Health insurance is now emerging as a tool to manage financial needs of people to seek health services. Today, various health insurance schemes are available in the market and providing benefits from an individual to an entire family. During 2013-14, the gross health insurance premium collected by non-life insurance companies was 17,495 crore. Present paper tries to present the health insurance scenario and some of the issues and challenges facing by the health insurance sector in India. The study discusses the issues and challenges such as high Incurred Claims Ratio, skewed distribution of health business, low level of consumer awareness, limited product and pricing innovation, delays and issues in claims processing and pricing in health insurance.