ESIC: Don’t sell it, fix it

The latest Sample Registration System data should worry every policymaker. In 2024, nearly half of all recorded deaths in India occurred without medical attention from a trained professional. This is up from 18 per cent in 2020. The proportion was even higher in rural India, and in states such as Bihar it was close to two-thirds. These are not merely mortality statistics. They are a measure of how distant formal healthcare remains from the reach of ordinary Indians.

This is the background against which we must examine the Employees’ State Insurance Corporation, or ESIC. There is growing discussion about ‘reforming’ it. Reform is overdue. But reform must not become a code word for privatisation, outsourcing or handing over a valuable social security institution to private insurers and hospital chains.

ESIC is often misunderstood as just another health insurance scheme. It is much more than that. It is a social insurance system for low-income workers in the formal economy. It combines medical care with income protection. It covers sickness, maternity, disability, workplace injury, dependants’ benefit, unemployment support and lifelong pension in cases of permanent disablement.

For a worker earning Rs 15,000 a month, the total annual contribution is about Rs 7,200, split between employer and employee. This sum entitles the worker (and family) to medical care without monetary ceilings, plus cash benefits that no ordinary private insurance product provides.

This matters not only for social justice, but also for India’s industrial future. India is among the world’s largest manufacturing economies, yet workplace injuries remain seriously under-reported and under-addressed. A properly functional ESIC system that ensures quick treatment, wage compensation, rehabilitation and disability support prevents injured workers from falling into poverty.

It also helps them return to productive work sooner. Worker health is productive capital. ESIC reform is therefore not merely welfare reform; it is productivity reform and should be seen as essential to sustaining industrial growth.

The scale is large. ESIC covers about 3.84 crore insured persons and, with their families, nearly 14.91 crore beneficiaries — roughly one-tenth of India. It has a large hospital network, medical colleges, land assets and a reported corpus exceeding Rs 1 lakh crore. By any measure, this is one of India’s most under-used public social infrastructure assets.

Its intellectual history is also worth recalling. Britain’s National Health Service (NHS) emerged from the Beveridge vision of social security. In India, Prof. B.P. Adarkar designed a similar framework for industrial workers in the 1940s. The ESI Act of 1948 came from that vision. The NHS became a globally respected public institution (currently facing severe challenges like funding cuts and staff shortages). It is true that ESIC has been suffering from neglect, weak governance and poor user experience. That is a failure of execution, not principle.

The flaws are real. Workers complain of queues, poor information, lack of medicines, slow referrals, indifferent staff and long delays in cash benefits. Safe in India (SII) Foundation’s work with injured workers in Haryana and Maharashtra shows how serious the problem is.

Of the 8,000-plus injured workers it assisted, 73 per cent waited more than six months for temporary disability benefits and 78 per cent waited more than a year for permanent disability benefits. In Manesar, many workers had to pay out of pocket for even basic diagnostics such as ultrasounds.

This is exactly why ESIC needs to be repaired, not surrendered.

The case for privatisation rests on attractive words: choice, efficiency, competition, scale. But for low-wage workers, ‘choice’ is often illusory. Many workers are migrants, on short contracts, poorly informed and dependent on employers for registration. SII’s experience shows that 16 per cent of assisted injured workers were registered with ESIC only after an accident, and 64 per cent received ESI cards only after injury. If mandatory registration itself is not properly enforced, ‘choice’ will not empower workers.

Nor can private insurance replicate ESIC’s benefit basket. A private family floater of Rs 5 lakh may cost Rs 15,000 to Rs 30,000 a year and usually covers only hospitalisation, with exclusions, waiting periods and sub-limits. It does not cover outpatient care, wage loss, maternity wage replacement, disability pension or occupational disease. A worker disabled at 28 may need support for 40 years. A disease like silicosis may appear decades after exposure.

These are not risks that private insurers will carry at affordable premiums. They require a statutory, mandatory, pooled system.

India’s own experience with private healthcare should also caution us. Even under publicly funded schemes, private providers can cherry-pick profitable cases, induce unnecessary procedures, dispute reimbursement rates and leave patients with out-of-pocket costs despite ‘cashless’ promises. Private capacity has a role to play in diagnostics, specialist care and underserved geographies, but not as a replacement for ESIC’s public core.

The reform agenda should be practical. First, simplify every worker-facing process. Accident reporting, claims, referrals, disability assessment and benefit tracking must be redesigned around the worker, not the file.

Second, publish enforceable service standards: claim-to-payment timelines, medicine availability, waiting time, referral turnaround and facility-wise performance.

Third, strengthen primary care in every major industrial cluster so workers do not bypass the system out of frustration. Fourth, fix human resources: doctors, specialists, nurses, technicians and hospital managers must be available where workers actually live and work. Fifth, deploy digital tools for appointments, health records, telemedicine and real-time claim tracking. Digital literacy, however, should not become a new barrier.

Governance reform is equally important. ESIC must become more accountable to workers, and also employers, especially MSMEs. Its boards and state bodies need stronger representation of workers, including contract workers, along with employers, government and independent health experts.

There should be independent performance audits, social audits, actuarial reviews and public dashboards. Employer compliance must be enforced: every eligible worker should be registered, receive an e-Pehchaan card and have accidents reported on time.

The wage ceiling also needs revision. It should be raised and indexed periodically to inflation. Coverage should gradually extend to construction, gig and platform workers. ESIC’s corpus must be used for workers’ promised benefits and to upgrade the institution — not diverted elsewhere.

ESIC has a distinct function. It is not merely a hospitalisation scheme. It links healthcare with workplace injury, wage loss, maternity protection, disability pensions and occupational disease tracking. That institutional capability took decades to build, and cannot be tossed aside.

India’s healthcare crisis is not caused by too much public provi-sion. It is caused by too little effective public provision. When nearly half of all deaths occur without trained medical attention, the answer cannot be to deny workers one of the few statutory systems designed for them. The answer is to make it work.

Fix ESIC. Professionalise it. Make it transparent. Use private expertise where necessary, but on ESIC’s terms. Preserve the public character of the scheme. A revitalised ESIC can become a model for broader social health protection in India.

Ajit Ranade is a noted economist. More of his writing here

Article courtesy: Billion Press