The Role of Employees State Insurance Corporation in Providing Social Insurance in India (Insurance)

By Damu Chandran.C

Email: damu111@hotmail.com

Ph No: 9895890079

Abstract
The Role of Employees State Insurance Corporation in Providing Social Insurance in India This paper evaluates the role of Employees State Insurance Corporation in providing social insurance to workers in India. Employees State Insurance Corporation set up by the

Government of India as per the provisions of the ESI Act, provides various social security benefits to the workers and their families in the form of medical care and cash payments to compensate loss of wages due to different contingencies for a single contribution through ESI Scheme. Since its inception in 1952, ESIC has been catering to the workers to a humane egalitarian mission for the advancement of the nation. The study is exploratory in nature using primary and secondary data. This paper examines the quality of Social Insurance Benefits provided by Employees State Insurance Corporation in India. Coverage of the Scheme is restricted to organised sector. The main source of finance for funding the Scheme is contribution received by the Corporation from employees and employers. This study revealed that to a certain point ESI Corporation was successful in playing its role of providing social security benefits to workers in the organised sector. It has vast resources to provide world class medical facilities and extend the implementation of the Scheme to more areas.

The Role of Employees State Insurance Corporation in Providing Social Insurance in India
1. Introduction

Social insurance is basically a system of monetary and health protection provided to individuals in contingencies such as disease, disablement and death which are beyond the human control. It may be any government-sponsored programme in which the benefits and eligibility requirements of the program are defined by law. The programme will be funded by taxes or premiums paid by or on behalf of participants and sometimes additional sources of funds may be used. The programme serves a defined population, and participation is either compulsory or the programme is heavily enough subsidised that most eligible individuals choose to participate. As per 2011 data, labourforce in India is about 459 millions. Out of which 27.27 Million workers are in the organized sector, (18.00 million in public sector and 9.27 million in private sector) and the rest are in the unorganized sector. Employees in public sector are provided social protection under the rules of the respective Governments. Therefore it is the workers in private sector and unorganised sector are those who are in need of special social insurance schemes. The social insurance programmes in India derives their strength and spirit from the directive principles of the state policy as contained in the Constitution of India. These principles provided that social insurance to workers are either solely at the cost of the employers or on the basis of joint contribution of the employers and the employees. Social security to the workers in the organised sector is provided through different Central Acts, namely: Employees State Insurance Act, 1948; Employees Provident Fund & Miscellaneous Provisions Act, 1952; Workmens Compensation Act, 1923; Maternity Benefit Act, 1961, and Payment of Gratuity Act, 1972. Social insurance arrangements in the unorganized sectors is by way of Central legislations including welfare funds, Social assistance through welfare Funds of Central, Social insurance Schemes, State legislations including welfare Funds and Public initiatives. The organised sector is characterized by a direct employer-employee relationship within an organization and has labour laws and other regulations to control the activities of the sector. The unorganized sector on the other hand, there is no direct employer- employee relationship, lack of labour law coverage, seasonal and temporary nature of occupations, high labour mobility, dispersed functioning of operations, casualization of labour, lack of

organizational support, low bargaining power, etc. all of which make it vulnerable to socioeconomic hardships. The social insurance needs of workers in both sectors differ in many ways. In addition to medical care, the workers in unorganised sector mainly require income support in times of drought, lean seasons and during periods of unemployment. Whereas organised sector workers medical and monetary support when are physical incapable of working since there is no problem of seasonal unemployment. In India, the problem of social insurance in organised sector is mainly handled by Employees State Insurance Corporation formed under Employees State Insurance Act, 1948. When all other Schemes provide only monetary support to workers, ESI Scheme provide both medical and monetary support to workers during eventualities such as sickness, maternity, temporary or permanent disablement and occupational disease or death due to employment injury for a single contribution. This Scheme was launched on 24th February, 1952 at two centers namely, Kanpur and Delhi by Pt. Jawaharlal Nehru, the first Prime Minister of India and Pt. Nehru also became the first Honorary Insured person. The ESI Scheme is based on the principle of pooling of risks and resources in which every contributor at any given point of time emerges as a beneficiary or a benefactor and society at large is the net gainer. The ESI Scheme is administered by the Employees State Insurance Corporation, a statutory body having a perpetual succession and a common seal, and set up by the Government of India on 24th February, 1952, with its Headquarters located at New Delhi. The Corporation comprises representatives of employees, employers, the Central Government, State Governments, Medical Profession and the Parliament. Union Minister of Labour functions as Chairman of the ESI Corporation and Director General as Chief Executive is responsible for day-to-day administration. A Standing Committee constituted from among the members of the corporation, acts as an Executive body. The Medical Benefit Council, a statutory body at the open level, Regional Boards at the State level and Local Committees at the grass root level has been constituted as advisory bodies for smooth functioning of the ESI scheme. Administrative machinery of the Corporation includes Social Security Officers, Revenue Recovery machinery, Employees Insurance Courts and Public Grievances cell.

