The entrenched insurance lobby, which has already made deep forays into the Indian healthcare industry in recent years, is now positioned to mount a serious assault on workers’ health. The recent revisions to the Employees' State Insurance (ESI) scheme, of 1948 vintage, which had provided workers and their families some access to modern healthcare services, threaten to significantly undermine the scheme. At the crux of the government’s ill-conceived “reform” of the ESI scheme is its utter inability to distinguish between the narrow focus on health insurance and the much wider responsibility of providing social security.
The ESI Act, 1948, born of the social contract that was part of the Indian freedom struggle, provides for various cash benefits such as maternity benefits, sickness benefits, unemployment allowance, dependent benefits and disablement benefits, apart from providing for medical treatment and healthcare for not only workers but also their families. In recent years, under mounting pressure from the private insurance industry, the government has equated the scheme with commercial medical insurance schemes. In reality, the ESI is far wider in scope of benefits that it provides, far beyond what any insurance scheme does, at a far lower cost to the workers. For instance, the ESI scheme provides for 26 weeks’ paid leave to women employees; the average monthly salary is transferred to the workers directly. This not only enables women to take care of their health during the pregnancy, but also attend to child care after delivery. More importantly, "More importantly, it enables women to remain in employment, avoiding the sack that many pregnant women face as soon as the employer learns that they are pregnant. This is not an insignificant issue, especially for women employed in labour-intensive occupations."
The ESI scheme also provides for significant benefits to the dependents on those who die in harness or while commuting to their workplace. Dependents who lose their breadwinner are eligible to receive 90% of the average salary drawn at the time of the death of the worker. In fact, there have been instances where dependent family members have received benefits even when the worker was not registered with the Employees’ State Insurance Corporation (ESIC), after the worker succumbed in a fall at their workplace. This lifetime benefit available to dependents is a feature that no commercial insurance scheme can match. Moreover, workers receive a measure of salary protection when they fall sick and are unable to report to work. Extended sickness benefit equivalent to 80% of the salary drawn by the employee would be paid during the entire duration of the paid leave, even while no contribution is being paid on his behalf. Further, the employee and his family members are entitled to medical treatment, similar to an employee, without a ceiling on cost of medical treatment during the receipt of Extended Sickness Benefit.
Clearly, the ESI reaches where no health insurance scheme does. But such a scheme requires a corpus or reserves in order to meet its commitments. Fundamental principles of accountancy dictate that provisions be made for liabilities arising in the future. This requires a build-up of reserves from current revenues. Indeed, the Comptroller & Auditor General of India (C&AG) mandates maintenance of reserves.
Obviously, no rational person would trust an organisation like the ESIC to pay them lifelong pension if it is not perceived as possessing adequate funds to pay where it is mandated to. Further, the reserves are to be deployed by the ESIC to create infrastructure such as hospitals for providing medical treatment to the employees and their family members. This is completely unlike what commercial medical insurance companies do as part of their business. In fact, there was a huge build-up of reserves, mostly because of decisions being made by career bureaucrats.
The task of building and maintaining ESIC’s reserves has been neglected by successive governments. Thus, building of reserves is essential as per the fundamental accounting and actuarial principles, as also mandatory as per the various rules. But the accumulation of excessive and huge reserves was the result of unilateral decisions taken by the bureaucrats, mostly without taking the Board of ESIC into confidence. Between 2014 and 2019, the “non-earmarked reserves” grew from Rs 15,650 crore in March 2013 to Rs 68,292 crore in March 2019 – marking an increase of 336%!
While the unilateral decisions taken by the Union Ministry of Labour and Employment have extended the ESI scheme to areas where no medical infrastructure (mainly dispensary to provide treatment and to issue certificates during maternity, sickness, etc., to avail cash benefits), there has been a reduction in medical benefits to employees as also tighter eligibility conditions for availing super specialty treatment and a general curtailment of benefits to workers and their families. The increase in the income ceiling for coverage under ESIC from Rs 15,000 to Rs 21,000 per month in January 2017 also contributed to the increase in the contribution income. In effect, while the coverage of the ESI Scheme has been extended, the benefits have been slashed. Thus, while the ESIC has been able to garner additional revenues through subscriptions as a result of the wider coverage, the actual benefits that members are able to access have been cut. While the number of dispensaries run by the ESIC has increased from 1,418 in 2014 to 1,500 in 2018, the number of employees covered by the scheme has increased from 1.95 crores to 3.11 crores, an increase of nearly 60%.
The fast-tracking of “reforms” since 2014 has substantially diluted the autonomy of the ESIC. In 2014, a series of changes made to the ESI scheme during the 162nd meeting of the ESIC Board, curtailed most of the benefits under the scheme. Importantly, members’ access to the super specialty treatment was reduced significantly.
The attack on the autonomy and benefits available under the ESI Scheme continued. In November 2016, a decision to increase the minimum eligibility period of coverage under the ESI scheme, for becoming entitled to super specialty treatment, was increased to two years from the then eligibility period of three months by the Labour Ministry, without even placing the proposal before the ESIC Board. This unilateral decision of the Union Labour Ministry in 2016 was diluted in October 2018 after staunch opposition and protracted efforts by the employees’ representatives on the ESIC Board. The government’s callous attitude is indicated by the fact that while the extension of the scheme to new areas that lacked basic health infrastructure resulted in revenue flowing into the coffers of the ESIC, expenditure from the corpus was slashed because of the arbitrary decisions that curtailed the scope of the benefits to the workers.
