employer health insurance (3)
TRANSCRIPT
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 1/55
EMPLOYEE HEALTH INSURANCE
1 | P a g e
CHAPTER-1
1 INTRODUCTION AND METHODOLOGY
S.NO CONTENTS PAGE NO
1 INTRODUCTION AND METHODOLOGY 01
1.1 Introduction 03
1.2 Background of the study 05
1.3 Purpose and objectives 08
1.4 Organization of the paper 09
1.5 Methodology 10
1.6 Scope of the study 11
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 2/55
EMPLOYEE HEALTH INSURANCE
2 | P a g e
1.1 INTRODUCTION
The word “hospital” is derived from the latin word which comes from Hosper
meaning a host. The term hospital means an establishment for temporary occupation by
the sick and the inured.
“The hospital is an integral part of social and medical organization, the function
of which is to provide for the population complete health care both curative prevention
and whose patient care service reach out of the family and its home environment. The
hospital is also a centre for the training of health work ers and bio social research”.
Hospital is becoming large and complex, with increase in modern health
facilities, increase health awareness among people and the advent of new technologies in
medicine. Government intervention recognizing the hospital a san industry and regulating
their purpose and performance has also increased in India.
Good and professional management is essential for all the fields of human activity
and the Hospitals are no exception.
Though the use of modern management techniques for the optimum utilization of
scarce resources is widely accepted , its use in the area of health sector , especially inHospital Administration does not have the same reception.
In a changing society , Hospital Administration in its right perspective is very
important. Moreover, Hospitals are very complex organization with a variety of jobs to
be performed by various personnel- specialized as well as the hierarchy in which the staff
members have to work is very sensitive and a constant tension exists. Rapid strides have
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 3/55
EMPLOYEE HEALTH INSURANCE
3 | P a g e
been made to improve the quality of preventive and curative service health care to the
people. Hence, management of hospital needs the same care and consideration which is
essential for running a business or industrial enterprise. It also calls for an imaginative
and constructive study of organizational behavior in the personnel managing the hospital.
Formal education and training methods have also been developed to acquire the
knowledge. But the success of the hospital administrator is not measured in terms of
money which they receive but it is to be considered in terms of the contribution which
they make to the welfare of the society.
As we prepare ourselves to march in the 21st
century , the organization and
management of health services and hospitals will also have to change rapidly in tune with
the advanced technological innovations. A thorough knowledge of proper application of
the existing infrastructure would help the management to plan effectively for acquiring
more modern equipments. Organizational potency of any instigation will depend on the
achievement of the required output of its managers and professionals.
Talking about “Hospital Administration is like talking about summarizing. One can
desire some principles and postulations and give advice. But is the final analysis , the
only way to achieve proficiency is to jump in and do it”.
It is therefore very necessary that each and every professional in the Hospital should
be equipped with the practical knowledge of the managerial function.
1.2 BACKGROUND OF THE STUDY
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 4/55
EMPLOYEE HEALTH INSURANCE
4 | P a g e
Hospitals are traditionally a place of healing. They have always been seen as an
institution for treatment, care and cure of the sick and wounded , for the study of the
disease and for the training of physicians, nurses and allied health personnel.
But we live in challenging times. Hospitals are beginning to organize their efforts by
focusing on VAS (value added services) that differentiate a hospital from its competitors
and bind the clients to the value added hospitals.
The health system of the country, the largest governmental organization next only to the
educational department is already very large and would increase much more in the next
decade. Co-ordination and management of these diverse components is going to be much
more difficult and complex.
In the health sector , such complexity and scarcity can be recognized in a host of
questions, that concern all who work there or use its services. Why has the volume of
resources absorbed by the sector increased so fast over the last four decades worldwide?
Why does it seem that no matter how many nurses and doctors are employed , new
technologies adopted new drug therapies introduced , that even the rich countries of the
world do not seem to be able to provide the highest quality of care for all citizens? Is usefollowing a wrong method of administration in the health sector?
Therefore due to the peculiar types of services and peculiar situations that arise in a
hospital but scientific approach is essential in its management. Management in hospitals
shall be professional for all the activities under taken in the hospitals.
Hospitals abroad now have a cadre of hospital administrators who combine some
knowledge of sound management principles and techniques. As it is essential in industry
to divorce management from ownership, similarly it is essential to separate management
from the care of side.
Ultimately, efficiency depend the proficiency and integrity of the persons employed in
the hospital. Unless and until they are proficient and expert in their respective areas ,
whether it be a medical side or administrative side, are cannot expert its worth from it.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 5/55
EMPLOYEE HEALTH INSURANCE
5 | P a g e
The question arises as to how we can develop the administrative skills and capability
along with hospital professional competence among the personnel responsible for
administration?
The future for a better administration is established by more formal university courses in
the subject. Close correlation of business management , public health. Medical
administration and welfare concepts are necessary, for the real worthwhile service.
Health care in India is basically urban area oriented, and hospital with n30 beds will stand
to gain a great deal if they adopt the system of employing a trained and qualified
administrator to take care of management aspects.
Still in most of the hospitals – administrative or managerial functions are normally
considered as “nuisance functions” and do not enjoy high status in a hospital system.
But, it is high time now to make hospital management more efficient systematic,
scientific and professional.
The various group involved – the hospital administrator, other personnel, the government
and of course the patients , stand to gain immensely from such attempt to optimize
resource utilization by introducing professionalism in hospital management and in all the
hospital courses. And the time to begin is now.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 6/55
EMPLOYEE HEALTH INSURANCE
6 | P a g e
“Tomorrow begins today” the strength of hospitals fundamentals, the spirit of winning
and the impressive transition it has made in these changing times will enable this great
organization to face the challenges of the 21st
century with a sense of purpose and to
continue to say at the top even in the next country.
However the achievement will be determined by the size composition of the hospitals in
the next four years, the acceptance of the health care professionals by the non-
governmental hospitals , and their own professional contribution to the efficient
management of hospitals.
1.3 PURPOSE AND OBJECTIVES:
1.3.1. Purpose :
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 7/55
EMPLOYEE HEALTH INSURANCE
7 | P a g e
The overall purpose of this project is to understand the corporate management
functions in a health care organization. This covers about the Health Insurance.
1.3.2 Objectives :
In the fulfillment of the above purpose following are the objectives.
1.3.2.1 To study about the employer Health Insurance in a Hospital.
1.3.2.2 To study about the coverage of employers in a Hospital.
1.3.2.3 To study about the register of employees in a Hospital.
1.3.2.4. To study about the maintenance of registers in a Hospital.
1.4 ORGANISATION OF THE PAPER
The organization of the paper includes the total study done as given below
Chapter-1 includes introduction, background of the study, purpose and objectives,
organization of the paper, methodology and scope of the study.
Chapter-2 includes introduction, objectives of ESIS, the employers insurance scheme,
expansions, design of the ESIS , the insurer for the expanded ESIS , premiums and
contributions for the expanded ESIS, the benefit package, the provider network for the
expanded ESIS , administration of the insurance programmme, criteria for empanelling a
hospital, claims and reimbursements, health insurance present scene and issues for the
future, consumer perspective, health insurance scene, mediclaim scheme offered by GIC
and other insurance companies, presentation on employee state insurance scheme,
particulars in India, insurance and social security schemes for the poor, Indian medical
associations role in changing scenario in the health sector, health insurance and
organization and structure of private provision.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 8/55
EMPLOYEE HEALTH INSURANCE
8 | P a g e
Chapter-3 includes advantages to employers, benefits to employers, benefits under the
scheme, cash benefits, employers files and registers.
Chapter-4 includes the comparative analysis of data, findings and suggestions.
Chapter-5 includes the conclusion of the study consisting of bibliography and appendix.
1.5 METHODOLOGY
1.5.1 Research Design
The nature of research design depends on the way in which the problem is
formulated. The research design used for the study in descriptive design and
observational design. The descriptive study is typically concerned with determining
frequency with which something occurs on how to very variables together.
1.5.2 Source of Data
The sources of data are both primary data and secondary data.
1.5.2.1 Primary Data
Primary data are these which are new and original in nature. These data are the
first hand information generated to achieve the purpose of the research. It was collected
through personal interaction and observation.
1.5.2.2 Secondary Data
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 9/55
EMPLOYEE HEALTH INSURANCE
9 | P a g e
Secondary data are these data which are not new and original in nature. These
data are obtained from published or unpublished sources. It were collected through text
books past records and websities.
