HEALTH INSURANCE SCHEME FOR WORKERS IN THE

UNORGANISED SECTOR

1. BACKGROUND

The workers in the unorganized sector constitute about 93% of the total work force in
the country. The Government has been implementing some social security measures for certain
occupational groups but the coverage is miniscule. Majority of the workers are still without any
social security coverage. Recognizing the need for providing social to these workers, the Central
Government proposes to enact a comprehensive legislation.

One of the major insecurities for workers in the unorganized sector is the frequent
incidences of illness and need for medical care and hospitalization of such workers and their
family members. Despite the expansion in the health facilities, illness remains one of the most
prevalent causes of human deprivation in India. It has been clearly recognized that health
insurance is one way of providing protection to poor households against the risk of health
spending leading to poverty. However, most efforts to provide health insurance in the past have
faced difficulties in both design and implementation. The poor are unable or unwilling to take
up health insurance because of its cost, or lack of perceived benefits. Organizing and
administering health insurance, especially in rural areas, is also difficult.

2. OBJECTIVE

Recognizing the diversity with regard to public health infrastructure, socio-economic

conditions and the administrative network, the health insurance scheme aims to facilitate
launching of health insurance projects in all the districts of the States in a phased manner for
BPL workers.

3. SALIENT FEATURES OF THE SCHEME

 Funding Pattern
(i) Contribution by Government of India: 75% of the estimated annual premium of
Rs.750, subject to a maximum of Rs. 565 per family per annum. The cost of
smart card will be borne by the Central Government. In case of States of North –
East region and Jammu and Kashmir, the contribution is 90%.
(ii) Contribution by respective State Governments: 25% of the annual premium, as
well as any additional premium. In case of States of North-East region and
Jammu and Kashmir, the contribution is 10%.
(iii) The beneficiary would pay Rs. 30 per annum as registration/renewal fee.
(iv) The administrative and other related cost of administering the scheme would be
borne by the respective State Governments

Implementing Agency & Formulation of Projects

The State Government while formulating the pilot project will determine the
implementing agency on behalf of the State Government.

Eligibility

 Unorganized sector workers belonging to BPL category and their family members (a
family unit of five) shall be the beneficiaries under the scheme.

 It will be the responsibility of the implementing agencies to verify the eligibility of the
unorganized sector workers and his family members who are proposed to be benefited
under the scheme.

 The beneficiaries will be issued smart cards for the purpose of identification.

Benefits
 The beneficiary shall be eligible for such in-patient health care insurance benefits as
would be designed by the respective State Governments based on the requirement of the people/
geographical area. However, the State Governments are advised to incorporate at least the
following minimum benefits in the package / scheme:

 The unroganised sector worker and his family (unit of five) will be covered
 Cashless attendance to all covered ailments
 Hospitalization expenses, taking care of most common illnesses including maternity
benefits.
 All pre-existing diseases to be covered
 Transportation costs (actual with maximum limit of Rs. 100 per visit) within an overall
limit of Rs.1000.

4. FORMULATION OF THE PROJECTS

The State Government shall formulate project/projects for providing health insurance
benefits, taking into account the aforementioned points, for the workers and their families in the
unorganized sectors for a defined geographical area, preferably a district. While formulating the
project/projects, the following aspects may be considered:

 There must be a clearly defined institution capable of organizing a health insurance

programme. It can be an autonomous body, State Government Department, a Cooperative
Society or even an NGO. The organization should have the technical skills to understand
the concept of health insurance, should be able to design a programme that is technically
sound, should have skills to be able to discuss with the community and should have the
administrative capacity to organize the programme.
 There must be a network of health care providers (public and private). The Project
should incorporate use of private and all public healthcare providers, including ESI
hospitals.
 There should be some basic data available regarding the demographic profile of the
District.
  The cost of the scheme, i.e., total premium per year, along with the procedure adopted to
arrive at the premium.
 The procedure for collecting the registration/renewal fee from the beneficiary should be
outlined in the proposal.

5. SETTING UP OF TECHNICAL CELL:

A Cell would be constituted in the Ministry, administering the scheme, to assist the
State Governments in formulating projects. The Cell would be headed by a Sr. Advisor who
would be assisted by two Advisors. The expert would be hired on contract basis or on deputation.
The Cell would perform following functions:

a) Plan the insurance scheme based on the requirements of State;

b) Workout financial implication and other details;
c) Assist the State Governments in the preparation of pilot projects
d) Assist in the effective implementation of the Scheme.
e) Monitor and evaluate the implementation of the project.

The proposal for launching health insurance project would be submitted to the
Administrative Ministry for approval along with all the financial implications and details.

