Sahdev K.

WADHAWAN, “Health insurance in India: The case for reform”

International Labour Review, Vol. 126, No. 4, July-August 1987. Reviewed by
Abhijith Harindran (17BLA1018).

In this article, the author initially describes how health insurance was introduced in India. The
discussion includes the pre-Independence period and post-independence developments in the
public health, medical care facilities and health insurance.

India as a signatory to the Alma-Ata declaration was committed to public health by all by
2000. A five year plan from 1985-1990 was setup and many efforts were taken in order to
enhance health care facilities in both rural and urban India. This article mainly focuses on
statutory schemes that were introduced in 1952 for wage earners in industry. So initially it starts
with the timeline of how statutory schemes were introduced, its drawbacks and few
recommendations of the author on how to improve the system.

If we look back into the history of health insurance in India, we can understand it all started from
the attention of the Government of India in 1928 when it was considering ratification of the
ILO's Sickness Insurance (Industry) Convention, 1927 (No. 24), and Sickness Insurance
(Agriculture) Convention, 1927 (No. 25). Central govt. had discussion with provincial states on
this idea but states weren’t prepared to frame a comprehensive scheme to take financial
responsibilities.

Royal commission on labour was set up in 1929, and suggested a general plan for health
insurance. So central govt approved a proposal of a scheme where there were enough medical
facilities and where workers were ready to contribute to the same, but provincial states were of
the opinion that an experimental scheme might be prepared, so the plan was dropped.

A provincial labor inquiry committee supported the commission’s suggestion and was raised in
India’s first conference on labor ministers.

It was during the All-India Organization of Industrial Employers and the Employers' Federation
of India that approved the principle of sickness insurance with a condition that there was a
tripartite contribution, legislation was enacted on an all-India basis and made applicable to all
important industries and government undertakings and similar legislation was also adopted
concurrently in all the Indian states. The Second Conference of Labor Ministers got much more
support from laborers and provincial govt., but without any statistical data, actuarial examination
wasn’t possible. But in third, a tentative scheme for sickness insurance for factory workers, with
only cotton, jute textiles and heavy engineering industries was submitted.

Govt. of India appointed Adarkar to prepare a scheme of health insurance for industrial workers.
He highlighted the need for simultaneous adoption of schemes providing for unemployment
insurance and old-age pensions, besides such measures as regulation of wages, strict enforcement
of factory laws, health education and improvement of environmental hygiene. His idea was not
to let medical care provided under the health insurance scheme be controlled by an outside
authority or to the provincial governments, but only by the insurance institution. He wanted
maternity and industrial injury benefits to be integrated into the scheme and for replacing the
Workmen's Compensation Act and the State Maternity Benefit Act by a single comprehensive
social insurance law. Govt. of India seeks technical assistance from ILO by examining the
scheme of Adarkar. Experts opined that if the control of medical benefits under a scheme of
health insurance is assigned to the medical services of provincial or state governments, the health
insurance fund would require positive guarantees of the efficiency of these services in the
administration of medical benefits. But the experts supported few things of Adarkar like
coverage of contingencies, the financial participation of the provincial governments and the
adoption of an integrated scheme covering sickness, maternity and employment injury.

If we see the emergence of Employees state Insurance Act, everything started from the Adarkar
plan, suggestions of ILO experts which initially formed Workmen’s state Bill 1946, which later
became ESI. Initially the coverage of ESI was limited, but coverage was extended gradually
special provisions were made like medical benefits were also included and it was expected that
the provincial govt. provide decent standard of medical care. Sickness, maternity, and disability
or deaths due to occupational injury are included under ESI. Employees State Insurance
Corporation which is an autonomous body was set up to administer the scheme. There was a
controversy regarding the states share which caused delay in implementation which ended up in
reducing of states' share from one-third to one-fourth and, when medical care facilities were
extended to insured persons' families, it was further reduced to one-eighth of the total
expenditure on medical care. There was delay in the scheme as the state governments refused to
take on the share of financing and the initial opposition of workers and employers to the payment
of contributions.

When talking about system of medicine and delivery of services, indigenous system along with
alopathy was included. In some cities full time integrated system wasn’t practicable. Panel
system was there where sufficient number of private practitioners ready to provide health
insurance was available. Gradually health insurance was extended to families.

Initially there was shortage of medical infrastructure in the country but with help of govt. ESIC
did a lot of development but at that time, ESIC wasn’t still able to their objective of health
insurance to most of the population. There was a need of state government and ESIC to work
efficiently.

There were lot of criticism in the service provided like standard of medical care by ESIC from
the part of employers and employees.
So there was a need of reform and unification of medical care administration. There was
confusion in bearing the responsibility between ESIC and state government. The solution for this
problem would be transferring of power from state to ESIC, and there was a need of state govt.
to oversee the activity and act as an advisory, so this change had to be considered.

If there is any shortcoming in panel system and service system, it shall be overcome through
checks and balance.

At the time the article was written, there wasn’t any cost sharing provisions by insured person.
The author says that, cost sharing would help in controlling abuse and overutilization of medical
services.

Author suggests that the existence of wage ceiling is a serious concern and shall be removed.
The wage ceiling was too low when compared with other organized sectors.

Preventive care has to be taken by the ESIC for improving general health and to reduce the cost
of medical service. ESIC should take effort to improve rehabilitation of disabled, sufficient funds
shall be allotted for that and support of both public and private institutions is needed.

There was a need of co ordination in providing facilities to rural population by the primary health
centers.

So to sum up, the author has focused on the introduction health policy formulation in India
throwing light on Employees State Insurance ACT, role of ESIC and state governments, the
shortcomings faced, need of a proper initiative to upliftment and improvement of the sector.
ESIC deserves enough praise for the initiatives that they took for providing a new face to
insurance program and for creating a organizational framework. There is a need of medical field
to be cost effective and more efficient, so authorities must transfer the responsibilities to ESIC.

These are the subjects on which author has mainly focused, it would have been better if author
tried to compare Health insurance system in India with any country which had successfully
implemented, so it would have been easier to understand the current status and how far India has
to improve. At present ESIC has improved a lot from what it was during the time the author has
done research.

Employees' State Insurance Act, 1948 (ESI Act), by the Parliament was the first major
legislation on social Security for workers in independent India. At that time the industry was still
in an emerging stage and the country was dependent on a variety of imported goods from the
developed or developing countries. Now, the ESI Scheme applies to factories and other
establishment's Road Transport, Hotels, Restaurants, Cinemas, Newspaper, Shops, and
Educational/Medical Institutions wherein 10 or more persons are employed.

However, in some States threshold limit for coverage of establishments is still 20. Employees of
the abovementioned categories of factories and establishments, drawing wages upto Rs.15,000/-
a month, are permitted to social security cover under the ESI Act. ESI Corporation has also
decided to improve wage ceiling for coverage of employees under the ESI Act from Rs.15,000/-
to Rs.21,000/-.

ESI Corporation has extended the benefits of the ESI Scheme to the workers set up on the
construction sites located in the implemented areas under ESI Scheme.

The rate of contribution by employer is 4.75% of the wages payable to employees. The
employees' contribution is at the rate of 1.75% of the wages payable to an employee. Employees,
earning less than Rs. 137/- a day as daily wages, are exempted from payment of their share of
contribution.

As year pass by, India has been improving its health insurance system.