1.5.3 Sample Size
The sample size is limited to the period of post three year‟s data.
1.5.4 Data Collection Method
Data is collected by interaction with the staff of the hospital and by the personal
observation.
1.5.5 Analysis of Data
Analysis of data helps to determine the critical examination of the tabulated data.
It helps to compare the collected data.
1.6 SCOPE OF THE STUDY
The study is focused on corporate management functions of a particular multi
specially Hospital. Data were collected by observation, personal interaction and referring
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 10/55
EMPLOYEE HEALTH INSURANCE
10 | P a g e
secondary source of data such as files, records, registers maintained in the hospital under
study. Simple statistical tools were widely used the period of data collection is one
month.
CHAPTER-2
2. LITERATURE SURVEY
S.NO CONTENTS PAGE.NO
2.1 Introduction 14
2.2 Objectives of ESIS 15
2.3 Employer Insurance scheme 16
2.4 Expansion 18
2.5 Design of ESIS 23
2.6 Premiums of ESIS 25
2.7 The benefit package 26
2.8 Network of ESIS 31
2.9 Insurance program 34
2.10 Empanelling hospital 36
2.11 Claims and reimbursement 38
2.12 Issues for the future 41
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 11/55
EMPLOYEE HEALTH INSURANCE
11 | P a g e
2.13 Consumer prespective 42
2.14 Health insurance scene 44
2.15 Mediclaim scheme 45
2.16 Presentation of ESIS 47
2.17 Particulars in India 48
2.18 Social security schemes 50
2.19 Changing scenario in health sector 52
2.20 Structure of private provision 53
2. LITERATURE SURVEY
DEFINITIONS AND MEANINGS
Multi-employer health plan – Generally, an employee health benefit plan maintained
pursuant to a collective bargaining agreement that includes employees of two or more
employers. These plans are also known as Taft-Hartley plans or jointly-administered
plans. They are subject to federal but not State law .
Minimum premium plan (MPP) – A plan where the employer and the insurer agree that
the employer will be responsible for paying all claims up to an agreed-upon aggregate
level, with the insurer responsible for the excess. The insurer usually is also responsible
for processing claims and administrative services.
Multiple Employer Welfare Arrangement (MEWA) – MEWA is a technical term
under federal law that encompasses essentially any arrangement not maintained pursuant
to a collective bargaining agreement (other than a State-licensed insurance company or HMO) that provides health insurance benefits to the employees of two or more private
employers.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 12/55
EMPLOYEE HEALTH INSURANCE
12 | P a g e
Medical savings accounts (MSA) – Savings accounts designated for out-of-pocket
medical expenses. In an MSA, employers and individuals are allowed to contribute to a
savings account on a pre-tax basis and carry over the unused funds at the end of the.
One major difference between a Flexible Spending Account (FSA) and a Medical
Savings Account (MSA) is the ability under an MSA to carry over the unused funds for
use in a future year, instead of losing unused funds at the end of the year. Most MSAs
allow unused balances and earnings to accumulate. Unlike FSAs, most MSAs are
combined with a high deductible or catastrophic health insurance plan.
2.1INTRODUCTION
Health-financing models based on formal employment are widely prevalent
and make up a significant source of health financing. This is in addition to the
other sources of health financing through general government revenues and private
insurance. These health financing mechanisms are recognised as powerful methods
to ensure adequate financial protection for all against healthcare costs, and are
compatible with the goal of fairness in financing.
In tax-funded systems, the population contributes indirectly via taxes, which then
form part of the general revenues to be used in the provisioning of healthcare. In
Employment-based social health insurance systems, it is the employees and employers
who pay in their contributions, with or without additional state support. These are
then used in funding healthcare for the employees, sometimes also covering their
dependents. Such employment-based contributions could take diverse forms, like a
mandatory, earmarked, payroll-tax, or a voluntary, tax-deductible contribution to a
health plan.
Internationally, many European nations‟ healthcare is financed by employee-based
social health insurance. The employers contribute to a „sickness‟
fund. The contributions may range from 5 to 15% of the annual income. This sickness
fund is used to finance the healthcare of the entire population – both employed and
unemployed. Germany, Belgium, France are examples from Europe, while Japan,
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 13/55
EMPLOYEE HEALTH INSURANCE
13 | P a g e
Thailand and the Philippines are good examples from Asia. Further details are given
below
In India, various forms of employment-based health coverage already exist, such as
the widely recognised Employees‟ State Insurance Scheme (ESIS) for employees in
the formal sector, the Central Government Health Scheme for serving and retired
civil servants, the schemes for serving and retired employees of the Armed Forces,
Railways, Paramilitary forces and other government organisations, and the various
health coverage schemes and benefits provided by banks, insurers, other public
sector companies, and the private sector employers. Together, they make up about
7% of the total health expenditure in the country. We shall now take a closer look at
these models, especially at ESIS, and whether employment-based health insurance
models are suitable for India.
2.2 OBJECTIVES OF ESIS
Employment-based insurance schemes aim at:
Ensuring adequate financial protection for all
Reducing adverse selection
Providing cross-subsidisation
Effectively pooling health risks, bringing in efficiencies from bulk purchasing of
health services.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 14/55
EMPLOYEE HEALTH INSURANCE
14 | P a g e
2.3 THE EMPLOYERS INSURANCE SCHEME
Employers‟ Insurance Scheme is one of the oldest health insurance schemes in India, is
aimed at targeting the formal sector to provide a social security mechanism for the lower
paid industrial workers. Established vide the ESIS Act in 1948, the scheme gives both
cash and medical benefits to the employees of factories and service establishments who
earn less than a specified wage ceiling, currently capped at Rs 7500 per month.
All eligible members must contribute a share based on their wages (currently 1.75% of
wages, but exempt for those earning less than Rs 40 per day) while the employer
contributes a larger share (currently 4.75% of wages of all eligible employees, including
the low paid ones). The state government also contributes a minimum fixed amount. The
scheme is managed by the Employees‟ State Insurance Corporation (ESIC), a statutory
body established under the Union Ministry of Labour, comprising representatives from
the ministries of labour, health and employees‟ federation.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 15/55
EMPLOYEE HEALTH INSURANCE
15 | P a g e
2.3.1 BENEFITS UNDER THE SCHEME
These include:
free, comprehensive healthcare at ESIS facilities
cash compensation for loss of wages due to illness
maternity benefits
disability benefits
survivorship and funeral expenses in the event of death of the worker.
Healthcare includes preventive, promotive, curative and rehabilitative services. ESIS
has its own dispensaries, hospitals and medical staff. It also empanels select private
practitioners to provide medical care to its beneficiaries. Patients requiring treatment
from specialists not available at the ESIS hospitals can receive it at the speciality
facilities, with the ESIS reimbursing the expenses.
Presently, the scheme is spread over 677 centres in 25 states and Union territories
across India, covering 7.8 million employees and more than 25 million beneficiaries.
One main limitation of the scheme is its coverage. Currently the scheme is mainly
aimed at the low-paid, non-supervisory industrial worker.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 16/55
EMPLOYEE HEALTH INSURANCE
16 | P a g e
2.4 EXPANSIONS
In this chapter, the formal sector can be covered by expanding the
ESIS. It could lead to many advantages as listed below:
1. Such an expansion would build upon an existing scheme which already has in
place legal mandate and provisions, structures to collect the contributions, provider
networks, claim settlement and payment mechanisms and a management body.
It could be easier to scale up this structure than to create a new one, thus saving
time and effort.
2. In the ESIS the current scope of risk pooling is only between the healthy and the
sick. All the beneficiaries are low-paid industrial workers and their dependents and
so there is no risk sharing between the rich and the poor. Expanding coverage
would bring larger numbers and all classes of wage earners into the risk pool.
3. A large purchaser and provider of health services like the ESIS could be a more
efficient mechanism of financing the health needs in the formal sector than prevalent
modes of out-of-pocket payments by individuals or the smaller group insurance
plans purchased for employees by their employers. For universal coverage of
healthcare, more funds would need to be generated in a more organised manner,
for the health service needs of the covered population. By providing a social
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 17/55
EMPLOYEE HEALTH INSURANCE
17 | P a g e
insurance mechanism for the formal sector, these funds can be utilised in a more
efficient manner.
4. There is a growing demand for medical insurance and risk protection for health
needs, even among those earning well. The ESIS with its long years of experience,
its healthcare institutions, statutory sanction and government backing would gain more
credibility and accountability.
