Employees’ State Insurance Scheme: A Preliminary Note

Mithun Som

Introduction to ESI:

The Employees’ State Insurance (ESI) Scheme, enacted in 1948 was the first major legislation for social security in India. Based on the principle of “pooling of risks and resources”, it guaranteed to provide full medical facilities to the beneficiaries. In addition to this, it also promised adequate cash compensation to insured persons for loss of wages or earning capacity in times of physical distress arising out of sickness, employment injury or unemployment.

The main benefits provided by the ESI are sickness benefit, disablement benefit, dependent’s benefit, maternity benefit, medical benefit and others like funeral expenses, unemployment expenses, etc.

ESI has the potential to become a full-fledged social security system in India. However, for that to happen, several lacunae must be addressed. This paper tries to outline the ESI structure, its operation, flaws and some directions for improvement.

Who is eligible for insurance?

Any factory/firm/establishment where manufacturing process is carried on and which employs more than 10 persons have to register with the ESI. The establishments include shops, restaurants, cinema theatres, road motor transport undertakings, newspaper establishments, private medical and educational institutions, etc. [12] Thus, in principle, permanent employees, temporary employees in the formal sector and employees in the unorganized sector are covered.

The requirement is an employer-employee relationship in which the employer is expected to deduct from the wages of the employee, add his own contribution and make the payment to the ESIC.  Thus, self-employed persons, e.g., people in the service industry, those who run auto-rickshaws, street vendors, etc., are not covered.

Employees earning not more than Rs.15,000 per month are presently entitled to it. They contribute 1.75% of their salary and the employers contribute 4.75% of the employees’ salary. The state government also contributes 1/8^th share of the cost of medical benefit. ESI gives unlimited treatment for the person and the family.

ESI smart cards are being introduced since 2009 to enable the holder to access ESI hospitals across the country. There is one smart card for the entire family including the dependents—spouse, children, father and mother. A person is entitled for super-speciality care three months after getting the card. A dependent is entitled to the same after six months.  A retired person and his/her spouse can also avail medical benefits on payment of a nominal amount of Rs. 120 per year.

Employee State Insurance Scheme (ESIS) and Employee State Insurance Corporation (ESIC)

ESIS as laid down by ESI Act of 1948 is implemented by the ESIC, an autonomous body under the Ministry of Labour and Employment, Government of India. Till recently the ESI department of respective state governments administered the provision of care. Since about a decade there has been a move to establish hospitals directly run by the ESIC in each state.  There is one such ‘Model Hospital’ in every state.

The Model Hospital at Nacharam, Hyderabad was the first in the country. [13] A senior official at Nacharam said that the corporation run hospitals are expected to be better because the head of the hospital gets a free hand, which means better equipment, supplies and overall management. He also said that the state run ESIs however do not run as efficiently largely because of low priority and lack of funds and that the corporation is taking steps to improve these.

Structure of ESI Health Care Network in India and AP:

The ESI health care system has a three-tier structure. At the first level are the dispensaries, which have two to five doctors. ESI has a network of 1403 dispensaries in the country. At the second level are 146 hospitals (as on March 2011). Diagnostic centres function between the dispensaries and hospitals without any surgical facilities. There are some super-speciality hospitals at the third level. However, if Andhra Pradesh is taken as an example, the bulk of the tertiary care referrals go to the corporate super-speciality hospitals. Five zonal occupational disease centres have also been set up in the country for early detection and diagnosis of occupational diseases.

In Andhra Pradesh there are eleven hospitals and 142 dispensaries. Hyderabad has three hospitals in Sanathnagar, Nacharam and Ramachandrapuram.

Finance

The tables 1 and 2 below provide a summary of ESIC finances. As table 1 shows total benefits that accrue to the beneficiary (medical and other cash benefits) amount to approximately 78% of the total expenditure, while the administrative cost is about 17%. However the total income of ESIC exceeds the total expenditure and the surpluses are very high. For example in the year 2009-10, the income was Rs. 4,452 crores while the total expenditure was Rs. 2,066 crores. This is a surplus of 54%.  The surplus funds are kept as fixed deposits in nationalized banks or as special deposits with the central government. Thus as table 2 shows the total invested funds with ESI in 2008-09 is Rs. 19,583 crores.

