SCHOOL OF LAW.

DEHRADUN
LABOUR LAW
ASSIGNMENT

Employees’ State Insurance Scheme: A Preliminary Note

MADE BY: SUBMITTED TO:

Jasveen Singh Ms. Mehreen Manzoor

500052818

R154216055

B.A.LL.B (Criminal/Labor Law)

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 1/8th 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. 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.

Patient information from the ESIC hospital in Hyderabad.

ESIC Nacharam had tie-ups with 24 hospitals in November 2012.

It referred 231 patients on an average in a month (2012) for admissions. Of the total referrals,
27% were referred to Nizam’s Institute of Medical Sciences, followed by 16% to Bibi Cancer,
14% to Kamineni and 9% to Mediciti. This is an average of 22% of the total patients admitted in
inpatient wards. These hospitals are at an average distance of about 10 km from the Nacharam
Hospital.

All medicines and tests are free for the patient.

Apart from this, ESIC Nacharam refers approximately 25 patients each day for consultations
with specialists.

Outpatient data indicates that the cardiac department that was functioning intermittently till
March 2009 has been shut down. Before 2009, in the months in which the cardiac department
functioned, there were approximately 160 patients per month.

Insights into Functioning:

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.
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.

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.

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.

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:

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.

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.
The data indicates that at least for the Nacharam hospital, about 22% of the serious cases are
referred to tertiary level corporate hospitals.

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.

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.

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.

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.

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.