Health insurance is a necessary evil, people buy it only because they have no other option

Health insurance is sold in India as a vital risk cover against unexpected medical expenses. Glossy brochures promise “cashless” hospitalization, “zero hassle” claims, and “peace of mind” for families. But when emergencies strike, consumers often find themselves battling two powerful institutions: insurance companies and hospitals.

Insurance providers, after pocketing hefty premiums, deploy every tactic to delay or deny claims — citing hidden clauses, procedural delays, or vague technicalities. Meanwhile, hospitals inflate bills based on a patient’s insurance coverage, further burdening families emotionally and financially.

Despite efforts by regulators like IRDAI to tighten the rules, lax enforcement and corporate manoeuvring have left patients largely unprotected. In this eye-opening conversation, Prof Bejon Kumar Misra, a well-known International Consumer Policy Expert and leading consumer rights advocate, reveals why India’s health insurance system needs urgent and sweeping reforms.

Is health insurance a necessary evil?

In many ways, yes — health insurance is a necessary evil. Most people don’t buy health insurance because they trust the public health system or believe it works fairly well in their favour. They buy health insurance only because they have other option. In today’s world, even a minor hospitalization can cost ₹1–2 lakh or more; a major illness like cancer or a heart surgery can wipe out a lifetime of savings. Without insurance, most middle-class families would simply not survive the financial shock of a serious medical catastrophe. Can you believe it, one study analysed by NSSO revealed that 55 million Indians were pushed into poverty due to healthcare costs in a single year. And yet, the trust deficit is real.

Insurance companies aggressively market peace of mind, but too often deliver stress and disputes when claims are filed. Maximum number of complaints are due to mis-selling by Insurance Companies.

Policies are full of hidden clauses, exclusions, and fine print designed to benefit the insurer.

Hospitals exploit insured patients by inflating costs and making the billing process cumbersome for the care givers to understand and comprehend.

Cashless claims are denied, partial payments are made, and families are left scrambling at the worst possible moment.

Thus, consumers pay premiums every year not out of loyalty or confidence, but out of fear — fear that without insurance, a medical crisis would be even worse.

In an ideal world, health insurance would be a trusted partner — easing pain, not adding to it. In reality today, it’s often protection against financial disaster in a system that itself is broken. So yes — health insurance today feels like a necessary evil:

You buy it because you can’t risk being without it — even though you know it may not fully help you when you need it the most.

Health insurance –behave and speak differently – before selling the policy and after selling the policy. They are only concerned about their own profits and the customer is nothing more than a sacrificial goat for them. How would you describe this situation?

It is not true for all. There are reputed health insurance companies, responsible brokers and agents. It becomes difficult for the consumers to differentiate between the genuine ones. At the point of sale, companies promise the world — easy claims, cashless coverage, and total peace of mind. But once the premium is paid, the reality is very different. Insurers become the King and not the consumer. At the time of admission in hospitals, they start with asking how much insurance a patient has even before the treatment starts. The consumer, in a moment of crisis, ends up fighting for basic rights instead of focusing on recovery and palliative care.

Why do hospitals ask about the insurance coverage even before admitting the patient? Does it make any difference on the final bill?

Once hospitals know the insurance limit, they inflate the treatment cost to fit that amount. It’s unethical. Instead of charging as per standards, based on actual medical need, room rents, doctor’s fees, and even investigation costs are raised arbitrarily, without the knowledge of the policyholders. In effect, having insurance becomes an excuse to overcharge. The hospital and doctors make more money and the patient too ends up paying more but doesn’t object – thinking that this money is not being spent from his pocket but covered by the insurance company. 

Even in case of cashless policies patients are asked to deposit advance at the time of admission or settle the final bill at the time of discharge- doesn’t this violate the purpose for which the cashless policy was bought or sold?

Yes, absolutely. It violates the very spirit and purpose of a cashless health insurance policy. The regulator IRDAI has issued circulars stating cashless insurance for all, irrespective of the hospital is empanelled or not with the insurance company. Cashless insurance is marketed and sold on the promise that the insured patient will not have to pay out-of-pocket for permissible hospitalization expenses at network hospitals — the insurer directly settles the bill with the hospital. However, patients are still asked to deposit an advance at the time of admission or settle the outstanding bill at the time of discharge, even though the expense incurred is covered under the insurance cover. Families are told to pay the full amount and claim reimbursement — defeating the entire purpose of cashless insurance. It defeats the very purpose for which the policy was bought.

