Kerala's flagship health insurance scheme for state government employees, pensioners, and their families, Medisep, has formally concluded its first phase. Originally set to end on December 31, the government extended it by one month to January 31 to prevent a coverage gap, sanctioning an additional Rs 61.14 crore for the extension. As the much-debated and more expensive second phase looms, official data from Phase I paints a detailed picture of massive utilisation, high-value treatments, significant rejections, and the financial pressures that shaped the scheme's first chapter.
Phase I in Numbers: High Claims and High-Value Treatments
The scale of Medisep's first phase was substantial. Up to August 1, 2025, the scheme processed a staggering 10,89,791 claims, providing insurance coverage worth Rs 1,964.74 crore. The financial exposure was heavily skewed towards complex, specialised procedures rather than routine care. Knee replacement surgeries emerged as the single largest treatment category by value, with 2,106 claims amounting to Rs 37.06 crore.
Other major high-cost interventions included 145 liver transplant procedures costing Rs 19.27 crore, 156 hip replacement surgeries involving Rs 2.75 crore, and 108 kidney transplants also worth Rs 2.75 crore. The scheme also covered advanced cardiac procedures like CRT-D and ICD implants, bone marrow and stem cell transplants, and cochlear implantation, collectively underscoring a focus on life-saving, catastrophic care.
Coverage during Phase I extended to 1,920 treatment procedures and 12 categories of serious organ transplant surgeries in empanelled hospitals. A critical provision allowed for emergency treatments for heart attacks, strokes, and road accidents even in non-empanelled hospitals, subject to conditions, via a reimbursement model.
The Undercurrent of Rejections and Financial Strain
Alongside approvals, a significant undercurrent of rejection ran through the scheme's first phase. By August 1, as many as 1,16,041 claims, involving Rs 87.85 crore, were rejected. While government data does not specify the reasons for these denials, the sheer volume became a major point of contention and dissatisfaction among employees and pensioners. This fed into wider complaints about difficulties in accessing cashless treatment and reported uncooperative behaviour from some hospitals under the scheme.
Financially, the government front-loaded the scheme. For Phase I, it released a premium amount of Rs 1,749.70 crore and GST of Rs 384.08 crore, taking the total government outgo to Rs 2,131.24 crore. These payments were made in advance. To manage the extraordinary costs of organ transplants and catastrophic illnesses, the government had earmarked Rs 35 crore from the premium as a three-year reserve. However, this insurer's corpus fund was exhausted within the first six months, forcing the government to release an additional Rs 45.21 crore from its retained corpus fund from April 1, 2023.
Phase II: Premium Shock and Unanswered Questions
Against this backdrop, the government issued orders on August 14, 2025, to roll out Medisep Phase II, with clear signals of a premium increase. Based on a medical expert committee's recommendation for a 5% hike, the contribution was initially suggested to rise to Rs 750 per month from the Phase I rate of Rs 500. However, the final order set the figure at Rs 810 per month—a 62% increase—which employee organisations described as a "premium shock."
The annual financial implication is stark: the contribution jumps from Rs 6,000 under Phase I to Rs 8,237 under Phase II, excluding GST. The concerns, however, extend beyond the quantum of the hike. There is widespread uncertainty among beneficiaries about whether this sharp increase will translate into proportionately better insurance coverage limits, improved treatment packages, or resolution of the operational issues that plagued Phase I.
"There is uncertainty over whether benefits will actually increase or whether the same problems will continue with a higher deduction from salaries and pensions," noted a serving employee from the law department, echoing a common sentiment. The resentment is particularly acute among pensioners and lower-level employees who feel the financial burden most sharply.
As Medisep transitions into its more expensive second avatar, the Phase I data tells a complex story of high utilisation and substantial public spending, tempered by persistent beneficiary dissatisfaction. Whether Phase II can address the unresolved concerns of cashless treatment access and hospital behaviour, or whether it will simply deepen the sense of financial strain without delivering clearer benefits, remains the central question hanging over Kerala's ambitious health insurance experiment.
