Can a company offer both ESI and group health insurance?

Yes, a company can offer both ESI and group health insurance, and many do. ESI is a statutory scheme for employees earning up to ₹21,000 a month, while group health insurance is a voluntary employer benefit that can cover employees above that wage threshold or supplement ESI cover. The two are separate systems and can run together in the same organisation.

Who is covered by ESI versus group health insurance?

ESI covers employees earning up to ₹21,000 a month, or ₹25,000 for persons with disability, while group health insurance can cover the rest of the workforce. ESI is now administered under the Code on Social Security 2020, which took effect on 21 November 2025 and repealed the older ESI Act 1948. Employees within the wage threshold receive medical and cash benefits through ESIC hospitals and dispensaries. Employees above the threshold are outside ESI, so employers commonly cover them through a group health policy that offers cashless treatment at private network hospitals.

How do the two schemes work together in one company?

In a mixed workforce, lower-wage employees are covered by ESI and higher-wage employees by group health insurance, so the two schemes cover different segments. Some employers also place ESI-eligible employees in a group health policy as well, giving them access to private hospitals alongside their ESI entitlement, because ESI treatment is restricted to ESIC-empanelled facilities. This dual approach widens access but adds cost, so employers decide based on budget and the location of ESIC infrastructure near their employees.

What are the cost and tax implications of running both?

ESI is funded by statutory contributions, while group health insurance is funded by the employer at its discretion. ESI contributions are a fixed percentage of wages shared between employer and employee. Group health premiums are deductible for the employer under Section 37(1) and are not a taxable perquisite for the employee under Section 17(2). Group health premiums paid by companies attract 18% GST, and input tax credit is blocked under Section 17(5)(b) of the CGST Act except where the cover is legally obligatory. Running both means the employer meets its ESI obligation and absorbs the group health premium as a benefit cost.

Is ESI enough on its own, or is group health needed?

ESI provides statutory medical cover but is limited to eligible employees and to ESIC facilities, which is why employers add group health insurance. ESI does not cover higher-wage staff, and access depends on ESIC hospital availability near the workplace. Group health insurance extends cover to the whole workforce, allows treatment at private network hospitals on a cashless basis, and lets the employer design the sum insured and add-ons. Many employers treat ESI as the statutory floor and group health as the benefit that makes their offer competitive.

How Plum approaches this

Plum sets up group health and group term life cover for companies with a minimum of 7 employees, against the common assumption that a group needs only 2 or 3 members. The claims experience is measured: Plum holds a claims NPS of 79 and a median pre-authorisation turnaround of 45 minutes, well inside the one-hour cashless pre-authorisation window set by the IRDAI Master Circular of May 2024. Cashless access depends on the insurer underwriting the policy, so the hospital network varies; Plum places cover with insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and matches the network to where a company’s employees actually live and work.

Frequently asked questions

Is ESI mandatory if a company already has group health insurance? Yes. ESI is a statutory obligation for eligible employees and cannot be replaced by a voluntary group health policy.

Can an ESI-covered employee also be in the group health policy? Yes. An employer can include ESI-eligible employees in its group health policy to give them private hospital access.

Did the Code on Social Security 2020 change ESI? Yes. From 21 November 2025 ESI runs under the Code, the ESI Act 1948 stands repealed, and dependent and family definitions have widened.