Table-1:  Income Expenditure Summary, ESIC

(Rs. in million)

ESIC, various Annual Reports – Source: PHFI, 2011

Table- 2: Surplus funds invested by ESI

(Rs. in million)

ESIC, various Annual Reports – Source: PHFI, 2011

Referrals:

ESI hospitals have tie-ups with super-speciality government and corporate hospitals. Any referral from the hospital has to be approved by the Referral Committee and finally approved by the Medical Superintendent of that hospital.

Insights into Functioning:

1. The dispensaries function as primary care centres. It is seen from patient experiences, that they are not operating effectively and people choose to go to other private practitioners at that level. For example, for Ramesh from Medak town, the nearest dispensary was in Alwal, Secunderabad. Even if he went to this dispensary, they would give medicines for simple ailments and generally refer him to Sanathnagar or Nacharam Hospitals in Hyderabad.
2. The interviews with patients and the data obtained suggest that the ESI hospitals are able to provide secondary level of care. Thus Ramesh (above) preferred to come to Nacharam for his wife’s delivery. Another woman, Indira, who has had an ESI card for the last five years, has never used the services. But this time she has come for her delivery as she gets three months maternity leave as well as some cash benefit. It is obvious that the functioning is like a typical government hospital system. However the tests and medications, specially at the level of secondary care, are reasonably effective.
3. Again observation at Nacharam indicates that serious cases are referred to corporate hospitals for tertiary level care. Thus, Khadija, a dependent mother of a BPO worker, has been diagnosed with brain tumor in a corporate hospital when she first went with her MRI result. She was told that she needs a surgery. She has now accessed the ESI for the first time and hopes to ask the doctor to refer her to the same corporate hospital for her surgery.
4. People who access the services, come for cash benefits in situations of sickness, maternity, or handicap. For example, both Indira and Khadija (above) came to ESI to access these other benefits. Many also come for medical benefits for critical illnesses which may otherwise be extremely expensive.
5. Retired workers too seek to use the ESI system but things always don’t work out.  For example, Azam Khan retired two years back and has been paying a deposit of Rs.120 per year to keep the ESI coverage. When he collapsed at his home in Adilabad, he was referred to Sanathnagar hospital and was told that he is not entitled to super-speciality treatment in the corporate hospital.

Observations and Analysis:

1. My tentative observation is that at the primary level, dispensaries operate in unsuitable rented premises, handle high patient loads and are poorly equipped with inadequate infrastructure, medicines, etc.
2. It is apparent that for the beneficiaries interviewed, the system is working fairly well at the secondary level, a little better than a government hospital.
3. The data indicates that at least for the Nacharam hospital, about 22% of the serious cases are referred to tertiary level corporate hospitals.
4. From the interviews of patients in ESI hospitals, we find that employees of BPO industry, health industry, reputed hotel chains also access the services.  E.g., Pizza Hut, Ramoji Film City, VLCC, etc.  Thus it would seem as if a wider segment of formal employees are accessing the ESI system. This has also been indicated by doctors who have said that more white collared patients are using the ESI.
5. The substantial surplus of income over expenditure also points to underutilization, a misplaced sense of thrift and overcautious control over the disbursement of benefits. Thus it would seem that there are opportunities to increase utilization of surplus funds for the existing catchment of patients.
6. However it is also clear from other contributions to this broadsheet that barely two percent of the workforce is covered under ESI. The reason for this is that workers are not registered by the employer. Sometimes, even though salary deductions for ESI may be made, the employer does not pay the money to the corporation. In such a case informal workers and contract workers have no access to the ESI system. Thus, in spite of claims about its improving functioning, the ESI as it stands is not addressing the health needs of the working population.
7. In the absence of a continuous employment record, the relationship between disease or injury and occupations never gets established. Therefore, these patients don’t get compensation due to them.
8. Thus, the larger question of how to bring the informal, unregistered workers, rural and urban, under the ambit of ESI will have to be answered by a change in the act itself.

Reference:

Public Health Foundation of India, “A Critical Assessment of the Existing Health Insurance Models in India” Research Study submitted in 2011.