Scope of the Study The study examines the role of the ESI Corporation in providing social insurance to workers in India by assessing the benefits provided by the Corporation under the ESI Scheme. The Study covers only insured persons from the state of Kerala for evaluating the

quality of benefits. An assessment of sources and application of finance of the Corporation is also done to get an idea about the expenditure on different social insurance benefits.

Objectives of the Study The main objectives of the study are to evaluate whether ESI Corporation is successful in solving the problem of social insurance in India and to what extent. Methodology The study is exploratory in nature using primary and secondary data. Primary data is collected from 100 sample insured persons who had treatment from ESI hospitals and also availed of any of the Cash Benefits provided under the Scheme and selected equally from two districts of Kerala: Alappuzha and Kollam, using purposive sampling technique. Out of 100 samples, there are equal number of insured men and women. The secondary data were collected from various printed and published materials of the ESI Corporation like annual reports, periodic journals, circulars and press releases and also from website of the Corporation. The study covers a period of three years from 2008-2009 to 2010-2011. For the purpose of analysis, statistical tools like averages, percentages and growth rates were used. Bar diagrams and tables were also used.

2. Analysis of Data Coverage of Scheme The ESI Act covers workers in the organized sector only. At present about 53% of organized sector are covered under the Employees' State Insurance Act, which represents only about 3.11% of the total work force in the country. The beneficiaries of the scheme include both the insured persons and their dependents. An insured person means a person who is or was an employee of whom contributions are or were payable under the ESI Act and who is by reason thereof entitled to any of the benefits provided under the Act. The ESI Act, 1948 is applicable to the following Factories employing 10 or more persons irrespective of whether power is used in the process of manufacturing or not. Establishments like shops, hotels, restaurants, cinemas including preview theatres, road motor transport undertaking and news paper establishments employing 10 or more persons.

The Scheme has also been extended to private educational institutions and private medical institutions in Rajasthan, Bihar, Pondicherry, Jammu & Kashmir, Uttarakhand, Chattisgarh, West Bengal, Jharkhand, Kerala, Uttar Pradesh, Andhra Pradesh, Assam, Punjab, and Tamilnadu. In India, the ESI Scheme has been implemented in All states except Manipur, Sikkim, Arunachal Pradesh and Mizoram. Union Territories like Delhi and Chandigarh The existing wage-limit for coverage under the Act is Rs.15,000 per month and this wage-limit is determined by the Standing Committee of the Corporation periodically. The Scheme extends to all types of workers whether permanent or temporary. The remaining workers (47%) in the organised sector are not covered under the ESI Scheme due to the following reasons: Employees of Central and State Governments Workers of factories and establishments employing less than 10 persons. Workers of factories and establishments situated in the non-implemented areas Workers drawing wages exceeding Rs.15, 000/- per month. The Committee on Perspective Planning (1972) of the ESI Corporation had aimed at extension of the Scheme in three phases. In the first phase, factories run with power and employing 10 to 19 workers, factories run without power employing 20 or more workers and establishments employing 20 or more workers are to be covered. In second phase the organized mines and plantations. In the third phase the unorganised and semi-organised sectors. The first phase had been almost successfully implemented even though it is not complete. ESI Corporation has started measures for second and third phase. In the case of unorganised sector since there is no fixed employer-employee relationship, no fixed earnings and no fixed wage records recovery of contribution from such workers will be very difficult. Since the ESI Scheme provides a uniform package of benefits at a uniform rate of contribution, it cannot be extended to workers in the unorganized sector in its present form. However, as per amendment in the ESI Act, 1948 w.e.f. 01/06/2010 vide ESI (Amendment) Act, 2010, medical benefit under the scheme can be extended to other beneficiaries on payment of user charges subject to framing of schemes by the Central Government. Further the Govt. of India, Ministry of Labour & Employment has introduced a Scheme called

