Serious lapses in Medisep: Finance department initiates action against insurer

THIRUVANANTHAPURAM: The state government is preparing to initiate formal action against Oriental Insurance Company, the provider for the Medisep health insurance scheme, following repeated failures to provide treatment benefits as stipulated in their contract. Preliminary findings suggest widespread administrative irregularities, with allegations that the company exploited the Election Code of Conduct to bypass its contractual obligations.

As a bilateral agreement between the government and the insurance provider, the Medisep contract grants the state the authority to terminate the partnership if specific terms are defaulted upon. Currently, the government remits an annual premium of Rs 956.3 crore—collected from 11.6 lakh employees and pensioners—alongside a Rs 40 crore corpus fund. Despite these substantial payments, the denial of promised benefits is being treated as a "serious lapse" by the Finance Department.

The current investigation follows a pattern of service failures. Last month, numerous beneficiaries were denied coverage under the guise of "software glitches." During the subsequent assembly election period, the government’s ability to intervene was legally restricted, a window of time that officials suspect was used by the insurer to commit further irregularities.

With approximately 31 lakh people—including 19.8 lakh dependents—relying on the scheme, Medisep remains the largest group insurance program in the country. Each member contributes an annual premium of Rs 8,244, and any failure to deliver the promised coverage is considered a legal default. Finance Minister K.N. Balagopal has confirmed that the government is reviewing the agreement's terms to determine the extent of the breach before taking further action.

Key grievances and findings

• Partial Claims: Failure to reimburse the full cost of treatment as per the agreed schedule.
• Denial of Cashless Facility: Forcing beneficiaries to pay out-of-pocket despite the "cashless" nature of the scheme.
• Hospital Non-Compliance: Discrepancies between the benefits promised in the contract and those actually available at empanelled hospitals.
• Regulatory Default: Evidence suggesting the insurer bypassed administrative protocols during the election period.