The Maharashtra government has recently made a significant decision by terminating a Rs 3,000 crore contract with United India Insurance (UII), a public sector company based in Chennai. This contract was for the implementation of the state’s flagship health insurance scheme, Mahatma Jyotiba Phule Jan Arogya Yojana (MJPJAY), which provides healthcare coverage to millions of families in the state. The termination was due to what the government cited as “unsatisfactory response” from the insurer.
Why Was the Contract Cancelled?
According to Ramesh Chavan, the CEO of Mahatma Phule Jan Arogya Yojana, the decision to terminate the contract stemmed from several issues. One of the main problems was that United India Insurance failed to meet its financial obligations. After signing the contract in June, the company was supposed to pay a Rs 93 crore performance bank guarantee, but it did not fulfill this requirement. Additionally, the insurer had delayed payments to hospitals due to an increase in claim amounts last year. This led to numerous complaints from hospitals participating in the scheme.
Despite multiple meetings between the Maharashtra government and the leadership of United India Insurance, the company’s performance did not improve, which eventually forced the government to take action and end the partnership.
Future of the Scheme: Going Solo?
The state government is now considering implementing the universal health coverage on its own, without the involvement of any insurance company. This raises concerns about how the government will manage such a large-scale program independently, especially since the scheme was previously managed by an insurance company for the last four years.
Under the previous arrangement, the Central government contributed around 60% of the insurance premium, with the remaining 40% paid by the Maharashtra government. It is yet to be seen how this financial structure will evolve if the state decides to take on the task without an insurer.
Financial Strain on the Insurer
Initially, the scheme seemed profitable for United India Insurance. In fact, during the first year of implementation, the insurer refunded Rs 265 crore in surplus funds back to the state government. However, in the second year, the scheme broke even, and during the following two years, it became a loss-making venture for the company. This financial burden may have contributed to the insurer’s unsatisfactory performance.
Premiums and Coverage under MJPJAY 2.0
Under MJPJAY 2.0, the state had finalized a premium of Rs 1,300 per family for an estimated 2.38 crore families, covering a total population of around 12.3 crore people. The total insurance premium was over Rs 3,000 crore, and the coverage for each family was increased from Rs 1.5 lakh to Rs 5 lakh. While United India Insurance was supposed to cover up to Rs 1.5 lakh per family, the rest was to be managed by the State Health Assurance Society (SHAS).
Issues with Payment and Contract Termination
An official from the insurance company alleged that the Maharashtra government had not paid any premium to UII, even though the scheme had been in effect since July. Instead, the government decided to cancel the contract abruptly, without providing any formal reasons or notice.
While the insurer has the option to take legal action, it is unlikely to do so. The contract contained a clause that allows the state government to terminate the agreement at any time during its tenure.
Importance of the Scheme
The Mahatma Jyotiba Phule Jan Arogya Yojana has been a popular scheme, especially at a time when healthcare costs are skyrocketing. The program was introduced in 2020 and aimed to provide universal health coverage to all residents of Maharashtra with valid ration cards and domicile certificates. The scheme offered cashless healthcare services for various medical conditions through a network of both government and private hospitals.
In its partnership with Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), MJPJAY expanded the list of covered medical procedures to 1,356, with 1,900 hospitals empanelled under the scheme. Over the last four years, SHAS had paid a premium of Rs 797 per family to UII, totalling around Rs 1,900 crore annually.
What’s Next for Maharashtra’s Healthcare?
As Maharashtra looks to transition away from using an insurance company to manage its universal health coverage, it remains to be seen how the government will handle the complexities and financial challenges involved. The state has shown its commitment to providing healthcare to its citizens, but the path forward is uncertain.
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