The Employees’ State Insurance Corporation (ESIC) is a statutory body responsible for administering India’s flagship social insurance program. It is established under the Employees’ State Insurance Act, 1948 which empowers it to make rules with respect to the scheme under Section-95 of the Act. Rule-50 of the Employees’ State Insurance (Central) Rules provides for the wage threshold for coverage of an employee under the Act, and consequently the scheme. It was previously amended in 2016 when the wage threshold was raised from Rs. 15,000 to Rs. 21,000. Presently, there is talk circulating with regards to another proposed raise in wage threshold to Rs. 30,000. This article shall examine the implications of this proposed move and the possible objectives behind the decision.
The first possible objective behind this move is to increase the coverage of the ESI scheme and supplement an increase in the corpus of the fund. This shall not only aid existing beneficiaries but also the individuals who will come under coverage if such a move materializes. Another possible objective is to provide individuals with an alternative to private health insurance. India has one of the world’s highest rates of out-of-pocket spending with respect to healthcare. Furthermore, WHO data reveals that India spent just 1.46% of its gross domestic product (GDP) on healthcare, which puts it at a rank of 187 out of 194 countries. The lack of public health insurance and infrastructure is apparent in rural India, however, insurance is not seen as a worthwhile investment even for the ever-growing middle class, who are averse to paying high premiums if they do not foresee using the same.
This is a trend that needs to be bucked especially in light of India’s rising population above the age of 65. Out-of-pocket financing with respect to this portion of the demographic can prove to be especially problematic because of the lack of information and awareness about retirement savings and schemes. Therefore, this might be another reason as to why the ESI has decided to expand its coverage. A proposal that should be examined is access to healthcare beyond retirement in the form of continued access to ESI hospitals in exchange for a nominal fee.
Another plausible reason for the proposed expansion in coverage is the failure of employer-based insurance schemes in providing for individuals who form part of India’s vast informal economy. This in part due to the inability of such individuals to pay high premiums as well as the fact that they are paid on a daily or task basis which leaves them with little money to spend on insurance and healthcare as they need cash for daily expenses. Another factor that must be given due weightage is the information asymmetry that exists between individuals in the formal economy and those in the informal economy. The former are on average more aware of the need for such investments and their benefits than the latter. However, this is a line of reasoning that cannot be prescribed to the increase in wage ceiling as the same does not directly impact this section of the labour market.
Impact of Increase in Wage Threshold & Other Reforms
For the employer, there would not be any drastic effects arising out of the increase in wage threshold under ESI. Several employers will be relieved as they pay insurance at two levels-the first being contribution towards the ESI corpus and the other being group medical insurance for their employees. By increasing the wage threshold, they can opt-out of paying group medical insurance for a larger chunk of their employees. This might lead to unions bargaining to ensure that their members are provided with group medical insurance at the expense of some other benefit or right, thus kick-starting a cascading effect which leads to doubled costs for a larger set of employees.
While the intention behind this move is noble with respect to its impact on employees, there exists a great deal of distrust between employees and ESI with respect to the latter’s ability to provide adequate healthcare through its facilities. This is a major reason as to why the Government has brought in the Ayushman Bharat scheme. It attempts to build a network of private hospitals that will provide services for which they will be reimbursed by the Government, thereby expanding the coverage of Central Government Health Services (CGHS). The issues with ESI stem largely due to the ineffective delivery mechanism it is reliant on. Therefore, it is recommended that the ESIC shift its focus to ensuring that benefits reach workers universally either by expanding its reach through Ayushman Bharat or by implementing a card-based system. The ESIC can thus cater to a vast number of people without relying on its healthcare delivery system that fails to provide quality healthcare for a large section of our society. This will address the trust deficit that currently exists leading to employees opting for group insurance with higher premiums and payment of ‘double insurance’ by employers due to a large number of establishments paying both ESI as well as private group insurance.
In addition to these measures, the Government must also clarify the ESI’s role under Ayushman Bharat and focus on the organization’s functioning under Code on Social Security when the same comes into force. This will ensure that the organization performs its duties with a long-term vision and addresses the needs of several lakhs of beneficiaries. While measures of the above kind are noble in spirit, their implementation and the externalities associated with the same make them problematic. This is especially true when there are bigger, systemic issues that require redressal.
Drop your thoughts in the comments below.
|Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney.|
Simpliance makes no representations or warranties in relation to the information on this article.