The government’s decision to launch phase 2 of the Medical Insurance Scheme for State Employees and Pensioners (MEDISEP) at an enhanced monthly premium of ₹810 does not seem to have gone down well with at least a section of government employees, who have objected to the government agreeing to an enhanced premium when many prominent hospitals have not been empanelled under the scheme.
However, in a State like Kerala where the health seeking behaviour is high, leading to a high utilisation of health insurance cover, it would not be viable for any insurance company to run a comprehensive health insurance scheme as MEDISEP at lower premiums, health experts point out.
According to sources, in 2020-21, the government was settling medical bills of employees by medical reimbursement to the tune of ₹58 crore, which came down to ₹53 crore in 2021-22.
Oriental Insurance company, which ran Phase 1 of MEDISEP from 2022-25, at a monthly premium of ₹500 for a basic health cover of ₹3 lakh per annum for three years sustained significant losses with the annual claims ratio (claims paid against the premium collected) consistently exceeding 100% in all three years of implementation.
Insurance cover was provided to 30,84,607 beneficiaries. From 2022-2025 July, the actual premium paid to Oriental insurance company was ₹1,461 crore. However, the company approved claims to the tune of ₹1,724 crore. Thus, in the first year, the adverse claims ratio of the insurance company was a whopping 141%, which was later brought down to around 100 % by the third year.
Thus when Phase 2 of MEDISEP was announced, with an enhanced health cover of ₹5 lakh, a more comprehensive package of procedures, and improved coverage of catastrophic illnesses, it was clear that the premium would be enhanced.
Though the Cabinet initially approved ₹750 as the premium, the amount was later negotiated to ₹830 and later brought down to ₹810, as Oriental insurance company expressed its inability to operate the scheme at a lower premium. Fresh Cabinet approval is awaited for finalising the new premium amount at ₹810.
The Cabinet had earlier approved extending MEDISEP to employees and pensioners in public sector undertakings, corporations, autonomous and statutory bodies, and the cooperative sector so that the increase in the overall risk pool might still help to keep the premium at reasonable levels.
Public health experts point out that Kerala has consistently had a high hospitalisation rate (around 11%) and high health insurance utilisation rate, compared to other Indian States, because of the high proportion of the elderly and the huge burden of non-communicable diseases. There are studies which report that about one-third of insured households in Kerala were actively using hospitalisation benefits.
Annual premium around ₹20,000
If one were to look at the health insurance policies available in the market today, there are no policies which offer comprehensive coverage at annual premiums less than ₹20,000, they point out. None of these policies covers any pre-existing diseases like MEDISEP does, that too without any age bar.
“In Tier 2 cities like Kochi, the annual premium for a health insurance policy offering a coverage of ₹5 lakh would be anywhere between ₹26,000 and ₹40,000 for those in the 60-65 year group and this goes up to ₹50,000 to ₹75,000 for those in the 76 years plus age group. These policies invariably have exclusions, co-payments and other limitations like not allowing expenditures on consumables used in hospitals and so on, which may result in the patient having to make cash payments at the hospital,” a health financing consultant said.
A look at the latest MEDISEP dashboard data shows that from 2022-2025, a total of 10,52,121 claims were approved by the insurance company, to the tune of ₹1,911.2 crore.
Published – October 26, 2025 06:53 pm IST
