All About Group Health Insurance

What is Group Health Insurance?

As the same suggests, group health insurance is insurance provided to a formal group like employees working in an organization or members of society. Companies commonly use group health insurance for their employees, which is why you’d often find people interchangeably using the words ‘group health insurance and ‘employee health insurance. 

Group health insurance can also be extended to people directly or indirectly related to the group. For instance, group health insurance for employees extends to their spouses, children, and even parents.

Why Group Health Insurance

Group health insurance is a suitable choice both for employees and employers.  One of the most basic benefits you can provide your employees is adequate health insurance coverage. A study reveals that employees value health insurance as the most important benefit.

Here’s what makes providing health insurance, especially group health insurance, a strategically beneficial choice for employers: 

Not just employers but employees stand to gain a lot from a group health insurance policy. Here’s how:

In addition to providing all the above-mentioned benefits, GHI also combats the problem of adverse selection. 

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Group Health Insurance and Adverse Selection

Adverse selection increases the chance for a person/organization to take insurance because they believe their immediate health risk is higher than what they would pay as an insurance premium.

Imagine an incidence where a person doesn’t have a health insurance policy and is diagnosed with a disease. The doctor suggests him/her go for surgery which is quite expensive. Looking at the problematic situation, he/she would buy a health insurance policy without disclosing the disease and get the treatment covered under insurance.

Waiting periods to solve adverse selection

Retail insurance products add waiting periods to avoid this adverse selection problem. A waiting period is a time an insured must wait before some or all of their coverage comes into effect. 

Here are the 4 types of waiting periods that are usually applied to health insurance policies>

However, GHI waives off all four types of waiting periods, i.e. one can make a claim on day 1 for any condition. Insurance companies provide the above benefits for group cover because it assumes that the group will have no selection in terms of who is getting covered in the policy. 

Know more about how group health insurance works.

Group Health Insurance V/S Individual Health Insurance‍

When faced with providing an umbrella cover for all their employees instead of letting them choose individual plans and reimbursing them, group health insurance is better. 

Group health insurance is more beneficial for both employees and employers as they are more holistic in coverage, provides a lot more customization, and has no waiting periods involved. Not just that, as an employer, it would be far easier to manage a single group health insurance policy than tracking and reimbursing for individual plans. 

In addition to that, group health insurance is also a cost-effective option. Being bulk purchases, they are much cheaper than individual plans. 

GHI VS Medical Reimbursements

Another dilemma that companies often have while deciding on health coverage for their employees is whether to simply reimburse those employees who incur medical costs or provide insurance coverage to each and every one of them. After all, the cover for those employees who don’t actually incur any medical costs in the year goes down the drain, right?

Yet, choosing group health insurance is preferable for two major reasons:

Premium calculation

There are  6 key factors that decide the premium costs for health insurance plans you buy for your employees: 

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Tax Implications

Section 17 of the Income Tax Act defines employers' health insurance premium as a ‘profit in lieu of salary”. That means the premium you pay would be considered a business expense, and you don’t have to pay any tax on that amount. 

However, if your employee bears some premium cost, they get a tax deduction as mentioned in Section 80D of the Income Tax Act. According to it, your employees can claim a tax deduction of up to ₹25,000 per year for any instalments they pay as health insurance premiums. In addition, if they pay a premium for guardians/parents, they are additionally qualified for a deduction of up to ₹25,000 every financial year. 

Indian Government Regulation

Health insurance has become a norm in developed countries like the US. The US government mandates all employers who have 50 or more employees to provide health insurance to all their employees.

But India didn’t have any such mandate or regulations. With the recent Covid-19 pandemic, the Indian government started taking initiatives to ensure that the entire population of India has some sort of health insurance. On that front, the government announced on April 4th, 2020, that the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana would cover all treatments for Covid-19.

Learn how group health insurance works in India.

‍On April 15th, 2020, the government took another bold step towards getting the Indian population insured. The government of India, as part of order No 40–3/2020-DM-I (A), issued as part of the consolidated revised guidelines by the ministry of home affairs, made it mandatory for all employers who resume functioning post-COVID-19 lockdown in the country to provide medical insurance to their employees. As per clause 5 of Annexure-II of the revised guidelines and standard operating procedure for social distancing for offices, workplaces, factories, and establishments, medical insurance for the workers is to be made mandatory.

Disadvantages

One disadvantage that group medical cover or GMC is that you are covered only until you are a part of the group. So, an employee’s cover ceases as and when he leaves the company. However, employees switch ships only after considering the benefits offered. So, they’d be covered in the group health insurance policy of the next company they join.