Covid-19 reminded us that “A modern state is a welfare state”, as governments worldwide launched 1000’s of new social protection programs in 2020. Sustainable social security lies in raising India’s 138th ranking in country per-capita GDP. However, on the social security schemes, there is a case for three reforms to our health insurance and pension schemes. These schemes are Employee State Insurance Scheme (ESIS) and Employee Provident Fund (EPF).
Issue with ESIS
The Employee State Insurance Scheme (ESIS) is India’s biggest health insurance scheme with 13 crore people covered and is worth Rs 80,000 crore in cash. Employers with more than 10 employees make a mandatory 4% payroll deduction for employees earning up to Rs 21,000 per month. Despite covering roughly 10% of India’s population a recent study suggests high dissatisfaction. The constraint is hardly resourceful as ESIC’s unspent reserves are larger than the Central government’s health care budgetary allocation.
Issues with EPF
EPS is India’s biggest pension scheme with Rs.12 lakh crore corpus and 6.5 crore contributors. Employers with more than 20 employees make a mandatory 24% payroll deduction for employees earning up to Rs.15,000 per month. It covers 10% of India’s labor force and 60% of accounts and 50% of registered employees are inactive. EPF just like ESIS offers poor services and pathetic technology despite the employer-funded administrative cost.
The solution to EPF and ESIS problems
EPF and ESI have combined the roles of policymaker, regulator, and service providers. Splitting roles is better for performance because the goals, strategy, and skills required are different. An independent service provider would invest heavily in technology, customer service, and human capital.
Splitting roles would lead to the following benefits
1] Competition from NPS for EPF
2] Raising and enforceability by making employee Provident fund contribution is voluntary
3] Improving portability by the de-linking accounts from employers
4] Targeting universalization by simultaneously ending minimum employer headcount and employee salary contribution threshold while introducing absolute contribution caps
5] The Health and Finance Ministry would be logical homes for ESI and EPF policy rules
The governing body of ESIS and EPFO 59 and 33 members respectively. Such a large group cannot have meaningful discussions, make decisions, and exercise oversight. This government deficit needs smaller boards (not more than 15 people), age limit, term limit, expertise, active subcommittees (HR, Investments, and Technology), and the real powers.
Health and pensions need complex skills development over time, Both organizations need professionals chief executives.
This article has been written by Siddhesh Patil for The Paradigm
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