Phase II of the Medical Insurance Scheme for Government Employees and Pensioners (MEDISEP) will be launched on January 1, 2026, with the Government of Kerala issuing orders under administrative sanctions for the implementation of the scheme.
As expected, the monthly premium in Phase II will increase from the current ₹530 to ₹810, working out to an annual premium of ₹8,237 plus 18% GST for the first policy period of 2026-2027.
This has gone down well with at least a section of government employees who argue that the increased premium is unreasonable when many leading hospitals were not involved in the scheme.
However, MEDISEP Phase II has an improved basic health cover of ₹5,000, a more comprehensive package of procedures and better coverage for catastrophic illnesses.
Health financing experts point out that in Kerala, where health-seeking behaviour, hospitalizations and health insurance utilization are relatively high, insurers may struggle. In fact, the premiums are increasing in Phase II as Oriental Insurance Company, which ran Phase I of MEDISEP from 2022-25, incurred heavy losses and approved medical claims of ₹1,724 crore when the actual premium paid to it was ₹1,461 crore.
No government. contribution
However, more than the increase in premiums, service organizations and pensioners are upset that the government does not contribute even nominally to the health insurance system.
Convener of the secretariat’s action board, MS Ershad, says the scheme has been a disaster as it does not allow the beneficiaries access to good private hospitals of their choice nor can they have cashless treatment facilities. “There is also no proper grievance redressal mechanism. The situation now is that we are burdened with a system that we are not happy with; the government is no longer paying for medical care and as for pensioners, they lost their medical allowance of ₹500 when they were added to MEDISEP. Now they have to pay another ₹310 to get medical benefits,” says Ershad.
“Make it Optional”
“We want the government to make MEDISEP an optional system because we don’t want to pay extra money for a system that often doesn’t provide the required care. This system should be restructured and the government should ensure its contribution,” he says.
“By not contributing to the health insurance system, the government has reduced its role to that of an intermediary or facilitator, taking no responsibility for how the system works. A contribution from the government would bring more accountability to the system,” says the public health expert.
Also, the fact that such a complex system, including the monitoring of the insurance company, is operated by the finance department is one of the reasons why most of the beneficiaries’ complaints remain unresolved. The government should hand over the implementation of the scheme to a professional government agency to better handle various aspects of the scheme, he says.
Published – 23 Dec 2025 19:51 IST