If proper medical care is extended to all the employees covered under the ESI scheme, the expenditure on medical care alone may amount to Rs 18,400 crore per annum, by applying the per capita expenditure towards medical care incurred by ESIC in Delhi, where the primary, secondary and tertiary medical care – are all administered by the ESIC directly (per capita medical expenditure being Rs.5,555 in 2017-18). Whereas, it may be pointed out that the income from contributions in 2017-18 was Rs 20,077 crores.
The proposed reduction in the contribution from the present 6.5% of the salary of the employee to 5% was further reduced to 4% when the official gazette notification was issued. However, these reductions, which were carried out in the name of “reforms,” were not based on any actuarial calculations, considerations or rationale. While the Ministry officials, who are divorced from any responsibilities, take the decision to reduce the rate of contribution, they have not decided as to how to provide the service to the 1.3 crore additional families in the new areas where ESI scheme was extended. In effect, the government has been collecting contributions from members who are unlikely to get any benefits in the near future, simply because there is no media infrastructure to serve them. Thus, self-proclaimed subject experts and advisors to the Labour Ministry exercise authority over the ESIC without any accountability.
Meanwhile, more reforms loom, which threaten the very foundation of the ESI scheme. One of these is the apparent proposal to make medical care optional to the employees covered under ESI scheme. For those, who opt out of medical care under the ESI scheme, the employees’ share of 0.75% of their salary, would be waived. If the medical care is made optional, what alternative has been extended to those of the employees who opt out of the medical care? Social security is non-existent without medical care.
As per the study by the Public Health Foundation of India, which was published in the British Medical Journal (2018), 5.5 crore families were pushed into poverty due to out-of-pocket hospitalisation expenditure. Further, 3.8 crore families were pushed into poverty due to unaffordable medicines alone. It said: “Despite governments launching several health insurance schemes, a majority of the population continued to incur significant expenditure on medicines as hospitalization-based treatment, which is what most insurance schemes cover, constitutes only one third of India’s morbidity burden.” It added that frequency of hospitalisation was lower than outpatient visits in general, especially for non-communicable diseases, which are chronic in nature requiring multiple consultations and long-term or lifelong medication and support.
With the public health spending of India being 1.15% of the GDP, which is lower than that of low-income countries like Bhutan and Sri Lanka, the so-called reforms are exposing Indians to a huge risk. It is obvious that the only beneficiaries of the dismantling of the ESI scheme would be the private insurance companies, many of which are in partnership with multinational insurers.
The premium for commercial health insurance starts at Rs.12,000 per annum for a family of four (2 adults, with the eldest being 30 years and 2 children for a sum assured of Rs.5 lakh), whereas the ESI scheme provides unlimited medical care for the family without any ceiling on cost of medical expenditure, at the cost of a mere Rs 150 per month (assuming the wage to be ceiling wages, Rs 21,000 per month).
In 2018-19, Rs 8,156.39 crores were spent on medical care for the employees and their dependents under the ESI Scheme. With a majority of the 1.3 crore families (in newly covered areas) becoming eligible for the super specialty treatment, it is reasonable to assume that expenditure under the scheme is likely to increase by at least 50% in 2019-20. Since about 10% of the Indian population is covered under the ESI scheme, improving the reach and efficiency of the ESIC would have a significant impact on morbidity levels in the country.
Another “reform” proposal being contemplated in the corridors of power is an amendment to the definition of wages in the ESI Act, to bring it on par with the Employee Provident Fund scheme. Currently, the ESI Act definition of ‘wages’ includes all remuneration paid or payable to the employee, unlike the EPF Act, which includes only basic wages, dearness allowance and retaining allowance, if any. This deceptively minor change in legal terminology threatens to significantly undermine the interests of the workers, especially those at the bottom of the pyramid.
Recall that the ESI scheme provides for a living wage even when the workers are sick, disabled or during child birth and maternity. This significant social security component lies at the heart of the ESI scheme. This living wage is extended in the form of cash benefits like sickness benefit (70% to 80% of average salary of the employees), maternity benefit (100% of average salary of the women employees), disability benefit (90% of average salary) and dependent benefit (pension to family members of deceased employee – 90% of salary drawn). All these cash benefits are computed based on the gross wages of the employees, as filed by the employer every month online, so that the employees are compensated (through direct bank credit), commensurate to the actual wages during the times of sickness. In effect, by reducing the scope of what constitutes the workers’ wage, the contemplated change would result in a large number of workers being shortchanged significantly. It would also result in an increase in morbidity levels because workers, fearing a shortfall in compensation under the ESI Scheme, may report for work when they are in fact ill. It would also be obviously heavily tilted against women and children who would bear the brunt of the changed definition.
There is no doubt that the ESI scheme can be improved significantly so that it fulfils its mandate better. For instance, the ESIC is unable to monitor and regulate the quality of service at dispensaries run by the state government. It could also implement changes in human resource planning to ensure that officials remain accountable.
Instead of widening the scope of the ESI scheme – the only countrywide scheme that delivers a measure of protection against illnesses – the government is tightening the noose around it. That this being done in the name of “reforms” is a supreme irony.
Also read: CITU, AITUC Condemn Government’s Decision to Cut ESI Contributions