"Rashtriya Swasthya Bima Yojana" for providing social security to BPL (Below Poverty Line) workers in the unorganized sector.
Bar Diagram-1 Number of Employees, Insured Persons and Beneficiaries under the ESI Scheme (No. in Lakhs)
700 600 500 400 300 200 100 0 2008-09 2009-10 2010-11 125.69 129.37 138.96 143 154.28 155.3 No. of Employees No. of Insured Persons No. of Beneficiaries 501.97 554.84 602.57

Source: ESI Corporation Annual Reports Table 1 Table showing the Benefits provided by the ESI Corporation under the Employees State Insurance Scheme ESI BENEFITS QUANTUM OF BENEFIT

Medical Benefit Medical Benefit to Retired /Disabled IP & his/her spouse Sickness Benefit

Full Medical Care to IP and his family Full Medical Care for self and spouse only 70% of average daily wages and is payable for 91 days during two consecutive benefit periods. 80% of average daily wages for an extended period of up to two years Full wage for undergoing sterilization operations for family welfare ; 7 days for Vasectomy and 14 days for Tubectomy from the date of operation or from the date of admission in the hospital Daily rate of benefit is equal to full wage. Benefit is payable for a maximum period of 12 weeks in case of confinement, 6 weeks in case of miscarriage or medical termination of

Extended Sickness Benefit Enhanced Sickness Benefit

Maternity Benefit

pregnancy which can be extended up to one additional month in case of sickness arising out of confinement. Temporary Disablement Benefit Payable in case of temporary disability arising out of an employment injury for the period duty certified by an insurance medical officer. Benefit is payable at 90% of average daily wage Payable where the disablement is due to an employment injury or occupational diseases that results in permanent, partial or total loss of earning capacity and is paid periodically to the insured person for life. Amount of benefit depends upon the loss of earning capacity of the IP determined by a Medical Board Periodical pension is paid to the dependants of a deceased insured person where death occurs as a result of an employment injury or occupational disease. The widow receives a fixed rate equivalent to 3/5th of the disablement benefit rate and each dependent child is paid an amount equivalent to 2/5th of the benefit. The rate of dependants benefit is 90% of average daily wage. Lump sum payment up to a maximum of Rs. 10,000 made to defray the expenditure on the funeral of the deceased insured person. Confinement expenses are payable to an insured woman or an insured person in respect of his wife in case facilities for confinement are not available in ESI Institutions. The amount payable is Rs.2,500/- per case up to two confinements only. Rehabilitation allowance is payable to the insured persons, for each day, on which they remain admitted in an Artificial limb-centre for fixation or repair or replacement of artificial limb at double the standard benefit rate. Standard benefit rate is calculated as per ESI (Central) Rules, 1950 Scheme is for insured persons not more than 45 years of age and disability due to

Permanent Disablement Benefit

Dependants Benefit (paid to dependants of deceased IP)

Funeral Expenses(paid for the funeral of a deceased IP)

Confinement Expenses( to insured woman or in respect of wife of IP)

Rehabilitation Allowance

Vocational Rehabilitation Allowance Skill

Development Scheme

employment injury is not less than 40 and allowance is paid for all the days of training in Vocational Rehabilitation Centre at the rate of Rs.123 per day or the actual amount charged by the centre, whichever is higher Under this scheme, an insured person who become unemployed after being insured for 3 or more years, due to closure of factory or establishment, retrenchment or permanent disablement (not less than 40%) arising out of non-employment injury is entitled to unemployment allowance equal to 50% of average daily wages for a maximum period of up to one year and vocational training is provided for upgrading skills for which the expenditure on fees and travelling is borne by the ESI Corporation. Medical care is also provided for the insured person and his family

