ESI benefits and private health cover

Finance minister Arun Jaitley, in his budget speech, proposed that the workers should be allowed to choose between the state-run Employee State Insurance Corporation (ESIC) scheme and a private health insurance scheme approved by the Insurance Regulatory and Development Authority (IRDA). But the move has met stiff opposition from trade unions.

At present, ESIC provides healthcare benefits, including cash benefits during sickness, maternity, disablement and death, to workers and their family members either through its own hospitals or empanelled state government hospitals. Workers get health security benefits without any upper limit on expenses or any condition on treatment. They avail these services by contributing 1.75 percent of their wages every month along with 4.75 percent contribution by employers.

Ram Kishore Tripathi, secretary of Hind Mazdoor Sabha (HMS) and a member of ESIC, says in ESI both the employer and the employee contribute, but if the worker opts for a private health insurance scheme, who will contribute on behalf of the employer? He adds that while the quality of service provided under the scheme and the ESI hospitals is a matter of concern, making it optional is not the solution.

“While ESI is not working well in states like UP and Bihar; it is doing extremely well in the southern states. We are working hard to improve it further. It has improved a lot in the last 10 years.” Tripathi adds ESIC is an autonomous body and it does not take any fund from the government, thus the government cannot amend it without their approval.

Calling it an anti-labour provision, Tripathi says the trade union will never accept it. “Of those insured under the ESIC, 15 percent were taking full benefits 10 years back. And now more than 80 percent are drawing full benefits. Certainly, there is improvement. The level of satisfaction has increased. But the new government is trying all measures to create hurdles.”
 

 Once they opt out for a health cover, they will realise the shortcoming of these products, says Prashanta Chowdhary, national secretary CITU and a member of ESIC. He adds there is just no scope of comparison between ESI and private schemes, and this provision will benefit only the employer and the private health insurance sector.

“If you have a problem with any part of your body, you do not cut it out. You treat it. ESIC has some limitations and there is a need to improve services but making it optional is not a solution. It would be anti-worker provision.”

“If a worker falls sick, he gets wage compensation for up to 90 days. Will any private health insurer ever provide that? If a worker meets with an accident while going to work, under ESIC it is called on-duty accident. Will a private insurer cover that?” he asks, while adding, “The biggest problem is that we could not make workers aware about the ESIC benefits. So, they will not be able to make the right choice and will be compelled to choose what the employer wants.”

Michael Dias, secretary, Employer’s Association in Delhi and a member of ESIC, differs. While criticising the services provided by the ESIC hospitals, he says if workers have an option, it will bring in competition among the private players and would also lead to improvement of services by ESIC.  “It is a brilliant scheme but the ground reality is very different,” says Dias.

“The services provided at ESI hospitals are cashless and perhaps that is the reason the staff treats workers as if they are doing any sort of favour to them. As the ESIC member, I receive 100 to 150 complaints a month about rotten services. Unless you see the options available, you cannot decide what is wrong and right.”


EPF and NPS

Another amendment proposed in the budget is the option between the Employees’ Provident Fund (EPF) and the National Pension Scheme (NPS) for workers to park their retirement savings. Finance minister Arun Jaitley said contribution to EPF would be optional, without affecting or reducing the employer’s contribution.

Based on this, the labour ministry will amend the Employees Provident Fund and Miscellaneous Provisions Act, and the bill is likely to be tabled in the current session of parliament. The finance ministry also proposed to invest at least 5 percent of the EPFO corpus in the stock market.

At present, the EPFO invests largely in safe debt instruments like government securities and in select corporate bonds through the professional portfolio managers. The EPFO, which manages a pension corpus of more than '6 lakh crore and has at least 42 million active subscribers, invests solely in safe but low-yielding government securities. The NPS subscribers, on other hand, can select between government securities, equities or corporate debt. EPF returns are tax-free, NPS withdrawals are taxable. Once a subscriber moves to NPS, which comes under PFRDA, the EPF Act will no longer apply to such employees.

Trade unions are opposed to the move. “EPF is the hard-earned money of employees. If the government wishes to invest money in a scheme, they should take it out from their budgetary allocation. It cannot take away workers’ money to fund a scheme,” says Virjesh Upadhyay, national secretary of the Bharatiya Mazdoor Sangh (BMS), and one of the 10 employee’s representatives on the Central Board of Trustees (CBT) of EPFO.

For the past several years, there has been a huge debate on whether the EPF should invest in direct equities or not. He says the usage of EPF for investing in equity will affect the interest of workers. “It involves a lot of risk. We asked the government to give us a guarantee that whatever will be the losses the government will bear it, but they refused. If they give this assurance, they can use the money wherever they want to,” he adds.

Raman Pandey, secretary, INTUC and member of CBT, says NPS and EPF are of different nature and thus cannot be optional. “NPS is a retirement plan while the EPF gives social security. If the government wants to introduce a pension scheme it should be done separately and not by replacing the EPF.”

On investment in equities, Pandey says if it is done for long run and will benefit workers they will not protest. Trade union leaders say many international pension funds are investing in stock markets, but most of them have gone bust after they put money in stocks. And thus it would be wrong to invest the pension corpus in the volatile share market.

BP Pant, secretary, FICCI and a member of CBT at EPFO, says the organisation has come a long way since its inception and its efficiency has increased over the years. Thus, instead of making it optional, it should be strengthened. “There are professional fund managers who look after the EPF corpus. The EPFO is structured well and can handle the challenges. EPF should not become optional.”

The current EPF return of 8.75 percent is not enough in these days of high inflation. Equity exposure with due safeguards can generate higher returns in long term. But, he adds, there is no harm in experimenting with the fund investment in a modest way.

“Investing 1 to 5 percent of the corpus in equity, which will not involve big risk, can be done. The workers covered under EPF have limited avenues of investments. Thus this experiment can give high return to their money. This can be done on experimental basis before finalising it,” he says.

jasleen@governancenow.com