Can Our Medical Insurance Replace ESIC for Unhappy Employees? Seeking Legal Insights

I work for the BPO industry and have some queries regarding ESIC. After the ceiling of ESIC is being raised from Rs. 7,500/- to Rs. 10,000/-, we have more employees who come under the ESIC cover.

We are currently providing the benefit of Medical Insurance to our employees (this is in addition to the ESIC cover for those employees who are eligible for it as per the law). The Medical Insurance benefit is based on the level/position one holds in the company, and the Insurer is Oriental Insurance. The employees at the lowest level are covered maximum up to Rs. 50,000/- per annum. The level of coverage is as follows:

Level 1 to 5: Rs. 50,000/- (only the employee is covered)

Level 6 to 10: Rs. 1,00,000/- (only the employee is covered)

Level 11 to 15: Rs. 2,00,000/- (employee + spouse + two children are covered)

Level 16 to 20: Rs. 5,00,000/- (employee + spouse + two children are covered)

The employee can claim the above benefit if they are hospitalized in a 15-bed hospital for at least 24 hours. This is also a cashless facility in case the employee goes to a network hospital.

I just wanted to know if the Medical Insurance benefit can be used in lieu of the ESIC.

Is there any law that says if the employer offers better benefits than ESIC, then it is not necessary to cover the employees under ESIC?

The reason I want to know this is that there are employees who are not happy with the services of ESIC, and they feel that the employee's contribution of 1.75% deducted from their salary towards ESIC is of no use to them.

Could any member of this group help me with my above query.

Regards,

Kuldeep Singh

Hi,

The first principle is that you cannot contract out of the law. If ESI (or any law for that matter) is applicable, we simply have to abide by it. Medical Insurance Schemes will NOT automatically cover you for non-implementation of ESI.

I remember that there is a provision in the ESI Act itself that if an employer offers superior benefits than the scheme, then it may seek exemption. This needs to be checked, though. The experience does not show any example of exemption.

Furthermore, if certain employees, though covered under ESI, are unable to utilize the ESI facilities, like frequent travel for work, or working in areas where ESI facilities are not available, then such employees may be exempted against a representation and by satisfying the authorities of the justification in exempting such employees. (I doubt if a BPO may qualify for such an exemption!)

Kindly check thoroughly these provisions before initiating any action.

Regards,

Samvedan
October 26, 2006

Dear Mr. Singh,

Yes, exemption can be sought from ESI if your organization has medical facilities being given to employees that are better than the ESI facility. For this, you will have to write to the Ministry of Labour. They will send you a form to be filled in for the purpose. This form will ask you for various details regarding your organization and also the details of medical facilities extended by you to your employees, which you feel are better than the ESI. Along with the form, you can attach copies of such medical policies. The copies can be from your policy manual or staff handbook.

Once the same is sent to the ministry, they might consider your request and grant you exemption. However, the process takes a long time, and the exemption is always given for only a year. Next year, again, you will have to seek a renewed exemption. Also, the Ministry publishes a Gazette carrying the names of the organizations that are exempted from the same.

Usually, to get an exemption for the first time, it might include an inspection from the Ministry's side and much documentation. Once you have obtained it, then it is only a matter of following up every year and keeping up your policies.

This exemption is slightly easier to get if the company is a PSU or semi-government. As my company was a PSU, I am aware of the procedures followed there.

Hope this clarifies your query.

Thanks and regards,

Rekha

Dear Kuldeep,

The first thing we all tend to stress is Hospitalization and Treatment only, but ESI also provides free treatment and medicines for minor ailments like fever, cough, and cold, indigestion. To replace this with a better system and still remain profitable requires a big infrastructure that very few companies can afford.

In my previous company, we were exempted from ESI. To replace the system, we had to employ staff numbering above 100, including doctors, administrative personnel, and support staff. The hierarchy went up to the level of Dy. General Manager, which was a very high rank in the company, two levels below the Executive Director.

Additionally, the scheme required maintenance of a network of External Medical Consultants like General Physicians, Surgeons, and Specialists of all Medical Disciplines including Dentists, Polyclinics, Hospitals, Nursing Homes, Pharmacy Shops, and Therapeutic and Rehabilitation Centers. The whole Medical Department was responsible for maintaining and coordinating the scheme, which started from Diagnosis, Treatment, Medication, Hospitalization if required, and finally, sanctioning the payment of bills. These bills were then submitted to the Insurance Company for settlement of claims. For claiming the amount from insurance, again, a set of qualified people had to be recruited along with consultants.

Therefore, an employee with any ailment could simply go to one of our company doctors and get treated for free. He had the option to go for even medical check-ups. This included employees with Chronic Drug and Alcohol Abuse, just like ESI.

The whole system is not worthwhile unless you have a workforce exceeding a few thousand for a particular location since Specialists, Nursing Homes, and Polyclinics will not get enlisted unless you are giving bulk and the Insurance Company has a profitable premium.

Now, the other thing is, in general, ESIs have received a non-written order not to entertain any such exemption from the private sector, as it results in a huge loss in revenue.

Regards,

SC

Getting an exemption from the ESI scheme is a very difficult task. While working in a Public sector undertaking, we had carried out this exercise, as the company medical scheme in our view was far superior to the ESI scheme. None of our employees were availing the benefits from the ESIC and were not paying the ESIC contribution. Since the beginning, the company was paying both the employers' and employees' contributions.

After I joined this company, I applied for an exemption on the plea that our company scheme was far superior, no employee was willing to take benefit from ESIC, employees were refusing to pay the contribution, and the recognized union gave in writing that it was willing to opt out of the scheme.

Despite this, the Ministry of Labour did not initially give us the exemption and wanted us to modify the company scheme at several places as they felt the provisions were inferior to ESIC. It was felt that in the process the company will end up giving many more additional benefits to employees than what was existing. The entire process had to be abandoned.

My advice is "DON'T ATTEMPT TO SEEK EXEMPTION."

Cyril

I appreciate the advice given by other senior members. Seeking exemption means undertaking a huge responsibility of running another establishment with a hospital specializing in taking risk cover of employees from sickness benefits, temporary & permanent disablement benefits, Workmen's Compensation Act, personal accident scheme, and pension. Medi-claim only covers the risk of hospitalization, not outpatient treatment, diagnosis, or medical reimbursement of bills for the same.

No business organization is an expert in taking care of the total risk of the ESI Act and running it. This may be a wild thought. Your organization is doing business in its expertise, and employers do not wish to take risks and assume additional responsibilities in this field unless the government insists under some other act of welfare and safety under occupational hazards of the industry.

Nowadays, ESIC is expanding its expertise in the field and building super specialty hospitals and trying to provide treatment to the members and dependent family members. Hence, my view is not to seek exemption from the ESI Act.

Regards,

One year ago, my wife underwent a uterus removal procedure at the Government Hospital. Is it possible to make any claims through ESIC with my ESI membership? She is also scheduled to undergo another surgery (hernia). Would it be possible to make any ESIC claims if I have her treated at a private hospital?

Addressing ESIC Concerns with ESI Dispensary

1. It would be better if you raise the issue with the appropriate ESI Dispensary to which you are attached. ESI dispensaries and hospitals are required to provide medical facilities primarily to eligible insured persons and their family members in their dispensaries or hospitals. Only in special cases do they refer matters to specialized hospitals, whether private or government, based on instructions from their superior office.

2. Therefore, it will be beneficial if you approach the ESI dispensary in your area and discuss the issue.

Regards.