Employee State Insurance Scheme: Is it for Workers?

Employees’ State Insurance Scheme (ESIS) is an integrated social security scheme based on the principle of “pooling of risks and resources”, mandated to provide protection to workers and their dependents in the organized sector in contingencies such as sickness, maternity and death or disablement due to employment injury or occupational disease. The scheme is operated by Employees State Insurance Corporation (ESIC) established under the Employees’ State Insurance Act, 1948 (the Act) under administrative control of Ministry of Labour and Employment, Government of India. ESIS is a self-financing health insurance scheme in which contributions are raised from covered employees (1.75%) and their employers (4.75%) as a fixed percentage of wages. The ceiling on monthly wages for coverage is INR 15000 with effect from 1 May 2010. At present ESI covers only about four per cent of the total work force and 67 per cent of organized workforce in the country.

To ascertain the functioning of ESIC, regular audits have been undertaken by CAG, in addition to internal audits carried out by its own audit wing. The last audit by CAG was done in 2015 for the period from 2008-09 to 2012-13. Previously CAG had conducted audit in 2005 and 1994. The audits have highlighted serious shortcomings and shortfalls in the working of the ESI scheme. Below are listed some important findings from the Audit and their implications

  • Income and Expenditure  – The accumulated surplus increased from 13481.40 crore in 2008-09 to 19157.09 crore in 2012-13. Consistently high income and low expenses is a matter of serious concern. Reluctance of ESIC to spend workers money for the benefit of workers themselves needs to be fixed urgently. Spurious rejection of claims, poor quality of services, lack of manpower are some areas which can be immediately fixed with this huge corpus of funds.
  • Arrears of Contributions – As of March 2013, an amount of INR 1655.42 crore was marked as arrears which is an increase of 30% from 2008-09. The faulty recovery mechanism has been highlighted in previous audits and no steps have been taken towards improvements.
  • Budget – the audit found discrepancies in the budgetary process and huge safety margins were built into the budget which effected the implementation and action plan. Further, the ministry of labour passed the budget without any oversight
  • Payments to states without audit certificates – payments were made to several states without any audited records and receipts. Maharashtra with 520 Crore, Karnataka 375 Crore, Kerala 206 Crore, UP 216 Crore, west Bengal with 189 crore and Andhra Pradesh with 197 crore were the biggest defaulters of unaudited payments.
  • Meetings of ESI Committee – Audit observed that in 15 states (Assam, Chhattisgarh, Delhi, Goa, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Uttarakhand) the shortfall in holding Regional Board meetings (as per norms and charter) was 75 per cent or more. If ESI committees does not meet and review the functioning, there is no way for the shortcomings to be fixed.
  • Delays in settlement of claims of cash benefits – Audit found long delays in processing of claims even though time limits have been set and the ESIC had undertaken computerisation of all processes and records. Some delays went as high as 1 year. Workers money not being provided to workers when they need the most?
  • Medicines (Procurement and Quality) – Audit observed that in several instances, medicines were procured at rates higher then specified, sub-standard medicines procured, medicines with close to expiry dates procured. No disciplinary actions were initiated against any erring officials.
  • Manpower – The shortage of 41 per cent of the specialists had an adverse impact on the specialists’ services of the ESIC hospitals, leading to an increase in the quantum of referral cases

There are several other shortcomings which have been highlighted in the CAG report. For a detailed critique of the Audit, read the report prepared by Environics trust by Clicking Here.