The Employees’ State Insurance Scheme (ESIS)
The ESIS started under the ESI Act of 1948. The ESI Corporation approved a structure of the State ESI Society, according to which, states are required to register the state level body. ESIC directly releases funds to the Society’s bank account to ensure efficient financial management. Since 1952, the ESIS has been pivotal in a social security system conceptualized to be egalitarian, inclusive and responsible.
ESIS has been designed to play the role of a protective scheme providing medical and cash benefits during illness, maternity, disability, or employment-related injury. Both employers (3.25% of pay) and employees (0.75%) contribute to the insurance.
A clear flagship for social responsibility in healthcare, the scheme was originally designed with several expectations. It has expanded over time in scale, covering over 34 million formal sector workers. Despite it being envisaged as comprehensive contributory insurance, the scheme continues to fall short of its promise and scope.
SATHI, Anusandhan Trust, has conducted a study to understand the functioning and performance of ESI hospitals and dispensaries across Maharashtra, the state with the highest number of ESIS registered beneficiaries.
Currently, the more than 70-year old ESI scheme has significant uncertainty, impacted by the role of privatisation, increasing centralisation and top-down pressure for digitalisation. In this context, the voices emerging from this study can offer important alternative perspectives, relevant to not just Maharashtra but to the entire country.
This research has aimed to: (1) Evaluate healthcare service quality, (2) Assess challenges affecting the scheme, and (3) Identify policy solutions to improve user outcomes. Functioning of ESI hospitals and dispensaries across the state are evaluated vis-a-vis 1) an exploration of the patient experiences, 2) an assessment of the healthcare delivery in the state under the ESIS umbrella, 3) wage ceiling problems, 4) infrastructural shortcomings, 5) challenges of empanelled hospitals, and 6) systemic inadequacies.
Secondary data was studied for ESIS use, functioning and coverage at the state level. Some aspects were also examined at the national level based on availability of data on those factors. The main source included national ESIS annual reports from the ESIC website, over the past 5–10 years.
In addition, there were 81 in-depth interviews conducted with key stakeholders. With workers, a total of 42 individual interviews and 13 group interviews with 117 workers, were conducted. Facility observations were done in 11 ESIS/ESIC run hospitals across seven districts of Maharashtra. The study found several gaps in ESIS Maharashtra — both at the policy level and at the operational level.
Governance: The scheme is jointly run by ESI Corporation (centre) and ESI Society (state). Key decisions — such as staffing, infrastructure upgrades — are stuck in multi-level, centralised clearances.
This leads to delays, poor responsiveness, and lack of accountability. Governance committees meant for participatory functioning (local committees, HDCs, regional boards) are not very effective.
“There is significant dysfunction within the ESIS system, as it involves both the state and central governments, who act like “dual controlling bodies” passing responsibilities back and forth without clear authority. The state government requests funds from the central government, but the state has little control over how these funds are spent”. (E20, AMO officer)
Financial allocation: Even though ESIC has an accumulated surplus of Rs. 74,348 crores, very little of this is used for upgradation of facilities. From 2020, there has been a major change in how these funds are being invested — from public sector banks to corporate portfolios.
“If the state received ‘100, only’ 20–30 was allocated to ESI hospitals, while the remaining funds were diverted to other departments.” (E31, Medical Superintendent)
Specifically, even though Rs. 2752 was collected from contributions from Maharashtra in FY 2022-23, only Rs. 997 crores was spent in the state. The per capita ESIS spends in Maharashtra is only Rs. 1727 as opposed to the all India average of Rs. 3557.
Coverage: One of the serious complaints about ESI is that it excludes several possible beneficiaries. Only employees from the formal sector are covered. Unfortunately, this leaves out close to 90% of India’s workforce, who are in the informal sector.
Also, the salary cap of Rs. 21,000 per month is outdated, especially in an urban context.
“Her salary was raised from ‘21,000 to ‘21,200, and as a result, the contractor informed her that she was no longer eligible for ESI coverage. She has hypertension and diabetes and relies on ESI for her medications.” (woman waste picker experience).
