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Unit 13: The Employees’ State Insurance Act, 1948

Coverage, under the chairmanship of Prof K.Srinath Reddy, has recommended interalia Notes
that the National Health Package be financed by the State with services being provided
by public as well as private institutions. The Committee has further recommended that
insurance companies (for profit ones) not be used for the purchase of healthcare on behalf
of the Government.
There is however lack of clarity about the role of various agencies in providing healthcare.
In particular, the policy papers are silent about the role of the Employees State Insurance
Corporation.
The ESIC is a statutory corporation responsible for administration of the Employees State
Insurance Scheme framed under the Employees State Insurance Act. This scheme was,
until recently, the only social insurance scheme in the country. The main objective of the
Scheme is to provide certain benefits to workers and their families in the event of sickness,
maternity, employment injury or death of workers.
Of all the services offered by the ESIC, the Corporation attaches the greatest importance
to medical benefit; bulk of its funding is used for providing this benefit. Medical benefit
is available to an insured person and his family in kind from the date of his entry into
insurable employment. Medical benefit has also been extended to permanently disabled
persons who cease to be in employment due to employment injury. The benefit is also
extended to insured persons after their retirement on the same conditions.
The Scheme provides for comprehensive medical care in the form of medical attendance
and specialist consultations, supply of drugs and injections, free hospitalization care,
outpatient service, specialist and hospital services.
Within the ambit of the program is a drive towards immunisation of young children, of
insured persons against diseases like diphtheria, polio, tetanus, measles and tuberculosis.
It provides family welfare services to the beneficiaries of the Scheme. Insured persons
and members of their families are provided with artificial limbs, hearing aids, cervical
collars, walking calipers, crutches, wheelchairs and pacemakers as part of their medical
treatment.

Conceptually, from the point of view of the insured persons, the ESI Scheme can be
said to be one of the best medical insurance schemes in India. But it suffers from several
drawbacks.
The Act envisages that the medical benefits will be provided by the State Governments;
the Corporation may enter into agreements with these State Governments to decide the
nature and scale of medical treatment that should be provided and cost sharing thereof.
The Act also provides for the Corporation itself, in consultation with the State government
concerned, undertaking the responsibility of providing medical benefit to insured persons
in a State. Accordingly, medical treatment and attending to insured persons and their
families is being provided by the State Governments everywhere, except in Delhi where
the Corporation has undertaken this responsibility.
The responsibility for creating the necessary infrastructure for providing medical benefits
therefore rests with the State Governments though the cost is met by the Corporation. The
inability or the unwillingness of the State governments to discharge this responsibility has
come in the way of expansion of the ESI Scheme. This is one of the reasons for the slow
growth of the scheme.
The arrangements under which the Corporation provides funds and the State Governments
implement the scheme has come in for criticism on the ground that there is a dichotomy in
the administration of medical benefit which is not conducive to efficiency and has resulted
in dissatisfaction among the insured persons. The committees which reviewed the workings
Contd...

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