5. Expanding the scope of ESIS will allow existing hospitals, facilities and human
resources of ESIS to be better utilised. Enhancing the scope of the scheme will
help to bring down administrative costs of ESIS.
6. As higher paid workers are enrolled into the scheme, the same percentage of wages
will get converted into higher contributions in rupee terms, raising the average rupee
contributions per member of the scheme. This increased contribution provides the
scope to improve upon the benefit package or to reduce costs of the scheme in
percentage terms.
2.4.1 PRE REQUISITES FOR EXPANSION OF THE
ESIS
Before considering expansion of the scope of ESIS, the following pre-requisites willneed to be addressed:
To create widespread consensus on this matter. Large industrial houses, chambers of
commerce and federations of industry should be involved. The main advantages which
could be highlighted to them are: social security for their human resources, ease of
administration of health benefit schemes, standardisation of coverage, etc. They will also
have to be assured that the quality of services and accessibility of services shall receive
due attention in this expansion. Efforts will also be needed to reassure the industry that
rather than being a 'payroll tax' without any direct returns, this scheme is an important
mechanism for social security and staff welfare for employees in the formal sector.
To convince the ministries of commerce, etc. about the rationale of the scheme.
This move would be associated with a marginal increase in input costs and would
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 18/55
EMPLOYEE HEALTH INSURANCE
18 | P a g e
have some impact on the cost of Indian goods in the international market. At
a time when the USP of India is its cheaply produced products and services,
expanding the ESIS might reduce this competitive edge. On the other hand, this
can also be taken as the actual cost of production even now. So far the industrial
houses have been benefiting by passing on this cost, either to their employees or
to the government, and this scheme only makes them partially share the burden
of healthcare of at least their employees. Last but not least, this can also actually
be a tool to enhance the productivity of the employees by keeping them healthy.
The employees‟ associations and unions must not regard this arrangement as
a diversion of their members‟ funds. Rather, they should be convinced of the
benefits for their members as such a move would increase the funds into the ESIS
and provide better quality of care for them.
Once a consensus has been reached, suitable amendments will need to be made
in the current ESI Act to include necessary changes. The Central Act could be
amended in a manner which allows the individual states to expand the scope of
the ESI scheme according to their local requirements, without compromising on
the scheme's basic principles.
Some of the main changes that need to be considered for revision in the Act
include:
Establishing the ESIC as an autonomous body, with independent
management.
Removing the wage ceiling limits for eligibility.
Identifying the establishments that are eligible (along the lines of the EPF) or
empowering the states to expand the list of covered establishments.
Strengthening the capacity and powers of the ESIC to
Collect dues from the establishments including penal provisions for
defaulting establishments or those not disclosing the true numbers/wages
of their employees.
Contract with and purchase care from private providers. Already, ESIS
uses various payment mechanisms, including prospective payment
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 19/55
EMPLOYEE HEALTH INSURANCE
19 | P a g e
mechanisms, and enabling provisions will help ESIC to control costs and
keep care accessible.
Purchase re-insurance from public or private insurance companies. This
will limit the exposure of the scheme and keep its costs predictable.
An expanded ESIS will improve its capacity to provide good health insurance through
a mix of its own facilities, facilities taken over for administration from PSUs and other
employers hitherto running their own facilities for their employees, as well as by
purchasing good quality care from providers.
2.4.2 BENEFICIARIES IN AN EXPANDED ESIS
Currently the ESIS only insures the low-paid industrial workers who are working in
Power-using non-seasonal factories and employing 10 or more persons
Non-power using factories and employing 20 or more employees
Service establishments like shops, hotels, restaurants, cinema, road transport
and newspaper establishments employing 20 or more persons.
It is recommended that the coverage of the ESIS is expanded in an incremental
manner, e.g. in the initial phase, the scheme could be expanded within the existing
ESIS-covered establishments to cover all the staff (including those who are earning
more than Rs 7500 per month) and their dependents. In the next phase, an expansion
to other establishments not presently covered by ESIS could be undertaken, while
reducing the minimum number of employees required to be within the scope of the
scheme. In the final phase, the rest of the formal sector, including contract workers,
construction workers, the self employed, etc. could be covered by the scheme.
The eligibility criteria until Phase II could be all permanent employees in these
establishments, along the lines of provident fund contributions. Retired employees can
continue to remain in the scheme if they contribute a fixed amount, depending upon the
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 20/55
EMPLOYEE HEALTH INSURANCE
20 | P a g e
last salary drawn. All dependents (to be defined) are to be eligible for the benefits. In
Phase III, the eligibility criteria would need to be further relaxed for the sake of
contractual workers holding contracts longer than a defined period, say 3 months.
The first phase would contribute greatly to an increase in the number of members, as
most of the higher-paid, or white collar workers would be covered. This would take
care of a constant complaint of the ESIS – that when an employee gets a raise in pay,
it disbars him/her from the ESIS and its benefits. At the same time, it is clear that the
higher paid workers presently do not see any benefit in contributing to the ESIS. In the
last decade or so, while the scope of ESIS has been expanded from those earning
from Rs 3000 per month to Rs 7500 per month, the utilisation of services continues
to made mainly by those belonging to the lower income strata within the covered
groups. Thus, despite contributing higher amounts per month, the relatively higher
paid workers seem not to be availing of the ESIS benefits to the same extent as the
lower-paid workers. This could be the reason for the income surpluses in the scheme
in recent years. However, by covering all the staff members, risk-protection and
riskpooling for all is taken care of, and all employees continue to benefit throughout their
employment period and even after.
Covering all employees has another advantage. Presently, under the Act, to opt outof ESIS, any establishment needs to show a better coverage already existing for its
employees and to seek specific exemption from ESIS. Thus, even if an establishment
chooses not to be covered by ESIS, adequate health coverage of all its employees
would continue to be ensured.
The risk pooling effect is greater when funds are pooled across establishments, e.g.
if the IT industry contributions are pooled with that of a small factory. If managed
properly, there would be money transfer from the better-off to the poor workers and
their dependents. On the other hand, this could also be interpreted by the higherpaid
workers as an additional „tax‟ on their wages, if they do not see any advantages
from their contribution.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 21/55
EMPLOYEE HEALTH INSURANCE
21 | P a g e
2.5 DESIGN OF THE ESIS
A proposed design of the expanded ESIS could look like what has been shown under
The employees, their employers and the government would contribute to a
common pool called, for the purpose of this paper, Employees‟ Health Insurance
Fund (EHIF). The fund represents the pooled contributions of all employees across
all establishments participating in the scheme, and is the corpus which would beutilised to provide the benefits under the scheme.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 22/55
EMPLOYEE HEALTH INSURANCE
22 | P a g e
2.5.1 PROPOSED DESIGN OF THE EXPANDEDESIS
To provide an element of choice and help facilitate the process of consensus
for the expansion of the scheme, the employees could be provided with three
options as regards their health coverage: to enrol with the ESIS, to enrol with
a private health insurance scheme, or to remain in the institutions‟ healthcare
scheme (in the case of those institutions that provide their own health services
for its employees). The incentive to choose ESIS rather than the private health
insurance would be the lower premium and the higher coverage offered by the
ESIS as compared to the private health insurance. Thus, enrolees would opt
for non-ESIS insurers only if these alternative insurers give them better coverage
or better quality of services than ESIS. Competition would also inspire the ESIS
to provide better services so that it does not lose the enrolees to competing
insurance companies.
Employers with existing health facilities could either continue with the sameor hand them over to ESIS for administration. The ESIS could then use these
facilities for any of its beneficiaries. If the employers choose to continue with their
own facilities, and to opt out of the ESIS, they would still need to contribute the
difference of the contribution they would otherwise be paying into the EHIF, and
the equivalent risk-adjusted average premium amount which EHIF would have
paid to any of the private insurance schemes for covering all the employees of
the establishment. Also, the employers must ensure better coverage than ESIS
to be able to opt out. Such an arrangement prevents misutilisation, ensures
comprehensive coverage for employees, yet lets employers choose to run their
own facilities, if they so desire.
If the employee enrols in the ESIS and requires care, he/she can receive care
at any of the empanelled hospitals or providers of the scheme, and the provider
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 23/55
EMPLOYEE HEALTH INSURANCE
23 | P a g e
will be reimbursed or otherwise paid by the EHIF. On the other hand, if the
employee enrols in a private health insurance scheme, and requires care, he/she
will be subject to the policy conditions and coverage provided by the insurance
company.