In Maharashtra, 88 lac PF paying workers aren’t registered for ESIS. There are several reasons for the gap.
- Poor awareness of scheme benefits
- Under-reporting by employers
- Omission of contract workers and outsourced staff
- Digital and documentation related issues
Infrastructure & Human resources: Only 7 out of 36 districts of Maharashtra have ESI hospitals. Overall, there are only 15 ESI hospitals, with 8 of them concentrated around Mumbai.
While the required number of hospital beds is around 19,200, only 2980 beds have been sanctioned, and of these, only 1,580 beds have been commissioned. And of these, up to 40% of the beds are not functional. Many of the buildings and beds are in a state of disrepair. There are no functional ICU beds across the ESI hospitals in Maharashtra.
Most facilities associated with the ESI hospitals are in poor condition, be it the outdated infrastructure or unused medical equipment. Many older ESI facilities were located in dilapidated and poorly maintained buildings. There is also a shortage of skilled staff.
“Even beds are so old and of poor quality that, we use bricks to elevate it for the comfort of patients”(E31, Medical superintendent)
Inadequate awareness among eligible workers: The employer is the primary source of information and the challenges lie in resources, poor attendance and the capacity to impart timely information.
“The real issue is the employer’s approach. Without employers’ cooperation, we cannot conduct awareness camps.” (E42, ESI local office assistant).
Registration and Documentation: Despite the workers having ESI numbers, the activation has additional procedures. Many workers do not realize such problems until they fall ill.
“Whenever workers submit papers or come to claim, they realize that their documents are not updated or their Aadhaar is not linked.” (E 25, Office from AMO).
After 2000, digitization and subsequent online registrations were introduced. Despite its advantages this is challenging for workers, especially since most are less educated. The OTP system requires workers to have functional smartphones, further limiting accessibility.
If paper work is not completed and Aadhar card is not seeded then payment to the secondary hospital will not be processed” (E26, medical officer at dispensary).
Engagement of Employers: Gaps in potential and actual coverage of employers lead to massive exclusion of workers. While action against non-compliance by employers can be taken up, unions or workers are reluctant as it takes several years for filed cases to be resolved.
“According to new GR, if there is complaint then it has to be registered in a ‘Central Inspection System (CIS)’. It is then sent at national level, and only after receiving approval from national level, an inspection can be conducted.” (E 18, workers advocate, Mumbai)
Healthcare Services Delivered: Due to the many challenges of ESI in Maharashtra, patients are now being referred to the district hospitals or other general government hospitals. Except for Bibvewadi Hospital, which reported a 96% bed occupancy, bed occupancy rates in ESI hospitals in Maharashtra range from 0% to 64%, well below the desirable norm of 70-80%. In 9 out of 15 hospitals, bed occupancy was below 40%.
Workers’ seeking care in ESIS hospitals in Maharashtra reported delays, waiting time for investigations, multiple hospital visits, and a lack of diagnostic and specialized services, leading to frequent referrals. It was shared that,
“If medicines are not available, they give a prescription, but it becomes very difficult for people who earn only 8 to 10 thousand rupees. They can’t afford to buy them.” (E 45, trade union representative, Kolhapur)
Recommendations for transformation
- The State government needs to be more committed and accountable for improving ESI in Maharashtra.
- The funding allocation from ESIC to ESI needs to increase in scale and consistency.
- Expansion of ESI is required to include far more eligible workers.
- Upgrading infrastructure and increase in regular staff are essential.
- Issues related to referrals and reimbursements in private hospitals need to be addressed.
- Simplification of documentation and removal of procedural/registration barriers are needed.
- Worker awareness, transparency and accountability need to be given importance.
- Key governance issues should be addressed.
- ESI needs to be gradually expanded to include informal workers.
Conclusion: An unwavering commitment to employee welfare from companies combined with an equitable access and service provision from ESIS, will go a long way in structuring a much better health platform and choice for beneficiaries.