The government’s decision to launch Phase 2 of the Medical Insurance Scheme for Government Employees and Pensioners (MEDISEP) with an increased monthly premium of ₹810 seems not to have gone down well with at least a section of government employees who protested against the government agreeing to the increased premium when many leading hospitals were not involved in the scheme.
However, in a state like Kerala where health seeking behavior is high leading to high utilization of health insurance coverage, it would not be viable for any insurance company to run a comprehensive health insurance scheme like MEDISEP at lower premiums, health experts point out.
According to sources, in 2020–21 the government settled the medical bills of the employees with a medical reimbursement of ₹58 crore, which declined to ₹53 crore in 2021–22.
Oriental Insurance, which operated MEDISEP Phase 1 from 2022-25 with a monthly premium of ₹500 for a basic health cover of ₹3,000 per annum for three years, suffered significant losses, with the annual claims ratio (claims paid to premium collected) consistently exceeding 100% in all three years of implementation.
Insurance coverage was provided to 30,84,607 eligible persons. From July 2022 to 2025, the actual premium paid to Oriental Insurance was ₹1,461 crore. However, the company cleared claims of ₹1,724 crore. The unfavorable loss ratio of the insurance company was thus an incredible 141% in the first year, which later decreased to approximately 100% in the third year.
So when MEDISEP Phase 2 was announced with increased medical cover of ₹5,000, a more comprehensive package of procedures and better coverage for catastrophic illnesses, it was clear that the premium would be increased.
Although the government initially approved ₹750 as premium, the amount was later negotiated to ₹830 and later reduced to ₹810 as the Oriental Insurance Company expressed its inability to operate the scheme at a lower premium. New cabinet approval is awaited to finalize the new premium amount at ₹810.
The Cabinet has previously approved the extension of MEDISEP to employees and pensioners in public sector enterprises, corporations, self-governing and statutory bodies and the cooperative sector, so that increasing the overall risk portfolio can still help keep premiums at a reasonable level.
Public health experts point out that Kerala has a consistently high hospitalization rate (around 11%) and high health insurance utilization compared to other Indian states, due to its high proportion of elderly people and huge burden of non-communicable diseases. There are studies that indicate that about one-third of the insured households in Kerala actively availed of hospitalization benefits.
Annual premium around ₹20,000
If we were to look at the health insurance available in today’s market, there are no policies that offer comprehensive coverage for an annual premium of less than ₹20,000, they point out. None of these policies apply to pre-existing conditions such as MEDISEP, even without an age limit.
“In tier-2 cities like Kochi, the annual premium for a health insurance policy offering a cover of ₹5 lakh would be anywhere between ₹26,000 and ₹40,000 for those in the 60-65 age group and this goes up to ₹50,000 to ₹75,700 for those aged 6 to 76. Deductibles and other restrictions like disallowing consumption expenditure material used in the hospital and so on, which can lead to the fact that the patient he will have to pay in cash at the hospital,” said a health finance consultant.
A look at the latest MEDISEP dashboard data shows that a total of 10,52,121 claims worth ₹1,911.2 crore were approved by the insurance company during 2022-2025.
Published – 26 Oct 2025 18:53 IST