Even for enrolees of the ESIS, there could be a provision for purchasing addon
or supplementary covers from private insurers, which could provide them
with services that are not part of the standard ESIS benefit package. This
could include, for example, stay in special/private wards, where the difference
between the costs of the general ward and the special ward could then be
paid by the insurer providing the supplementary cover. The availability of this
choice will also ensure that the higher-paid workers can avail of high-end
or non-essential services if they so desire, by purchasing the appropriate
add-on insurance covers over and above the contributions they make to the
ESIS, and the availability of this option will help achieve industry and employees‟
consensus.
2.6 THE INSURER FOR THE EXPANDED ESIS
The Employees‟ State Insurance Corporation (ESIC) will be the main insurer of the
scheme. It will provide certain products for the employees. Those employees who are
not satisfied with these products could purchase insurance from private insurance
companies. However, the payment of premia for this purchase would be through
the ESIC, so that it can calculate the applicable premium, make sure that all the
employees of the institution are insured, and that the contributions from the employers
and the governments into the EHIF are being collected at the appropriate time.
The role of ESIC would include:
Providing health insurance
Purchasing healthcare from providers in a larger way
Managing employer health facilities
Paying for alternative health insurance cover from insurance companies. This
requires that the capacity of the ESIC be enhanced.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 24/55
EMPLOYEE HEALTH INSURANCE
24 | P a g e
The ESIC can reinsure with the GIC or other appropriate reinsurer(s) to protect its
fund. Along with good fund management, this should ensure that there are enough
resources to provide good quality care to all the employees in the formal sector.
Currently, the ESIC‟s credibility is low, and it is seen as a bureaucratic organisation
that responds more to its own needs than of the employees. This image has to
change, for which professional managers (finance managers, health managers,
actuarials, human resource managers, etc.) need to be enrolled to manage the EHIF
and the provider network.
2.7 PREMIUMS AND CONTRIBUTIONS FOR THE
EXPANDED ESIS
2.7.1 SOURCE OF CONTRIBUTION
Contributions to the ESIS will be from four basic sources:
(i) the employees
(ii) the employers
(iii) the state government
(iv) the central government. The government contributions will be mainly to fill inthe gaps, if any, and will be subject to limits. The government would also, as
it does now, continue to contribute to the provision of health insurance in an
invisible manner by doing away with income taxes (individual and corporate) for
all contributions made into the fund.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 25/55
EMPLOYEE HEALTH INSURANCE
25 | P a g e
2.7.2 CURRENT RATES OF CONTRIBUTION
At present, the employees contribute at the current rate of 1.75% of their payroll.
This percentage share could be retained, or with higher expected contributions and
favourable claim experience, be reduced marginally. The employee contribution will
be deducted at source by the employers and transferred to the EHIF on a monthly/
quarterly basis. Similarly, the employer‟s contribution (of 4.75% as at present, or a
lesser amount as decided) will also be added to the amount deducted at source
and transferred to the EHIF. These contributions will be the core funding mechanism
for the EHIF. The ESIC will use its MIS and its field machinery to ensure that all the
enrolled employees in the establishments are contributing. Special cells for this can
be formed and provided with punitive powers to enforce the legislation, including
levying fines on defaulters.
At the end of the year, after the accounts are closed and audited, any deficit in the
EHIF will be made good by the government in a ratio of 2:1 (state: centre). However,
there will be an upper limit to this to control the spending. The premia can also be
suitably revised to prevent a recurrence of the deficit.
This contribution into the EHIF will ensure that the employee receives the standard
set of ESIS benefits as described below. However, if an employee wants greater
coverage, high-end or higher benefits, he/she can subscribe to add-on or
supplementary covers by paying an additional premium or contribution. Such covers
can be provided by both ESIC and private insurance companies, and the employee
can select from a variety of products and insurers. This approach ensures that
the employee gets all the information at one site and is able to make an informed
decision. At the same time, the insurance companies have to incur less cost in
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 26/55
EMPLOYEE HEALTH INSURANCE
26 | P a g e
marketing as most of their products will be available for the individual customer at
the point of need.
Who will join the scheme?
Being a mandatory insurance, all employees will have to join and contribute to the
scheme. However, in case both husband and wife are in the workforce, a policy
decision will need to be taken; in certain countries, both spouses continue to pay
their premia, while another policy option could be that only one need contribute. In
the latter case, on presenting an appropriate certificate, the lower-paid spouse can
be exempted from contributing towards the ESIC. However, this has to be renewed
every year to prevent fraud.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 27/55
EMPLOYEE HEALTH INSURANCE
27 | P a g e
2.7.3 CONCEPT OF SOLIDARITY
The contributions will continue to be income-rated, ensuring some form of equity.
Those who earn more will contribute more, and will cross-subsidise those who earn
less. However, for this the concept of solidarity needs to be built up, else there will be
tremendous opposition to such a move.
2.7.4 INSURANCE CARD
All the enrolees will be issued an insurance card, which not only identifies the
covered individuals and their eligibility for cover, but ideally serves as a smart card
that can be swiped at any of the empanelled dispensaries/hospitals, ensuring a
cashless health cover for the enrolees. Only employees of those establishments
who have contributed to the ESIC in the previous quarter will be eligible to use
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 28/55
EMPLOYEE HEALTH INSURANCE
28 | P a g e
the benefits, while for others, the card will initially warn of default status and after
two quarters also lead to the cashless facility being temporarily withdrawn. Only
after the defaulting establishment pays up its dues will the employees be eligible
to lodge their claims for reimbursement. This mechanism can be another check
on defaulting institutions, while also not depriving the employees of cover, as their
own contribution is likely to have been deducted by the employer on time. The
smart card will have all the details of the employee, his/her dependents and the
institution that he/she works in. It will include a photograph of their family, and
perhaps some biometric identifiers such as fingerprints coded and embedded
electronically in the card chip. This will help minimise fraud due to impersonation to a
large extent.
2.7.5 CONTRIBUTION RECORD
The contribution records will be maintained in a transparent manner, and will be
available for viewing at a website. This will enable all the stakeholders – government,
insurance companies, employees and employers – to review the status of their
contributions. Separate accounts will be maintained at the establishments for
the ESIC contributions and prior to being paid into the EHIF, this corpus will not
be used for any other purposes as is the wont with many of the social security
contributions.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 29/55
EMPLOYEE HEALTH INSURANCE
29 | P a g e
2.8 THE BENEFIT PACKAGE
This is an important factor for the success of this scheme and includes medical as
well as cash benefits to enrolees.
2.8.1 Cash benefits
These are an important component of the total claim cost incurred by the ESIS, and
an important social security mechanism for employees at the lower end of the wage
spectrum. However, they may not be as relevant for the higher paid workers. At this
stage, the policy maker has three options, namely:
To separate the system for cash benefits from the health benefits/health insurance
component. Contributions received from employers will be distributed into these
two parts and separately administered for persons drawing wages up to Rs. 7500
per month. The contributions in terms of percentage of wages could then be
lower for higher-paid workers who are not eligible for any cash benefits.
To reduce premiums for all employees while making all the cash benefits available
only to those who earn less than Rs 7500 per month.
A ceiling on the daily cash benefit, basing it on the wage drawn by an employee
earning up to Rs 7500 per month.
In each of these options, all those presently receiving the cash benefits continue to
do so unaffected, while there is still scope for cutting down premiums.
The higher-paid workers may not value the cash benefits vis-à-vis the higher
contributions required for the same, and there may not be much point providing
them with this cover. So their cover could be limited only to the other three benefits,
i.e. medical benefits, maternity benefits and disability benefits.
2.8.2Medical benefits
In the healthcare component, currently the employees receive the following benefits:
2.8.2.1 Promotive care – for all.
The ESIC will develop materials and inform employees and employers on healthy
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 30/55
EMPLOYEE HEALTH INSURANCE
30 | P a g e
lifestyles.
Employees will be encouraged to give up smoking, allocate some time for physical
exercise, encouraged to eat a healthy diet, etc. Employers will be educated and
encouraged to adopt safe industrial practises so that accidents and exposure to
occupational hazards are minimised.
The workers as well as the management will be made more aware about pertinent
industrial hazards.
The ESIC will thus endeavour to reduce illness on all counts through a special unit
staffed by experts in communication, media, occupational health, etc.
2.8.2.2 Preventive care – for all the employees and their dependents, including
antenatal check-ups for pregnant women
routine immunisation services for those eligible
annual medical check-ups for the staff and screening programmes.
