Take-home salaries of govt employees may rise as mandatory health insurance to go

NEW DELHI: Take-home salaries of millions of workers could rise with the government moving to free employees from compulsory coverage in a state-run healthcare programme that costs them 6.5% on a cost to company basis, and give them the choice to buy a health insurance product from an insurance firm instead. 

The government has called a meeting of the Employees' State Insurance Corporation (ESIC) on Tuesday to approve amendments to this effect in the ESI Act of 1948, India's first social security legislation. If ratified, the change could throw up a major opportunity for the country's $2 billion health insurance business. Finance minister Arun Jaitley had declared the government's intent to allow employees to exercise their individual choice in health insurance in his Budget speech.

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"We intend to bring amending legislation in this regard, after stakeholder consultation," he had said. "We have proposed adding two new sections to the law that gives employees a one-time option to opt for a health insurance product regulated by the IRDA. Employers would have to submit proof of such alternate coverage," said a senior government official, adding that workers would be allowed to return to the ESI fold if they are not satisfied with the health insurance coverage. "However, such aswitch-back to the scheme would be allowed only once. 

We are also putting in a safeguard, so that employers can't force workers to opt for either the ESI or a health insurance product as a pre-condition for employment," he added. About 60% of India's organized sector workforce or 1.74 crore employees are covered by the ESIC, which offers medical care to them and their dependents along with unemployment benefits in case of disablement or occupational accidents, including fatal ones. The law mandates employers to contribute 4.75% of an employees' gross salary (up to Rs 15,000 per month) with a 1.75% matching premium payment from employees. In return, members get access to ESIC's 151 hospitals and 1,380 dispensaries around the country. 

Trade unions are annoyed with the haste in which the corporation meeting has been scheduled. "We got a notice about the meeting on April 2, after which there have been a slew of government holidays. Moreover, any amendments to the law are usually debated by our board first. This is the first time that the government is bringing amendments to the table," said the general secretary of a major trade union, who is on the ESIC board.