The main purpose of health insurance is to provide financial security during medical emergencies. The ‘cashless’ facility is central to this promise, allowing patients to receive treatment without paying the hospital upfront, as the insurance company settles the bills directly.
However, recent disputes between hospitals and insurance companies in India are threatening this facility. Conflicts over payments and regulations are affecting millions of policyholders, forcing them to bear hospital costs out of pocket despite having insurance coverage.
Let us understand the ongoing disputes and how they impact you as investors and policyholders.
What’s Happening?
The dispute came under the spotlight when the Association of Healthcare Providers India (AHPI) warned that if Star Health Insurance did not resolve hospitals’ grievances, they would suspend cashless services for its policyholders starting September 22, 2025.
Behind the hospitals’ anger were several serious allegations. According to AHPI, the insurer had refused for years to revise treatment rates (tariffs), even though medical inflation has been rising at an annual rate of 7%–8%. This, hospitals argued, made it financially unviable for them to continue operating under outdated rates.
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Hospitals also alleged that the insurance company made unfair deductions from bills even after approval and, in some cases, removed hospitals from its network without prior notice, creating major difficulties for patients.
Major Reason for Escalation
The dispute between Star Health and AHPI is not an isolated case. It is part of a broader pattern across the industry. In recent months, AHPI has issued similar warnings against other large insurers, including Bajaj Allianz General Insurance and Care Health Insurance.
Likewise, disputes over cashless services have also arisen between Niva Bupa Health Insurance and Max Healthcare Hospitals. These incidents show that the problem is not limited to a single company but lies in the system itself. The root cause is the widening gap between rising medical costs and the rates paid by insurers.
Impact on Policyholders
Amid this conflict, policyholders are left helpless. The key purpose of buying health insurance is to secure financial protection and peace of mind during medical emergencies. The cashless facility is central to this promise, sparing patients the stress of arranging large sums of money at the time of hospital admission.
When this facility is suspended because of disputes between hospitals and insurers, it undermines the very purpose of health insurance. Patients are forced to pay hospital bills upfront and later file claims for reimbursement.
What Does this Mean for Investors?
The conflict is not just a concern for patients and hospitals but also for investors in the insurance and healthcare sectors. For listed companies such as Star Health, such public disputes can cause serious reputational damage.
When more than 13,000 complaints are filed against an insurer and the country’s largest hospital association stands in opposition, customer trust is weakened. This could make it harder for the company to retain existing policyholders and attract new ones.
Investors should closely track these developments, as the issue goes beyond one insurer and reflects broader challenges facing the industry.
What’s Next?
AHPI and Star Health issued a joint statement on September 21, 2025, agreeing to resume cashless services from October 10 and to resolve pending issues, such as tariff revisions, by October 31.
AHPI also announced plans to form a committee of industry leaders to engage with major insurers at the sector level to avoid such disruptions in the future.
However, AHPI warned that if the tariff issue is not resolved by October 31, the suspension of cashless claims for Star Health policyholders could once again become a reality.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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