Rajiv Gandhi Shramik Kalyan Yojana

Source: Official website of the ESI Corporation: www.esic.nic.in

Finance of the ESI Corporation Contribution received from employees and employers was the main source of finance of the Corporation. The rates are revised from time to time. The rates of contribution were last revised by the corporation in 1st Jan, 1997. There rates are Employees Contribution - 1.75 percent of the wages. Employers Contribution - 4.75 percent of the wages. Total - 6.50 percent of the wages. Employees in receipt of an average daily wage up to Rs.100/- are exempted from payment of contribution, but are entitled to all social security benefits under the Scheme. However, employers will contribute their own share in respect of these employees. The other sources of revenue are interest on investments of reserve fund, rent, rates & taxes and fees, fines & forfeitures. As per the provisions of the ESI Act, the State Governments also share a 12.50% of expenditure on medical care. According to the financial reports of the ESI Corporation during the 3 year period from 2008-2009 to 2010-2011, out of total income, average percentage of contribution was 80.12%, interest on reserve fund

investments was 17.53% and other sources including rent, rates & taxes; fees, fines & forfeitures; compensation from State Government and miscellaneous came to 2.35%. Revenue of the Corporation is mainly utilised for the purpose of providing medical care to the insured persons and their dependants, payment of cash and other benefits, and administrative expenses. A portion of revenue is provided as provision for repairs, maintenance and depreciation of buildings and remaining is transferred to various reserve funds. As per the financial reports of the corporation during the 3 year period from 20082009 to 2010-2011, the Corporation has spend an average of 27.19% of the total revenue for providing medical benefits to the insured persons and their dependants, 8.62% for providing cash benefits, 0.05% for the other benefits. The percentage of administrative expenditure of the Corporation came to 8.39%. An average of 0.80% of the total revenue was transferred to capital construction reserve fund and 1.99% was provided as provision for repairs, maintenance and depreciation of buildings. Average Surplus revenue over expenditure came to 52.96%. Even after providing benefits to all needy insured persons the Corporation was able to make surplus. Since the Corporation is a social organisation existing for providing social security to the people, with the help this surplus income it can improve its medical facilities and extend its services to more and more areas.

Quality of Social Insurance Benefits

Quality of Medical Benefit Medical benefit is the most important social security benefit provided by the ESI Corporation under the ESI Scheme. Out of the total average amount spend on providing benefits i.e. Rs. 2, 06,081.27 Lakhs during the three year period from 2008-09 to 2010-11, Medical Benefit amounts to Rs. 1, 62,460.83 Lakhs (78.83% of total benefit). Medical benefit is provided to the insured persons and their dependants by way of free, full and comprehensive medical care. The primary, out-patient, in-patient and specialist services are provided through a network of panel clinics, ESI Dispensaries and Hospitals. For the purpose of providing medical care to insured persons and their dependants, the Corporation has 146 ESI hospitals, 1496 ESI dispensaries, 7455 Insurance Medical Officers and has reserved beds in State Government Hospitals. 1540 private medical practitioners had also been empanelled

for providing primary medical care. Super specialty services are provided through in-house super specialty facilities in some of the ESI Hospitals and large number of advanced empanelled medical institutions on referral basis.

Table- 2 Expenditure Incurred for Provision of Medical Care and per capita Contribution Income
Year Expenditure on Model/ESIC Hospitals (Rs. in Lakhs) 2008-09 2009-10 2010-11 32334.92 41958.34 54682.75 Expenditure on Super Speciality (Rs. in Lakhs) 9873.56 13590.20 33093.98 Total Expenditure (Rs. in Lakhs) Total Per Capita Expenditure (Rs.) (Rs.) 125964.10 198965.77 268031.55 1007.11 1460.97 1797.05 3114.55 2944.42 3918.73 Total per capita Income from Contribution

Source: ESI Corporation Annual Reports Table -1 shows that total per capita medical expenditure of the Corporation is increasing every year and the Corporation has more than enough income to provide fund for medical benefits. Even if the Corporation doesnt receive assistance from the Government, it can easily provide best medical care. Even though as per section 58 of the ESI Act, the
responsibility for providing medical treatment to the ESI beneficiaries is vested with the State Governments, the ESI Corporation had decided in principle to take over the administration of the ESI medical scheme from the State Governments because of its strong financial base.

In order to assess the quality of medical benefit provided by the ESI Corporation under the ESI Scheme, an analysis of the satisfaction level of the insured persons in the services and facilities provided in the ESI Hospitals is made in the study. Except in case of Availability of Medicines, other services and facilities provided in the ESI hospitals like Service of Doctors, Laboratory services, In-patient Treatment and Health Improvement Services were satisfactory to insured persons.