This practice creates unnecessary financial stress on patients and their families at a time when they are already vulnerable. It shows a lack of coordination and trust between hospitals, TPAs (Third Party Administrators), and insurance companies. Often, hospitals cite reasons like pending insurer approvals, exclusions (non-medical expenses), or lack of real-time guarantees to demand money from patients. All these tantamounts to Unfair and Unethical Trade Practices.

While technically some “non-admissible charges” (like administrative fees, consumables, or special services) might not be covered under insurance and are payable by the patient, asking for large advances or full settlements goes far beyond that and erodes the very confidence people place in health insurance products and the healthcare delivery system.

If cashless hospitalization cannot truly be cashless in practice, then insurers and hospitals have an ethical and legal obligation to make this clear at the time of selling the policy — not leave consumers feeling cheated during medical emergencies.

Would you agree with the suggestion that Health insurance In India, today protects corporate profits more than affordable quality healthcare for patients?

Absolutely — in today’s world, health insurance in India has become more about protecting corporate profits than protecting patients.

Insurance companies are raking in record profits, while patients — who faithfully pay premiums year after year — are left battling paperwork, hidden clauses, unjustified delays, and rising out-of-pocket costs. Policies are carefully designed with loopholes: co-payments, sub-limits, disease-specific exclusions, and long waiting periods ensure that insurers can legally deny or underpay claims when patients need help the most.

Meanwhile, hospitals and insurers have turned healthcare into a business deal. Patients are no longer treated as individuals in distress — they are “revenue streams” to be billed heavily, while insurers selectively approve or reject expenses based on what suits their financial targets.

The cashless system is a cruel joke. Patients still have to pay deposits, settle bills, and fight for reimbursements — while corporate hospitals and insurers settle their accounts behind the scenes.

The original purpose of insurance — to safeguard people against financial ruin due to illness — has been systematically sacrificed at the altar of shareholder profits. In effect, people are paying to be denied, delayed, or drained financially.

Unless radical reform is enforced — with strict penalties for exploitative practices — health insurance will continue to serve corporations first, and patients last.

Apart from this, what are other irregularities you observe in the sector?

There’s rampant use of fine print to deny claims, hidden sub-limits on room rent and surgeries, arbitrary deductions for “non-medical expenses,” unregulated TPAs delaying claims, and insurers pushing reimbursement instead of direct settlement. Consumers are systematically disadvantaged.

Over the past few years, health insurance premiums have increased sharply. Is this justified or another way to exploit consumers?

Premiums are rising due to irrational expenses incurred by the insurance companies and the inflationary trend in the healthcare cost in India, without corresponding quality improvement in services. Instead, insurers are capping benefits, adding new exclusions, and cutting coverage. Healthcare costs are definitely rising — but insurers and hospitals are also fuelling this inflation for mutual benefit and burdening the policyholders with avoidable expenses.  The consumer ends up paying more for less.

How serious is the problem of patients’ and their families being mentally harassed because of poor coordination between the hospitals and insurance companies processing their claims?

The problem is not just serious — it is devastating, and it strikes at the very heart of patient dignity. There is a saying, in India, health insurance buys you paperwork — not peace of mind. Even after the regulator has instructed the insurers not to ask for any documents from the policyholders while processing the claims, it is observed still the hospitals and the insurers are insisting on documents from the policyholders.

Imagine this: a father rushes his child to a hospital after a severe accident. He has a valid cashless health insurance policy and assumes he can focus on his child’s treatment. Instead, he is told to deposit money immediately because “insurance approval is pending.” Hours pass. The hospital refuses to start full treatment without guarantees. The insurance company cites “technical processing time.” Caught in the middle, the father is torn between helplessly watching his child suffer and desperately making phone calls to faceless customer care lines.

This is not a rare story. It plays out every single day across India.

The poor coordination between hospitals and insurance companies leads to unimaginable mental harassment for families — adding trauma on top of trauma. Patients, already battling life-threatening conditions, have loved ones who are forced to sell assets, negotiate, beg, or even borrow money just to get basic care. In many cases, families end up settling bills themselves just to escape the ordeal, even though they were supposed to be covered.

The psychological impact of this — the humiliation, helplessness, anger, and shattered trust — often lingers long after the hospital discharge. It breeds a sense of betrayal not just against insurers and hospitals, but against the entire healthcare system. Health insurance was meant to be a safety net. Instead, due to rampant mismanagement and profit-driven apathy, it often becomes a trap — and ordinary families are paying the price.

