under IRDAI Act 1999; headquarters in Hyderabad
- IRDAI mandates claim settlement ratios, standard definitions for pre-existing conditions, and grievance redressal mechanisms
- Rs 26,037.65 crore in health insurance claims were disallowed/repudiated in FY 2023-24 — a 19.1% increase year-on-year
- IRDAI introduced the "Bima Sugam" portal and reforms to standardise health insurance products (2024)
- Integrated Ombudsman Scheme (2021): insurance ombudsmen adjudicate complaints up to Rs 50 lakh; free for policyholders
Connection to this news: The scale of claim rejections highlights the tension between insurance companies' commercial interests and policyholders' right to healthcare access. UPSC may link this to debates about universal health coverage (UHC) and the role of private sector in social health insurance.
Clinical Establishments Act and Hospital Regulation
The Clinical Establishments (Registration and Regulation) Act, 2010 provides for the registration and regulation of clinical establishments with a view to prescribing minimum standards of facilities and services. However, adoption has been uneven — many states have not adopted it.
- Applies to clinical establishments including hospitals, maternity homes, nursing homes, dispensaries, clinics, and diagnostics centres
- States under State List must pass resolutions to adopt the Central Act; as of 2026, only a few non-Part C states have adopted it fully
- The Act empowers a National Council and State Councils to fix standard charges for procedures — a mechanism intended to curb price gouging
- Does not currently regulate insurance claim procedures or fix maximum charges for insured patients
Connection to this news: The absence of mandatory adoption of the Clinical Establishments Act in major states is a key reason why hospital billing practices remain opaque and exploitative. The debate is directly relevant to Mains questions on health sector governance.
Key Facts & Data
- Health insurance claims disallowed/repudiated in FY 2023-24: Rs 26,037.65 crore (19.1% increase over FY23)
- PM-JAY: launched September 23, 2018; covers ~55 crore beneficiaries; Rs 5 lakh/family/year
- PM-JAY fraud: 3.56 lakh claims worth Rs 643 crore rejected; 1,114 hospitals de-empanelled
- IRDAI: statutory regulator for insurance; established under IRDAI Act 1999
- Health insurance regulation is bifurcated: IRDAI regulates insurers; FSSAI and state health departments regulate hospitals
- The National Health Policy 2017 envisages Universal Health Coverage (UHC) by 2025
- India's Out-of-Pocket Expenditure (OOPE) on health: ~48% of total health expenditure (one of the highest globally)