2.8.2.3 Curative care – OP
For all the employees and their dependents, provided at ESIS hospital OPDs,
ESIS dispensaries and empanelled dispensaries.
Doctors will be empanelled based on pre-specified criteria to provide OP care for
the insured.Over a long term, a gatekeeper function through a system of registration with
a „family doctor‟ can be developed to reduce the costs of healthcare as it will
ensure that illnesses are treated at the appropriate level.
The smart card will identify the insured and control fraud.
2.8.2.4 Curative care – IP care.
This will need to undergo certain changes from the system prevalent presently.
All insured patients will be eligible for the standard package consisting of meeting
hospital expenses for most conditions, up to a maximum of, say, Rs 200,000 per
family per year.
The only exclusions could be cosmetic surgeries, spectacles, dental prosthesis,
etc. Admissions will be in empanelled, pre-contracted hospitals and ESIS‟s own
facilities.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 31/55
EMPLOYEE HEALTH INSURANCE
31 | P a g e
The facility available would be a semi-private room in the ESIS hospital and a
general ward in the empanelled hospital.
Co-payments will be required for those availing of facilities in non-empanelled
hospitals in emergency conditions, as a cost-control mechanism and to prevent
moral hazard.
Those who find that this package is inadequate for their needs can subscribe on
additional payment to an appropriate add-on cover from ESIS or a private health
insurance company, which will provide various additional benefits as per their
needs, like coverage in higher classes of rooms, greater annual ceilings, annual
executive health check-ups, etc.
To avail of IP care, the patient must be referred from an empanelled dispensary.
This will reduce moral hazard and also reduce costs. One of the basic documents
required would be a referral letter explaining why the patient could not be treated at
the primary level and required care at the secondary or tertiary level. This needs to be
monitored strictly to ensure that there is no fraud in the system.
One important consideration for the policy maker at this stage would be to provide
mechanisms for portability of the coverage across employers and perhaps also
during brief periods of unemployment. This will ensure that the employees do notlose benefits when they change their employers. One basic requirement for this
would be a unique beneficiary identification number that is used by the employee.
Once allotted, this could remain constant even when employers change. Also, the
scheme could provide for a limited period, say three months, of continued cove
2.9 THE PROVIDER NETWORK FOR THE
EXPANDED ESIS
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 32/55
EMPLOYEE HEALTH INSURANCE
32 | P a g e
This is another crucial element for the success of this scheme. If the ESIC can
ensure credible healthcare at reasonable costs, it will ensure an acceptable and
sustainable healthcare programme. To this end, the ESIC should negotiate with the
providers and enforce appropriate conditions in the interest of its beneficiaries. One
of the first activities of the ESIC would be to empanel dispensaries and hospitals.
Similar pre-qualification criteria can be developed by the ESIS for the dispensaries as
well. All hospitals meeting the specified criteria and agreeing to ESIS conditions will
be eligible to enrol under the ESIS.
However, the ESIS hospitals must change their mode of operations. Currently
they are financed by the ESIC and the staff are paid a fixed salary, leaving little
incentive for them to perform. Once this expanded ESIS is in force, these hospitals
could become independent trust hospitals which will have to compete for patients
along with the private hospitals. They would however still have certain preference
of beneficiaries, e.g. a higher class of rooms will be available to beneficiaries
in ESI facilities. They could also admit non-ESI patients and charge marketdetermined
rates from them, improving utilisation of their facilities. These steps
will help them become more efficient and patient-friendly. Also, it would help to
provide a scope of incentives and disincentives to staff based on individual and
collective performance.The ESIC should also ensure that there are adequate hospitals/dispensaries
empanelled within the area where its beneficiaries are located. Norms for this
are suggested above and can be developed as per local needs and national and
Once the hospitals/dispensaries are empanelled, the ESIC should immediately
develop standard treatment guidelines for common diseases. Based on this, the
costing for each procedure could be worked out by the ESIC management team.
This will help develop tariffs for inpatient procedures and for contracting with private
providers. These tariffs could be a flat rate, i.e. Rs X for a normal delivery, Rs Y for
a Caesarean section, or could be based on location, e.g. metro and non-metro
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 33/55
EMPLOYEE HEALTH INSURANCE
33 | P a g e
tariffs. This will prevent costs going up and be easier to administer.
Next, the ESIC would monitor whether these hospitals are adhering to the
aforementioned guidelines and providing quality services to its beneficiaries. For
example, ESIC could check if the patients are being prescribed generic medicines,
the treatment is as per the standard treatment guidelines, the billing is as per the
contracted tariffs and so on. This is an important activity for which a separate
monitoring cell needs to be set up. Supervising the hospitals, helping them
implement the guidelines, empowering the hospitals to influence the prescribing
pattern of the doctors, all this and more will be part of the activities of the ESIC, as
provider-level reform will need to complement reform of the financing system for
optimum effect.
2.10 ADMINISTRATION OF THE INSURANCEPROGRAMME
The ESIC, with its long experience in administering an insurance programme, already
has the administrative capacity to manage such a scheme yet certain changes are
required to be made in its current administrative role. For example, it needs to:
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 34/55
EMPLOYEE HEALTH INSURANCE
34 | P a g e
2.10.1 Create awareness among the employees. Especially as more employees join the
scheme and later more institutions join the scheme. Creative efforts using modern
media should be used to focus on the positive impact of having health insurance.
The hospital should:
Be registered with the local administration and under other relevant legislation.
Have appropriate numbers of resident medical officer (allopathic or ayurvedic or
homeopathic or siddha or Unani) available round the clock.
Have facilities to admit at least 10 patients at a time.
Have at least 3 qualified nurses (or nursing assistants), at least one for each shift.
Have its own pharmacy, or access to an independent pharmacy that will supply
medicines to the patients.
Have its own laboratory or access to an independent laboratory where investigations
will be done on a credit basis for the insured patients.
Be willing to use generic medicines for the treatment of the insured patients.
Be willing to incorporate standard treatment guidelines for the treatment of the
insured patients.
Be willing to provide cashless services to the insured patients.
Not charge any money from the patient (except for specified co-insurance, as
applicable). All services (medicines, investigations and consumables) will be supplied
by the hospital.
Accept the tariff rate developed by the ESIC.
Maintain adequate records and registers (e.g. IP register, OT register, Labour room
register, pharmacy register, accounts register) as per the prescribed format.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 35/55
EMPLOYEE HEALTH INSURANCE
35 | P a g e
Allow inspection of its records by prescribed representatives of the ESIC.
Be willing to change its treatment practices if some indicators (e.g. infection rates,
(Caesarean rates, admission rates, investigation rates, etc.) are found to be higher
than average.
Be willing to submit claims as per the requirements.
Be willing to wait for at least 30 days for reimbursements.
In the event of any fraud, bear the cost of the fraudulent bills.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 36/55
EMPLOYEE HEALTH INSURANCE
36 | P a g e
2.11 CRITERIA FOR EMPANELLING A HOSPITAL
This should also build on the message of solidarity and the steps required to be
taken to use the benefits. This will be an ongoing activity and the centre will be
staffed by experienced media/communications people.
Collect premiums in a more proactive manner to ensure that all the institutions and
their employees are covered by the ESIS.
Identify and negotiate with the providers. This is a new task requiring considerable
technical, managerial and social skills. The negotiators should have knowledge
about medicine and treatment regimes and should be able to convince thehospital
management to follow the ESIC guidelines.
Process claims and reimbursements rapidly. For this decentralised offices should
be given the responsibility of managing the funds and issuing cheques.
Computers will help prevent and detect frauds, and will also have provisions for
audit trials.
Provide feedback to the employees and employers in a regular manner. Annually,the
ESIC should give each establishment a summary report indicating the contribution
inflow from their institution and the benefit outflow – in rupee as well as service
terms. This is an important measure for enhancing the credibility of the ESIC and
will in turn ensure that the membership in the ESIC is increased in relation to the
private insurance companies.
Keep accounts of the entire operations. The ESIC has been doing this and should not
face any problems here.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 37/55
EMPLOYEE HEALTH INSURANCE
37 | P a g e
Monitor the important process and output indicators. A detailed list is given in the
Annexure. The MIS is an important tool which will play a vital role in managing
the scheme. Good data and analysis can help the manager detect fraud, moral
hazard, cost escalation, etc. This requires that good data be generated and an
experienced team analyses this data.
The ESIC should also consider support and grievance redressal mechanisms
through 24x7 call centres to ensure that patients are given their due hearing and
appropriate information. There could also be an online information and email
support mechanism offering the same service. Such a proactive and customerfriendly
approach will not only improve their credibility but also enhance the quality of services.
