Learn how group insurance for employees help expand small businesses
Discover how group health insurance policy can help small businesses and explore how it can help your business expand. Learn its types, benefits and application process.
10 minutes read
September 11, 2024
Simmran Sharma
Group insurance for employees is a vital benefit offered by employers or organizations to provide comprehensive healthcare coverage for a collective group of individuals. This type of insurance typically offers more favorable terms and lower premiums than individual policies due to the pooling of risk among many participants. Understanding its features and benefits can help organizations make informed decisions for their teams.
What is a group health insurance policy?
Group health insurance policy provides medical coverage to a collective group of individuals, typically employees of an organization, members of an association, or participants in a cooperative or professional body. This insurance is usually procured and maintained by a group sponsor, such as an employer or an organization, and offers benefits to all eligible members of the group. Such a plan often provides cover not only to group members but also to their spouses, children and dependent parents. If the member leaves the organization the cover can be discontinued or ported to an individual plan instead.
Types of group health insurance
Group health insurance policy comes in various types that cater to different needs and group structures. Here are the primary types of group health insurance:
a) Based on who its for:
In group health insurance, formal and informal are two types of insurance arrangements. Here's a breakdown of each:
Formal group health insurance | Informal group health insurance |
Purchased by an employer for employees. Eg. Corporate health insurance | Purchased by a group administrator for members of cultural, social or welfare associations. Not for employees. Eg. Community health fund |
More structured and organized insurance plan typically arranged through official channels | Less structured and more casual or non-traditional arrangements. |
Clearly defined eligibility criteria for group members, often including employees of a company, members of an association, or participants in a union. | Eligibility is often based on informal criteria or group dynamics rather than structured eligibility requirements. |
Includes standardized coverage options such as hospitalization, cashless treatment, preventive care, and additional benefits like maternity cover or wellness programs. | Coverage may be limited or vary widely based on the specific arrangement. Often lacks the comprehensive benefits and features of formal insurance plans. |
Premiums paid by employers or organizations are often eligible for tax benefits under Section 80D of the Income Tax Act. | In India, informal group health insurance arrangements generally do not qualify for the same tax benefits as formal group health insurance policies. |
b) Based on how premiums are paid:
In group health insurance, contributory and non-contributory group insurance plans are two types of arrangements that differ in how premiums are paid and managed. Here’s a detailed look at each type:
Contributory plan | Non-contributory plan |
Both the employer or organization and the insured members share the cost of the insurance premiums. | Full premium is paid by the employer or organization, with no cost borne by the insured members |
Enrollment is usually handled by the employer or organization, with premiums deducted from employee salaries. | Enrollment is typically automatic for eligible employees or members, with no deductions from salaries. |
Benefits of group medical insurance cover
Following are the advantages of group health insurance plans designed to provide comprehensive medical coverage:
a) Cost-effective
Premiums for group health insurance are generally lower than individual health insurance. This is because group health insurance covers a larger number of individuals, which spreads the risk of high medical costs across a broader pool. Further, the diversity in health conditions and ages within a large group can balance out the risks, reducing the overall financial risk for insurers. Larger groups often also have better bargaining power to negotiate lower premiums and better terms with insurers.
b) Comprehensive coverage
Comprehensive coverage includes a wide range of medical services and treatments, often with no cap on the number of claims. Group health insurance may cover the following, depending on the terms and conditions of the policy:
> Hospitalization expenses including room rent, doctor’s fees etc. incurred during a hospital stay.
> Pre and post-hospitalization expenses for diagnostic tests, consultations etc.
> Maternity benefit for related expenses, such as childbirth and newborn care.
> Pre-existing condition coverage is usually provided after a waiting period specified in the policy.
> Access to network hospitals with cashless facilities.
c) Standardized benefits
Group health insurance plans often have standardized benefits and coverage, which reduces the complexity and administrative costs associated with customizing individual policies. It also ensures people from lower income groups get the same coverage as people from higher income groups.Streamlined processes for claims, enrollments, and renewals in group policies contribute to lower overall costs.
d) Tax deductions
In India, group health insurance policies can provide tax benefits for both employers and employees. Employers can claim premiums paid for group health insurance as a business expense to receive tax benefits under the Income Tax Act. Similarly, employees may benefit from tax deductions for their own individual contributions (if any) under Section 80D of the Income Tax Act.
Tax benefit for employers | Tax benefit for employees |
section 37(1) deduction: premiums paid for group health insurance can be claimed as a business expense under section 31(1) to receive tax benefits. | section 80D deduction: In contributory group plans employees can claim a tax deduction under Section 80D of the Income Tax Act. |
Employers no longer need to pay additional tax on the Fringe Benefit Tax (FBT) since it was abolished in 2009. | Find more details on deduction limits for self, family and senior citizens here. |
Understanding these tax benefits helps both employers and employees to make informed decisions about group health insurance and optimize their tax planning.
d) Portability
Portability in group health insurance refers to the ability for individuals to transfer or continue their health insurance coverage from a group policy to an individual policy when they leave the group, such as when changing jobs or leaving an organization. Some policies offer the option to convert or port the group policy to an individual plan if an employee leaves the organization, subject to the insurer’s terms. The process to port group health insurance may include following aspects:
> Application: The individual needs to apply for portability to the insurance company that provides the group policy or a new insurer, as per the guidelines set by the insurer.
