There are more than 30 insurance companies in India offering health insurance policies. Each of these insurers has its own network of empanelled hospitals, and they continuously add more to their network. Every hospital signs separate agreements with different insurance companies—these agreements cover things like applicable rates for treatment and discounts on the final hospital bill.
For example, Max Hospital in Gurgaon might have 30+ different agreements with 30 different insurance companies. Each agreement can have different treatment rates and discount terms. So, if one person is insured with Star Health and another with Care Health, both might end up paying different amounts for the same treatment at Max Hospital—because Care Health may have negotiated different rates than Star Health.
Now, ideally, this shouldn’t concern a person who already has a health insurance policy. These are internal commercial arrangements between insurance companies and hospitals. Star Health, for instance, gives Max Hospital business in the form of policyholders, so they may have more bargaining power and can negotiate higher discounts than a smaller insurer with fewer customers.
But in practice, this does impact the policyholder.
Hospitals sometimes charge patients more than the agreed rates. They might also charge separately for services or supplies not covered by the insurance policy. On top of that, hospitals revise their rates every year—usually linked to inflation. All of this creates confusion.
The result is an uneven system where hospitals have different rates for different insurers, and the policyholder has no way of knowing what those rates are. This lack of transparency traps the policyholder, who may end up paying more out-of-pocket and also a higher premium for their policy—partly because of these inflated treatment costs caused by such asymmetry.
What IRDAI Is Doing About It – Common Empanelment
To solve this problem, IRDAI (Insurance Regulatory and Development Authority of India) has asked all insurance companies to come together and onboard hospitals on a common empanelment basis, that means, same hospital rates for all insurers.
This new approach is inspired by the PMJAY (Pradhan Mantri Jan Arogya Yojana), a government health scheme where hospitals work on around 900 pre-defined package rates. No matter which hospital you go to, the treatment cost is the same under PMJAY. This creates uniformity, removes confusion, and helps patients avoid excess payment.
Earlier in the January 30, 2025 IRDAI circular: IRDAI/HLT/CIR/MISC/27/1/2025, to make healthcare more affordable for senior citizens, IRDAI has added a safeguard: insurance companies cannot increase annual premiums for seniors by more than 10%. Additionally, insurance companies have been asked to work on common empanelment and negotiate standard package rates, preferably in line with PMJAY.
Key Benefits of Common Empanelment
This new system is expected to bring many benefits to policyholders:
- Affordable premium: The escalating cost of healthcare, driven by high medical inflation, has forced insurance companies to increase premiums year after year, placing a significant financial burden on policyholders, particularly senior citizens. The common empanelment initiative solves this issue by standardizing treatment costs across hospitals. When hospitals adhere to uniform package rates, insurers can better predict and manage claim expenses. This predictability reduces the need for frequent premium hikes, making health insurance more affordable.
- Less confusion: Costs will be predictable and easy to understand. Currently, policyholders are not aware of agreed rates between insurance companies and hospitals for that treatment, and hospitals take undue benefit of this, sometimes overcharging policyholders. This will reduce overcharging. Cashless treatments become truly cashless.
- Wider network access: More hospitals will offer cashless facilities to more insurers, especially in small towns and rural areas. This will help people seek treatment in nearby hospitals and also help in increasing insurance penetration in areas hitherto uncovered.
Challenges Ahead for Common Empanelment Initiative
While this initiative promises to control healthcare costs, stabilize premiums, and enhance access to cashless treatment, its implementation may not be without significant challenges.
Pushback from Big Hospitals
One of the most significant challenges is the resistance from large private/corporate hospitals to the fixed package rates proposed under this initiative.
These hospitals, often equipped with state-of-the-art infrastructure, advanced technology, and specialized services, argue that the Ayushman Bharat PMJAY rates are insufficient to cover their operational costs. Many of these hospitals are not working with PMJAY. A similar initiative – in the form of common empanelment – is facing the same hurdle.
This pushback poses a significant hurdle, as larger hospitals are critical to the network’s credibility and accessibility, particularly in urban centers where they serve a substantial portion of insured patients. Their reluctance to join could limit the initiative’s reach, leaving policyholders with fewer high-quality options for cashless treatment.
Mass Onboarding: A Logistical Challenge
The scale of IRDAI’s ambition onboarding 4,000–5,000 hospitals by mid-2025 presents a formidable logistical challenge. While progress has been made, with over 600 eye hospitals and 150 general hospitals already engaged as of May 2025, expanding this network to thousands of facilities, especially beyond metropolitan areas, requires massive coordination. Rural and semi-urban regions, pose particular difficulties due to fewer hospitals, inadequate facilities, and logistical barriers like poor connectivity and limited digital integration.
IRDAI’s common empanelment plan, based on circular IRDAI/HLT/CIR/MISC/27/1/2025, has the potential to make healthcare more affordable and accessible across India. To succeed, insurers, hospitals, and regulators will need to work together, use smart technology, and have clear discussions. If these issues are solved, IRDAI can build a single, affordable hospital network that helps millions of people