The entire ESIC should have a dynamic management structure comprising important
stakeholders, e.g. representatives from the government, the employees, the
employers and the health profession. Working committees should meet regularly
to monitor the scheme. Decision making in terms of claims and reimbursements,
empanelling hospitals, negotiating with employers, etc. should be standardised and
then decentralised as much as possible, to minimise bureaucratic delays.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 38/55
EMPLOYEE HEALTH INSURANCE
38 | P a g e
2.12 CLAIMS AND REIMBURSEMENTS
Claims and reimbursements will be handled by the ESIC. All hospitals/dispensaries
with claims will submit them to ESIC on a monthly basis to the regional office of the
ESIC, which, after checking the validity of the bills, will clear them within one month.
This last point is important for the ESIC to be a credible insurer and a credible payer
for its bulk purchase of services.
The ESIC already has administrative departments but till now they have mostly
looked at accounts. Now they must add technical scrutiny to this job description,
using protocols like Appropriate Evaluation Protocols to check whether the treatment
provided is appropriate and relevant for the symptoms and diagnosis. Such
mechanisms will ensure that the providers are regulated strictly.
From the beginning it must clear that a cashless system of reimbursement will be
followed. The hospitals will have to take some risk in this system, of their claims being reduced or denied. The focus will be on the patient who will benefit from this
measure. Also, with smart ID cards, the risk of fraud, charging over the upper limit, etc.
is totally minimised.
Computerised data at all levels will help in accessing and processing information
quickly. Software for this purpose can easily be developed or customised. Once
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 39/55
EMPLOYEE HEALTH INSURANCE
39 | P a g e
this is in place, the performance of the scheme is likely to improve. More important,
these indicators ensure adequate focus on the patients and outputs vis-à-vis
people.
2.13 HEALTH INSURANCE PRESENT SCENE AND
ISSUES FOR THE FUTURE
During the last 50 years India has made considerable progress in improving its health
status.
Death rate has reduced from 40 to 9 per thousand, infant mortality rate reduced from 161
to 71 per thousand live births and life expectancy increased from 31 to 63 years.However, many challenges remain and these are: life expectancy 4 years below world
average, high incidence of communicable diseases, increasing incidence of non-
communicable diseases, neglect of women‟s health, considerable regional variation and
threat from environment degradation. At any given point of time 40 to 50 million of
population on medication for major sickness. About 200 million days are lost annually.
The annual rate (range) of outpatient: rural 30-152/1000, urban 9-81/1000 and for
hospitalisation: rural 16-76/1000, urban 5-38/1000.
Who finances this? We spend about 6% of GDP on health expenditure. Private health
care expenditure is 75% or 4.25% of GDP. Insurance coverage is negligible. Over the
period the private health care expenditure has grown at the rate of 12.84% per annum and
for each one percent increase in per capital income the private health care expenditure has
increased by 1.47%. The health financing scene raises number of challenges which are:
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 40/55
EMPLOYEE HEALTH INSURANCE
40 | P a g e
increasing health care costs, high financial burden and income of poor gets eroded,
increasing burden of new disease patterns and increasing risks and government health
care system under-funded. Insurance mechanism is one of the financing mechanisms to
over come some of the problems of our system.
Based on ownership the existing health insurance schemes can be broadly divided into
categories such as: government or state-based systems, market-based systems (private
and voluntary), employer provided insurance, member organization (NGO or
cooperative)-based systems. Government or state-based systems include government
employees health scheme (CGHS) and ESIS. Employer managed systems cover about
20-30 million of population.
The schemes run by member-based organisations cover about 5% of population in
various ways. Market-based systems (voluntary and private) have Mediclaim scheme
which covers about 2 million of population. The performance of these schemes has not
been satisfactory.
The scheme to focus poor (Jan Arogya Bima Policy) was introduced in 1995 and covers
expenditure up to Rs. 5000 for a premium of Rs. 70 per annum. Its performance has also
remained less satisfactory. The present insurance schemes are more urban biased.
There are number of implications of introducing the private health insurance. These are
problems of moral hazard, adverse selection, and information gap problem. We have verylittle understanding on what are different insurance mechanisms and how do they serve
the different segments of population. Given the present presence of private sector and
provider payment mechanism, what is best for our country has not been debated.
Insurance Regulatory and Development Authority (IRDA) has been proposed to basically
regulate the entry of insurance providers, protection of interests of policyholders,
promoting efficiency, control and regulation of rates, regulating investment of funds and
supervision of insurer, insurance intermediary and other organisations connected with
insurance business. Given the provider payment systems, which works on fee-for-service
basis, unmanaged indeminity insurance schemes is definitely not the right solution for
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 41/55
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 42/55
EMPLOYEE HEALTH INSURANCE
42 | P a g e
terms and conditions of a contract. Many times insurance companies do not strictly
follow the conditions in all cases and this create confusion.
There is lot of confusion on what constitutes pre-exiting conditions. A number of
litigations cases are disagreement on these pre-existing conditions. These problems also
arise because of lack of specification of number of areas and properly spelling out the
conditions. For example, is it justifiable to bring the health condition of an individual
which he had gone through 12 years ago and he had no complaint during the last 12 years
as the pre-existing condition for settling the claims.
The policy related to accidental death, which have double benefit schemes have been
found to mislead the consumers. Other issue is about the dates of the renewal of the
annual policy.
Insurance companies lack information system and do not give appropriate notice to the
policyholders about the renewal of the policies. This is seen as major issue as it changes
the conditionalities about what constitutes pre-exiting conditions. Courts, however, have
rules that even if there is delay in renewing the policies it should be considered as
renewed policy.
In case two doctors give different reports one favouring consumer and other insurance
company, the insurance company generally follows the later opinion.
Many are taking about the HMOs as the best form of organisation to handle healthinsurance.
However, we not clear about the implications of having this form of organisation. The
insurance companies and its agents do not have much incentive in promoting the health
insurance products. Many doctors are also becoming agents and agents pretend to be
doctors.
What are rights of consumers in these situations are likely to figure out in the agenda
ofconsumer protection agencies.
2.15 HEALTH INSURANCE SCENE
As you all know on 28th October 1999 Union Finance Minister has once again tabled
'Insurance Regulatory Authority and Development Bill' in the Parliament. There is
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 43/55
EMPLOYEE HEALTH INSURANCE
43 | P a g e
considerable debate going on in the Parliament and outside Parliament about the pros and
cons of privatisation of insurance sector. It is now certain that the economic reform
process unleashed since 1990 have left little options for us to retrieve back. Economic
changes need financial support from international financial institutions in present day
global situations. World over, economies are liberalizing the state control on trade,
commerce and industry. It is a subject of debate, whether insurance sector should be
opened up or not in India. We are not going to discuss the same from this platform. We
are here to discuss the Health Insurance in India. There are many concerns:
(a) Environmental pollution is causing serious health problems to humans. The fast
spreading AIDS, poisonous gases, various wastes including nuclear waste generated by
the people are seriously endangering the life on earth.
(b) A person may face a serious monetary problems for the medical treatment and
hospitalizations during life. In India, GIC and its subsidiary companies and LIC have
various health insurance covers for Indian nationals like: Ashadeep Plan II and Jeevan
Asha Plan II by Life Insurance Corporation of India and various policies by General
Insurance Corporation of India as under: Personal Accident Policy, Jan Arogya Policy,
Raj Rajeshwari Policy, Mediclaim Policy, Overseas Mediclaim Policy, Cancer Insurance
Policy, Bhavishya Arogya Policy and Dreaded Disease Policy. The most popular health
Insurance cover is Mediclaim Policy. A person between 3 months to 80 years of age can be granted mediclaim policy up to Rs. 5 lakh against accidental and sickness
hospitalizations during the policy period as per latest guidelines of General Insurance
Corporation of India.
(c) The health care demand is rising in India now days. Only 10% of Health Insurance
Market can be tapped till today. Still there is a scope of rise up to 35% in near future.
The Indian health care industry is now worth of Rs. 73,000 crore and expected to surge
by 10,000 crore annually as per market study. The share of Insurance market in above
figure is significant. Out of one BILLION population of India 315 million people are
estimated to be insurable and have capacity to spend Rs. 1000 as premium per annum.