> Documentation: Submission of relevant documents, such as proof of previous coverage, claim history, and health records.
> Waiting period: The waiting period for pre-existing conditions may carry over from the group policy to the individual policy, depending on the insurer’s policy on portability.
Who should buy group health insurance
Group health insurance can be a valuable benefit for various types of businesses. Here’s a rundown of the kinds of businesses that should consider offering it:
a) Startups
For startups looking to build a strong team and offer competitive benefits, group health insurance can be a great way to do that. It can also help in creating a positive work environment and employee loyalty.
b) Small and Medium Enterprises (SMEs)
Small businesses can find group health insurance beneficial since it helps attract and retain talent. It provides a safety net for employees, and is more affordable than individual policies.
c) Manufacturing and industrial companies
Businesses in industries with higher health and safety risks might find group health insurance especially important to cover medical costs associated with workplace injuries and health issues.
e) Healthcare providers
Hospitals and clinics might use group health insurance as part of their employee benefits package, given the nature of their work and the importance of health coverage.
f) Non-Profit Organizations (NGOs)
NGOs and other non-profits can also benefit from providing group health insurance, helping them offer a more attractive benefits package to their employees and volunteers.
How does group health insurance benefit businesses
Group mediclaim insurance policy for employees offers several benefits for businesses in India, making it a valuable addition to employee benefits packages. Here’s how it can benefit businesses:
a) Expand business through increased employee retention & loyalty
Offering group health insurance can make your company more attractive to prospective employees and can help retain current staff by providing them with valuable health coverage. Employees are more likely to feel valued and committed to a company that invests in their well-being.
b) Competitive edge in job market
In competitive job markets, having group health insurance can give your company an edge over competitors who may not offer similar benefits. Offering group health insurance makes your benefits package more attractive. This can be a decisive factor for candidates when comparing job offers. Satisfied employees are also likely to refer others to the company, creating a cycle of positive referrals and enhancing your recruitment efforts through word-of-mouth.
c) Improved productivity and higher workplace morale
Employees with access to health insurance are more likely to seek medical care when needed, leading to better overall health and fewer absences. Access to healthcare can help manage and prevent illnesses, which can reduce the number of sick days employees take. Modern group health insurance plans often also come with data analytics tools that help businesses track health trends, costs, and employee wellness metrics. This data insight can be used to enhance health and productivity in the workplace. It will ultimately contribute to a positive work environment, as employees feel valued and supported. This can enhance team spirit and overall morale.
e) Telemedicine and digital health solutions
Many group health insurance plans now include coverage for telemedicine and digital health services. This allows employees to access healthcare remotely, which can be especially beneficial for those working in tech-driven environments or remote locations. This convenience can lead to higher productivity and more efficient use of technology within the workplace.
Overall, any business that wants to enhance employee benefits, improve retention, and foster a positive work environment might find group health insurance a worthwhile investment.
Process to get insured
Whether you're purchasing it for employees in a corporate setting, members of an association, or other types of groups, buying group health insurance in India involves several steps. The group must comply with any regulatory requirements set by the Insurance Regulatory and Development Authority of India (IRDAI) or other relevant authorities. Here’s a general outline of the process:
a) Check eligibility
Understand the eligibility criteria for members and the process for adding new members or handling claims. There are some common guidelines and requirements that apply to group health insurance:
> The minimum age for entry is 18 years. The maximum age may vary. Some policies might allow dependents and family members to be covered up to a certain age as well.
> For employee group health insurance, the business or organization must be legally registered and operational.
> Minimum 7 employees can buy a corporate group health policy. All insured must be full-time members of the group.
b) Get quote
Gather details about the group, such as the number of members, their age ranges, and any specific requirements in order to receive estimates from top insurance companies. Consider working with an insurance TPA like OneAssure who can help you navigate the options and find the best plan for your needs.
c) Review policy terms
Based on the quotes and policy reviews, choose the plan that best meets the group's needs and budget. If needed, negotiate for better terms or additional coverage options. Carefully review the coverage details, including any co-payments, deductibles, limits, and exclusions.
d) Submit required documents
Fill out the application form provided by the insurer and attach all the required documents, such as:
a) Proof of group formation (e.g., company registration or association membership)
b) Identity proof (PAN/ Aadhaar etc.)
c) Address proof (Voter ID/ Driver’s License etc.)
d) Proof of financial stability for corporate groups (Income proof, IT returns)
e) Employee or member details
f) Recent photographs
e) Policy issuance
Pay the initial premium amount as required. Group health insurance premiums are typically paid annually or semi-annually. Once the payment is processed and the application is approved, the insurer will issue the policy documents. Share the policy details and documents with the group members, explaining the coverage and how to make claims.
Manage the policy by keeping track of renewals, updating member information, and handling any claims. Periodically review the policy to ensure it continues to meet the needs of the group and adjust as necessary. Looking for something similar for your family? Explore family floater plans.
Bottomline
Group health insurance is a strategic benefit that provides comprehensive medical coverage to a collective group, be it employees, association members, or participants in a cooperative. The advantages of group health insurance to small businesses are manifold. By effectively managing healthcare costs and improving access to care, group health insurance supports both individual health and organizational success. With proper guidance and comparison of various plans, employers can achieve better coverage and avoid potential pitfalls. Contact OneAssure to book a free consultation.