Unless there is strict enforcement of patient rights, automatic penalties for delays, and a fundamental change in attitude, this harassment will continue to haunt patients and destroy public faith in the very idea of “cashless care.” It’s systemic cruelty at the worst possible moment.

Regulatory reforms have been discussed for years. Why is there still no effective grievance redressal for consumers?

In India, regulatory reform is what happens when outrage must be silenced, not solved. The so-called “regulatory reforms” have mostly been on the drawing board — designed to pacify public anger without truly shaking up the system that profiteers from consumer helplessness.

For years, authorities have announced guidelines, circulars, and committees, but none of it has translated into real power for the consumer. Grievance redressal remains a slow, frustrating joke. Patients are forced to fight giant insurance companies and corporate hospitals alone, armed with nothing but paperwork and desperation.

Insurance companies know there are no serious consequences for harassing or denying claims. Regulators rarely come down hard. Fines, if any, are symbolic. Meanwhile, insurance premiums keep rising, claim settlements keep getting delayed or denied, and patients keep suffering — while boardrooms celebrate bigger profits and devidents.

The harsh reality is: corporate lobbies are too powerful, and ordinary patients are too weak a voice. There’s no political will to fix the problem because consumers — scattered and exhausted — can’t match the resources available with the private and public sector and God forbid, if you go for litigation, you have to wait for years and spend more than the claim amount to access justice and fight back with the same force that billion-dollar corporations can manage with.

Until the government creates an independent, patient-first health ombudsman with the power to slap massive penalties, order immediate relief, and name-and-shame offenders, the system will stay broken — by design, not by accident.

In India today, healthcare injustice is not a system failure. It’s a business model. It’s a systemic design flaw, not an accident.

What reforms would you recommend to fix this?

No advance payment at the time of admission for patients with Health Insurance. .

Regulate and monitor hospital billing practices in a transparent manner by establishing a State Hospital Regulator under the provisions of the Clinical Establishment Act of 2010.

Mandate a simple one-page disclosure for insurance policies outlining room rent caps, sub-limits, and major exclusions rather than pages of fine print as Customer Information Sheet or Lengthy “Know Your Policy” document.

Hold insurers and TPAs jointly accountable for delays and deterrent action taken by IRDAI.

Create a time-bound, independent and neutral grievance redressal system with punitive penalties for insurers who delay or deny claims unfairly.

What advice would you give to ordinary consumers when buying or using health insurance?

Ask questions about sub-limits, room rent, disease exclusions, and cashless process timelines. Prefer insurers with in-house claim settlement teams. Save every hospital bill, doctor’s note, and approval communication. And if you’re treated unfairly, don’t hesitate to escalate: write to the insurer, IRDAI, and go to consumer redressal commissions, if necessary. Only persistent consumers will force the system to change. Always Speak Up against injustice and unfair practices.

Recently, we’ve seen shocking cases where health insurance premiums have skyrocketed without reasonable explanation. For instance, a customer who paid ₹20,000 in 2023 for a Star Health Insurance policy was asked to pay ₹30,000 in 2024, and then ₹43,000 in 2025 — for the same coverage, without any claims. Why do you think health insurers are allowed to impose such steep, arbitrary hikes year after year? Doesn’t this amount to exploiting the consumer’s helplessness rather than rewarding their loyalty? What can be done to address this systemic issue?

Absolutely, this is a classic case of exploiting consumer vulnerability. Insurers know that once a consumer has invested years into a policy, it becomes difficult to switch providers. Instead of rewarding loyalty, they weaponize it. Premiums are raised sharply without clear disclosure. We need regulatory caps on hikes, mandatory public justification for increases, and better portability protections.

In such cases, even if the consumer switches to a new insurer, they often lose continuity benefits like waiting periods for pre-existing diseases. Isn’t this double exploitation — first through unfair pricing, and then by making it risky for consumers to move away?

It’s a two-pronged trap. Consumers are punished both for staying and for leaving. Continuity of benefits must be legally protected across insurers to truly empower policyholders. Any increase in pricing has to be justified technically and approved by the regulator IRDAI.

Insurance companies often claim that “medical inflation” justifies these premium hikes. Is that a valid argument, or is it being misused?

Healthcare costs are rising, but insurers use “medical inflation” as a blanket excuse without sharing in a transparent manner the actual payments made to the hospitals with the policyholders. If hospitals are overcharging, insurers should negotiate better and engage with Patient Organisations— not simply pass the burden onto helpless consumers.