Global Insurance giants like CIGNA, EAGLE STAR, ASTNA and ROYAL SUN
ALLIANCE have already into pacts for future mega business in India. Market research,
detailed planning and effective insurance marketing has become the prime need of the
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 44/55
EMPLOYEE HEALTH INSURANCE
44 | P a g e
hour. Health insurance has a wider scope in present day situations in India. It requires
efforts to tap Indian health insurance market with proper understanding and training.
2.16 MEDICLAIM SCHEME OFFERED BY GIC AND
OTHER INSURANCE COMPANIES
The current statistics on health insurance indicate that out of 1 billion population only 3.8
million population is insured. The product of health insurance is new to the GIC and its
subsidiary companies. Health insurance represents very small percentage of overall
business.
There is also not much preference for present health insurance products. The government
insurance companies started health insurance in 1986 and thereafter Mediclaim has
revised and the companies have tried to make it attractive product. First there is used to
be categorywise ceilings on items such as medicine, room charges and later when the
policies were revised these intra ceilings were removed. After this the demand for
Mediclaim has picked up. People are becoming more and more aware of the policies andare asking questions about the rules of the policies. The GIC companies has little means
to monitor the scheme and we should understand that it is because of technical problems
there are number of cumbersome rules to many undesirable complications. It looks that
health Insurance is growing fast There have number of cases where the cases have been
refused to become of mediclaim polices. Age has been one such factor. It has been
observed that agents as well as insurance companies are reluctant to admit the persons
whose age is beyond 60. It is perhaps because of the reasons of adverse selection.
There is no information on what is course of action available to a person who wants to
become member of mediclaim. GIC companies have instituted mechanisms but this
information is generally not avail be to the customers. There is potential problem of other
following the similar practices. It was suggested that the prospectus should include
information on whom to meet in case of grievance or complaints.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 45/55
EMPLOYEE HEALTH INSURANCE
45 | P a g e
Time limit for renewal should be mentioned in the prospectus. It was observed that very
few people read the prospectus. To popularize the schemes it is important that proper
marketing is done. It will be possible if the insurance companies show efficiency and
reduce the price.
There is also problem of fraud and manipulation. The monitoring systems are weak and
there are chances that if the doctor and patient collude with each other, they can do more
harm to the system. There is no data on this issue.
2.17 PRESENTATION ON EMPLOYEE STATE
INURANCE SCHEMEIt is essential for the people to be healthy so as to contribute to the social and economical
development of a society and thereby to a nation. A healthy population makes a nation
prosperous by achieving developmental goals on all fronts. But the members of a society
are exposed to certain risks like sickness, maternity, old age, death etc. Moreover, social
and economic order also creates certain imbalances against which members of society
should have protection by society. Social Security aims at building a medico-social
organisation in a participatory approach that can safeguard the health and economic prosperity of people in the society. Social security based on the idea of liberty and human
dignity and its benefits are dispensed in a manner consistent with sense of self-respect
and principle of social insurance.
The social security expenditure is not merely consumption expenditure, but also an
investment because it enhances the productive potential of such workers & thereby of a
nation. So, pooling of risks, resources and benefits are the hallmark of any social security
scheme. Insurance is defined as 'coverage by contract whereby one party agrees to
compensate or agrees to guarantee the other against loss by specified contingent event or
peril'. In case of Health Insurance an insured party pays a premium and the insurance
company provides required services or pays the agreed sum spent on hospitalization in
the case of illness of the policyholder.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 46/55
EMPLOYEE HEALTH INSURANCE
46 | P a g e
There are two types of health insurance one is compulsory, which is economically viable
due to large number of participating persons and lesser administrative cost entailed. But
average health care quality and long waiting period with resultant dissatisfaction are the
disadvantages e.g. ESIS in India
and N.H.S. in U.K.
Under the ESI Act, 1948 ESI Scheme provides protection to employees against loss of
wages due to inability to work in exigencies like sickness, maternity, disability and death
due to employment injury and medical care to employees and their family members.
When implemented for the first time in India at two centres namely Delhi and Kanpur
simultaneously in February 1952, it covered about 1.2 lakh employees. Presently the
scheme is spread over 22 states and Union territories across India covering 91 lakh
employees and more than 350 lakh beneficiaries. The Act covers:
(a) all power using non-seasonal factories employing 10 or more Persons
(b) all non-power using factories employing 20 or more employees and
(c) establishments like shops, hotels restaurants, cinema, road transport and news papers
are covered. ESIC is a corporate body headed by Union Minister of Labour as Chairmanand the Director General as chief executive. Its members are representatives of central
and state governments, employers, employees, medical profession and parliament.
ESIC is made up of contributions from:
(a) Employees who contribute at the rate 1.75% of their wages (if daily wage is Rs.25 or
less, his contribution is waived)
(b) Employers who contribute at the rate of 4.75% of total wage bills of their employees
to contribution on behalf and for employees having daily wage of Rs. 25 or less
(c) State Governments who contribute 12.5% of total shareable expenditure worked out
by prescribed ceiling on expenditure which is Rs. 600 per insured person per annum and
expenditure incurred outside/over and above the prescribed limit.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 47/55
EMPLOYEE HEALTH INSURANCE
47 | P a g e
The State Government runs the medical part of this unified and integrated scheme of
social insurance meant for employees covered under the ESI Act 1948. This scheme -
compulsory and contributory in nature - provide uniform package of medical and cash
benefits to insured persons in implemented areas all over Gujarat through 11 hospitals
and 52 diagnostic centres and 124 dispensaries.
The delivery of medical care is through service (direct) system and/or panel (indirect)
system. It provides allopathic medical care, but medical care by other systems like
ayurvedic and homoeopathy in the states is also provided as per the state government
decision. The medical care consists of preventive, promotive, curative and rehabilitative
types of services are provided by the scheme through its own network or through
arrangements with reputed government or private institutions by concept of proper
referral system and regionalisation.
Preventive services include immunisation of pediatric population, maternal and child
health, family welfare services. Promotive services include health education and health
check-up camps. Curative services include: dispensary care, hospital care, maternity care,
supportive services including diagnostic centre, drugs, dressings, surgical procedures,
dental care, prosthesis and other appliances. Rehabilitative services include: physicalrehabilitation, economical rehabilitation, and provision of artificial aids (social,
psychological rehabilitation)
2.18 PARTICULARS IN INDIA
No. of Centers 632 32
No. of Insured Persons/Family Units 84,45,000 7,03,050
ESI Hospitals 125 11
Number of ESI Hospital Beds 23,334 2,035
ESI Dispensaries 1,443 124
Insurance Medical Officers 6,220 669
Insurance Medical Practitioners 2,900 102
ESIS, largest and premier social insurance scheme, provides comprehensive medical care
to its beneficiaries. It is expected, that quality of services provided will definitely
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 48/55
EMPLOYEE HEALTH INSURANCE
48 | P a g e
improve and in the coming years it may be able to provide a definite base for extension to
other sectors to formulate a unified national health scheme.
There are many problem areas in managing this scheme that will need the attention of
policy makers.
These are: a large number of employers try to avoid being covered under the scheme, a
large number of posts of medical staff remains vacant because of high turnover and
lengthy recruitment procedures, there is duality of control, rising costs and technological
advancement in super specialty treatment, management information system is not
satisfactory.
India, one of the most promising countries of South-East Asia, has a large network of
health insurance cum social security scheme in the form of ESIS besides C.G.H.S. and
other health insurance scheme. The health insurance has not developed fully in India, but
if decision to open up medical insurance for privatisation is taken, there are many
opportunities for development of health insurance schemes for various sections of the
Indian society. Based on principles of sound management, equitable distribution and
evolution of long network and linkages, such organised and structured health insurance
schemes can be developed. For this purpose, first, regional network of health insurancecentres should be established. This lead to better cooperation among health care providers
by pooling their resources of manpower, training facilities to provide comprehensive
medical care services to one and all in that geographic area.
Secondly, efforts should be made to develop public-private partnership in tertiary health
care services (CT Scan, MRI, Cancer therapy) so as to increase utility of health insurance
service and to make them financially more viable.
The existing health insurance scheme like ESIS may be upgraded by covering
PSU/MNC employees under them, by making due budgetary provision to train and
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 49/55
EMPLOYEE HEALTH INSURANCE
49 | P a g e
develop human resources, to allow to generate revenue by allowing access to affluent
class of society to avail tertiary medical care.