6. SELECTION OF INSURANCE PROVIDER:

The selection of the health insurance provider shall be done by the state/implementing
agency through tendering process inviting both Public and Private Insurers for better terms of
reference. The State Government would formulate the projects and determine the implementing
agency such as Insurance Trust/ Insurance Cell/ Mother NGO etc. to monitor/supervise the
scheme and integrate with insurance company. This would be further monitored at State and
Central level.

7. APPROVAL AND MONITORING COMMITTEE:

 A Committee consisting of the following shall examine the proposals submitted by the
State Governments and grant approval to the projects:

i) Joint Secretary/Director General Labour Welfare,

Ministry of Labour & Employment Convener
ii) Representatives of Ministry of Finance Member
iii) Representatives of Ministry of Health and Family Welfare Member
iv) Representatives of Planning Commission Member

The Committee will also periodically monitor and review the progress of the projects.

8. RELEASE OF FUNDS:

On the approval of the project, the State Government will, from time to time, intimate
the Central Government about the payment of the premium to the Insurance Company. The
Central Government, on receipt of this information, shall release its share of premium.

9. FINANCIAL IMPLICATION:

(a) Central Government Contribution to the Scheme: The census 2001 indicates 26%
of BPL population in the country. This comes to around 30 crore BPL population. An average
of 5 members in a family will translate to 6 crore BPL families across the country. These
families will be covered in five years with a coverage of 20% each year. Average per district
would be around 1 lakh BPL workers and BPL families. The average premium would be Rs.
750 per family. The Central Government would bear 75% of the premium subject to the
maximum limit of Rs. 565 per family. The State Government will bear the remaining premium.
The worker would pay Rs. 30 per year as registration/renewal fee every year. This would be
collected and used by the State Government. The administrative cost would be borne by the
State Government. Thus, the Central Government contribution for the first year would be Rs.
678 crore going up to Rs. 3450 crore by fifth year when all 6 crore BPL families will be covered.
(b) Administrative Expenses:
In view of the complexities involved in providing health insurance cover and also in view
of the lack of experience amongst most of the states in formulating health insurance projects and
in evaluating and monitoring such projects at the Center, there is need to constitute a Cell in the
Ministry of Labour & Employment to undertake field visits, reality checks, technical vetting of
the proposals, drafting of tender document, making recommendation, monitoring etc. not only
for the Central Government but also for the State Governments.

It is, therefore, proposed to constitute a Cell in the Ministry of Labour & Employment,
Office of Director General (Labour Welfare) to assist the State Governments in formulating pilot
projects. There would be a Sr. Adviser and two Advisers in the Cell. There would also be a
small Computer Division for managing information and data flow. The Cell would also assist in
the effective implementation of the Scheme. The experts would be hired on contract basis or on
deputation basis. For running the Cell, there would be recurring and non-recurring expenditure.
The estimated expenditure on account of salary & travel expenses of the Advisers, support staff
and the Computer Division within the Cell would be around 51 lakh per annum. The other
expenses like telephone/Internet/Stationery/fax etc.; local conveyance /visitors entertainment and
other related expenditures; workshops at various level; publicity awareness generation through
print & electronic media would cost around Rs. 59 lakh per annum. As this is a new scheme, a
contingency amount of Rs. 40 lakh is being added.

Thus the annual recurring administrative expenditure for technical Cell would be Rs. 1.5
crore. Apart from this, there would be one time requirement of Rs. 50 lakh for setting up of the
office of advisers, programmers and for office equipments.

Accordingly, the fund requirement would be as follows:

In Rs. crore
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Premium contribution @ - 678.00 1356.00 2034.00 2712.00 3450.00
Rs.565 per worker per
annum
Smart Cards @ Rs. 60 - 72.00 72.00 72.00 72.00 72.00
per Card
Administrative Expenses 0.75 1.50 2.00 2.50 3.00 3.50
(Recurring)
Administrative Expenses 0.50 - - - - -
(Non Recurring)
Grand Total 1.25 751.50 1430.00 2108.50 2787.00 3525.50
Note:
 1.2 crore BPL families will be added each year till all 6 crore such families are covered.
 During 2007-08 the cost incurred would be only on setting up the Cell, interacting with
States, traveling, projects formulation, etc.
 After 2012-13, the annual expenditure would be Rs.3453.50 crore (Premium contribution
Rs. 3450 crore + Rs. 3.5 crore Adm. Exp.)

10. MONITORING AND EVALUATION:

The State Government will put in place a well defined mechanism for monitoring and
evaluation of the pilot project at the time of its implementation. At the Central Government
level, the Cell constituted for examining project proposals shall also periodically monitor and
evaluate the performance of each pilot project with a view to evolving workable models which
can be up-scaled for wider application.