CourtKutchehry Special Report on Health Insurance Rules
Health Insurance in India: Can Insurers Deny Claims Over Hospital Discounts?
IRDAI rules stress transparency and fair claim settlement
Policyholders can challenge denials through Ombudsman and consumer courts
By Our Legal Reporter
New Delhi: December 17, 2025:
Health insurance is meant to provide financial protection during medical emergencies. Yet, disputes often arise when hospitals give discounts on certain parts of the bill, and insurers question whether they must pay the full claim amount. A recent debate has emerged: Can insurers deny claims because hospitals offered discounts on non-claim portions of the bill?
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The Insurance Regulatory and Development Authority of India (IRDAI) has issued new guidelines in 2025 to make health insurance more transparent, customer-friendly, and fair. These rules clarify how claims should be handled, what insurers can deny, and what rights policyholders have.
Hospital discounts and claim settlement
- Hospital discounts: Hospitals sometimes reduce charges for non-medical items (like food, room upgrades, or administrative fees) or offer package discounts.
- Insurer’s role: Insurers are only liable to pay for admissible medical expenses covered under the policy. Discounts on non-claim portions do not affect the insurer’s obligation to settle the medical claim.
- Common disputes: Some insurers argue that discounts reduce the overall bill and therefore reduce their liability. However, IRDAI rules emphasize that insurers must pay the admissible claim amount, regardless of hospital discounts on unrelated portions.
IRDAI’s 2025 health insurance guidelines
According to IRDAI’s latest rules:
- Standardization of terms: Policies must use uniform definitions for medical conditions and exclusions, reducing ambiguity.
- Moratorium period: If a policy is renewed continuously for five years, insurers cannot reject claims except for proven fraud.
- Claim rejection rules: Insurers cannot reject claims on technical grounds like minor documentation errors.
- Transparency: Insurers must clearly explain reasons for claim denials and provide written communication.
- Cashless access: Hospitals and insurers must ensure smoother cashless claim settlement to reduce patient stress.
These rules strengthen consumer rights and limit arbitrary denials.
What insurers can deny
Insurers can deny claims only in specific situations:
- Fraud or misrepresentation: If the policyholder provides false information or submits fake bills.
- Exclusions: Expenses not covered by the policy (like cosmetic surgery, non-medical items, or experimental treatments).
- Waiting periods: Claims made during waiting periods for certain conditions.
- Policy lapses: If the policy was not renewed or premium not paid.
Hospital discounts on non-claim portions do not fall under these grounds.
Remedies for policyholders
If an insurer denies a claim unfairly, policyholders have several options:
- Grievance redressal: File a complaint with the insurer’s grievance cell.
- IRDAI complaint portal: Approach IRDAI’s Integrated Grievance Management System (IGMS).
- Insurance Ombudsman: Free and fast dispute resolution mechanism available across India.
- Consumer courts: Policyholders can file cases under the Consumer Protection Act for deficiency of service.
These remedies ensure that policyholders are not left helpless against unjust denials.
Supreme Court and High Court rulings
Indian courts have repeatedly emphasized that insurers must act fairly:
- Supreme Court (2019): Held that insurers cannot deny claims on technical grounds if treatment is genuine.
- Delhi High Court (2021): Ruled that insurers must honour cashless claims if hospitals are empanelled, even if billing practices vary.
- Bombay High Court (2023): Stated that discounts or concessions by hospitals cannot reduce insurer’s liability under the policy.
These judgments reinforce IRDAI’s consumer-centric approach.
Practical advice for policyholders
- Check policy terms: Understand what is covered and excluded.
- Keep records: Maintain hospital bills, discharge summaries, and prescriptions.
- Ask for itemized bills: Ensure clarity between medical and non-medical charges.
- Challenge denials: Use grievance mechanisms if insurers reject claims unfairly.
- Renew policies on time: Continuous renewal strengthens protection under the moratorium rule.
Conclusion
The debate over hospital discounts and claim denials highlights the need for clarity in health insurance. IRDAI’s 2025 rules and Supreme Court judgments make it clear: insurers cannot deny genuine claims because hospitals offered discounts on non-claim portions. Policyholders have strong remedies if faced with unfair denials, including Ombudsman and consumer courts.
This ensures that health insurance remains a reliable safety net, not a source of stress during medical emergencies.
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Sources:
- MedBound Times – IRDAI Health Insurance Changes
- Spearhead Insurance – New IRDAI Guidelines 2025
- ACKO – IRDAI Rules for Health Insurance
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