2.19 I NSURANCE AND SOCIAL SECURITYSCHEMES FOR THE POOR
With 70 per cent of population in India living in rural areas and 95 per cent of
work-force
working in unorganized sectors, and disproportionately large percentage of these
populations living below poverty line, there is strong need to develop social security
mechanisms for this segment of population. The most vulnerable group among these is
the women. The SEWA has developed an initiative to protect the poor women from
financial burdens arising out of high medical costs and other risks. Each member has
option to join the programme by paying Rs. 60 per annum and it provides cover for risks
arising out of sickness, maternity needs, accidents, floods and riots, widowhood etc. The
scheme is also linked with saving scheme. Member can deposit Rs. 500 in SEWA Bank
and interest on this deposit will cover the annual premium. SEWA started its insurance
programme with the support of one of the public sector insurance companies. The
experience of SEWA has been that the insurance companies are not well equipped tohandle the present day complexities of health insurance particularly responses it requires
to handle the specific issues in context of lower income groups. Given the bureaucratic
rigidities in settling the claims, procedures, which one has to follow, and poor monitoring
mechanisms make it difficult for the poor to continue with these schemes. For example,
the patients belonging to lower income groups opting for the schemes would need
systems which are simple, flexible, prompt, relevant, having less paper work and have
fewer tiers. The design of the product including what it covers, scope of coverage and at
what premium are important considerations for people belonging to lower income groups.
SEWA experience suggests that the design of the insurance products have to be
integrated with several add-ons that may be priced differently. For example, health risk
coverage should include sickness as well as maternity aspects. SEWA experience
illustrates that other aspects of risk which need coverage include natural (accidental)
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 50/55
EMPLOYEE HEALTH INSURANCE
50 | P a g e
death, accidental death of women member (including disablement), accidental death of
member's husband (including disablement), loss because of riots/flood/fire/theft etc. The
overall premium has to be low.
The scheme has 30000 members and is expected to grow to 50000. There has been lot of
emphasis and education in the community on understanding the concept of insurance.
This awareness is growing. The linkage with the providers has been critical aspect in
keeping this cost of scheme down. At the same time the member has complete choice in
selecting the provider. It has been observed that costs in private are more than 5 times
than what they are in public, developing linkages with the public facilities is also critical.
This also depends on quality of care at public facilities. The overall impact of health
insurance has been encouraging and we find that women have started to seek health care.
The scheme has tried to address the special needs of women health and also allowing the
other systems of medicine, which is quite popular in various places. The up scaling of the
scheme is problem from viewpoint of management, organisation and finances and this is
major challenge.
2.20 INDIAN MEDICAL ASSOCIATIONS ROLE IN
CHANGING SCENARIO IN THE HEALTH SECTOR
Central to "Health for All" goal articulated in the historic 1978 declaration of Alma Alta
is a fundamental assertion that all nations should seek to improve the length of productive
life of the population and reduce disparities in health status among population subgroups.
Many variables, including per-capita income, housing and education influence health
status. Priorities for health care, medical practice and medical education must be guided
by the prudent use of financial, human and technical resources that are shown to improve
health. Countries that provide optimal health care, medical practice and medical
education demonstrate the following characteristics.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 51/55
EMPLOYEE HEALTH INSURANCE
51 | P a g e
(a) Cost effective public health and personal services provided.
(b) Financing policies promote health - effective financing policies must be in place that
reward systems and providers for improving the health of the individual and community
and place a premium on cost effectiveness. Public and private sector financing of medical
care should reward preventive care, effective treatment of acute illness and management
of chronic diseases in a way that maintains a person's optimal function and independence.
Financing should emphasize such elements as quality, continuity, and co-ordination of
care, as well as accessibility, acceptability and consumer satisfaction.
(c) Primary care emphasized - quality primary medical care should be available to all.
Adequate infrastructure such as clinical facilities, medical equipment, records and
staffing should be universally available.
(d) Appropriate utilization of secondary and tertiary care services - Individual seeking
care by a specialist physician should have initial contacts with a generalist. The physician
and the patient together should have adequate information regarding quality of care,
likely outcomes, and cost to determine whether consultative services of a specialist
physician are necessary. There are large number of men, women and children in the ruralcenters as well as towns, who because of poverty are unable to take advantage of medical
and surgical services or use the drug that may be prescribed for them.
To achieve the above goal, government alone cannot fulfill all the expectations required
by the society. The combined experience of mankind is today predominantly in favour of
state compulsory health insurance. One might naturally ask, "should not health insurance
be left to the independent will and responsibility of the individual." The answer would be
NO. Individuals will find it difficult to pay the premium to an insurance company as to
pay the doctor's fees or the druggist's bills. And among our agriculturists, artisans or
middle class men in India more than in other countries the surplus in the family budget is
so limited that the ability or willingness to pay the premium or the bill is non-existent.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 52/55
EMPLOYEE HEALTH INSURANCE
52 | P a g e
Besides, those who are in need can hardly appreciate the advantages of the "insurance
principles".
Indeed, if the combined experience of economically developed nations, e.g., Europe and
America is of any value, it has been proven the voluntary health insurance cannot be
depended upon either as an effective measure of health provision for the people or as a
measure of administrative economy.
Sickness must not be treated as a private misfortune. It is not to be regarded as a calamity
against which the individual should protect itself as much as it can. It is not even to be
counted as a misfortune in which the family alone is interested and therefore which the
family alone should attempt to combat or prevent. Rather, it is time to look upon sickness
as a national misfortune. We should take it as a calamity for the entire community and
therefore one to be prevented or cured by the community, and the State.
Remarkable in its social and moral bearing is the advantages conferred on the community
by compulsory sickness insurance legislation. On the one hand, the medical practitioner
is relieved of the burden of honorary service. On the other hand, the patient is spared the
ignominy of depending on the medical practitioner‟s benevolence or some philanthropic
institution's charity.
The financial burden of sickness cannot be borne by the individual. It must be widely
distributed through out the country. Premium is therefore to be paid by three parties, first,wageearner or salaried person, secondly, the employer, and thirdly, the state. Since the
premium is paid by a large number of persons, the healthy as well as the sick, the risk is
well distributed and the rates per individual can become very small. Besides, the social
goal derived from such a system is extensive.
As soon as the state and the community become financially responsible for the health
insurance of the individual the prevention of diseases is rendered almost on a fait
accomplish. In every scheme of sanitation and public health, compulsory health insurance
on a wide basis should be regarded as a great prophylactic.
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 53/55
EMPLOYEE HEALTH INSURANCE
53 | P a g e
2.21 HEALTH INSURANCE AND ORGANISATION
AND STRUCTURE OF PRIVATE PROVISION
The implication of private sector coming in insurance is that the costs are definitely going
to increase. Given the present system of fee for service and current scenario of health
infrastructure in private sector, the development of insurance will need improvements in
quality. The new investments to improve quality will result into high cost and therefore
increase in prices of insurance products. There would be developments in the direction of
exploring options of managed care, which would help in reducing the costs. The
developments would be in the direction of developing strong information base and
accreditation system for providers. The models, which have emerged elsewhere need, to
be examined and their applicability to India situation need to be examined. These aspects
would need detailed programme of study.
There are also examples within the country, for examples schemes of NGO's like SEWA,
Tribhuvandas etc. These need to be looked into and strategies to upscale these examples
need to be studies. Since 70 per cent of population lives in rural India, the relevance these
schemes will grow.
We lack adequate information base to operate insurance schemes at large scale. Theinsurance mechanism prevalent in many developed countries has their history. Health
reforms experiences in many countries are replete with the suggestion that the systems
cannot be replicated easily. Self-regulation is an important in any market driven system.
The regulation from outside does not work. Implementation is difficult. We significantly
lack mechanisms and institutions, which would ensure self-regulation and continuing
education of provides and various stakeholders. The accreditation systems are hard to
implement without mechanisms to self-regulate. For example it took 35 years in US to
put the accreditation system effectively in place. For example, it has been difficult for
many States in India to put nursing homes legislation in place. So it is important to
understand the real situation of India.
CONCLUSION
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 54/55
7/27/2019 Employer Health Insurance (3)
http://slidepdf.com/reader/full/employer-health-insurance-3 55/55
EMPLOYEE HEALTH INSURANCE
BIBLIOGRAPHY
Dr. Ashok Shani, “HOSPITAL AND HEALTH ADMINISTRATION”(Indian Society
Of Health Administrators, thane , 2013)
WEB ADDRESS
www. Billroth hospitals.com
www.cdc.gov/nchs/data/misc/employer.pdf
www.health.utah.gov/upp/pdf/employer health
www.eric.org/forms/upload files/pdf