Bar Diagram- 2 Percentage of sample insured persons who opined the services and facilities provided in the ESI Hospitals were satisfactory. Insured Persons
100 90 80 70 60 50 40 30 20 10 0 87% 77% 46%

82%

76%

Insured Persons

Service of Doctors

Availability of Medicines

Laboratory Services

In-patient Treatment & other hospital facilities

Health Improvement services

Source: Primary Data

Quality of Cash Benefits Cash benefits include Sickness benefit, Maternity benefit, Disablement benefit, Dependants benefit, Rajiv Gandhi Shramik Kalyan Yojana and Funeral expenses. Out of the total average amount spend on providing benefits i.e. Rs. 2, 06,081.27 Lakhs during the three year period from 2008-09 to 2010-11, average percentage of Cash Benefit payments is 21.17%. During this period out of the total average cash benefit Rs. 43,391.5 Lakhs , 34.05% is provided as sickness benefit, 8.43% as maternity benefit, 42.55% as disablement benefit, 13.83% as dependants benefit, 0.36% as unemployment allowance under Rajiv Gandhi Shramik Kalyan Yojana and 0.78% as funeral expenses to the dependants of insured persons who died. The amount of cash benefits depends on the income earned by the insured persons from their employment. The study (Bar diagram-3) reveals that the majority of insured persons who have availed of the cash benefits were satisfied with amount of the benefits.

Table-3 Per capita expenditure as regards Cash Benefits of ESI Corporation and per capita contribution income
Benefits Sickness Benefit Maternity Benefit Temporary Disablement Benefit Permanent Disablement Benefit Dependants Benefit Funeral Expenses Rajiv Gandhi Shramik Kalyan Yojna Other Benefits Total Cash Benefit Income from Contribution 2008-09 (Rs.) 102.89 26.19 28.84 107.64 41.74 2.31 0.70 2009-10 (Rs.) 99.57 27.14 28.38 97.79 51.98 2.78 3.11 2010-11 (Rs.) 105.91 26.83 31.79 104.20 49.40 3.77 3.13

1.42 322.72 3114.55

1.43 324.06 2944.42

1.67 338.48 3918.73

Source: ESI Corporation Annual Reports Income of the Corporation from contribution alone far exceeds the amount paid as cash benefits, so the Corporation is able to provide reasonable compensation to insured persons. Since the fund is readily available, it will reduce the delay in disbursement of the cash benefits. The corporation will not find any difficulty in increasing the amount of benefits if there is any necessity.
Bar Diagram-3 Satisfaction level of Sample Insured Persons in the amount of Cash Benefits received by them

Insured Persons
100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Sickness Benefit Maternity Benefit Disablement Benefit Other Benefits Insured Persons 81.00% 83.33% 88.89% 71.43%

Source: Primary Data

3. Conclusion and Suggestions This paper examined the role of ESI Corporation in providing social insurance to workers and the quality of social insurance benefits provided by the Corporation under the ESI Scheme. To a certain point ESI Corporation was successful in playing its role of providing social insurance benefits to workers in the organised sector. The majority of insured persons were satisfied with the quality of medical benefit and those who availed of various cash benefits were satisfied with the amount of the benefits. The Corporation was successful in implementing the ESI Scheme covering more than fifty percent of workforce in organised sector. The Corporation needs to give more importance in improving its medical infrastructure because in todays world of rising prices and climatic changes, people are more prone to diseases and an ordinary person find it very difficult to pay his hospital bills. Since the Corporation has sufficient resources, it can extend the implementation of the Scheme to the unorganised sector which consists of majority of workforce in India. This will help to reduce poverty and health problems faced by workers in this sector. In the 60th year of service to the nation, the Corporation can convert the journey into a movement and place it amongst the leading social organisations of the world if it continues to provide best social insurance benefits and takes measures to improve and extend the implementation of the ESI Scheme.

Bibliography Books Amit Nanda. The Employees State Insurance Act, 1948 & The employees State Insurance (central) Rules, 1950. Current Publications, Mumbai, 2010. Employees State Insurance Corporation. 6 Decades of Inspiring Hope. ESIC, New Delhi, 2011. Employees State Insurance Corporation. Employers Guide. ESIC, New Delhi, 2001. L.R. Potti. Research Methodology. Yamuna Publications, Thiruvananthapuram Reports Employees State Insurance Corporation. Annual Reports (2008-2009 to 2010-2011). ESIC, New Delhi Employees State Insurance Corporation. Statistical Abstract (2008-2009 to 2010-2011). ESIC, New Delhi

Websites www.esic.nic.in esickerala.gov.in www.keralaesic.com www.scribd.com www.wikipedia.org www.disabilityindia.org