How Does Group Health Insurance Work? The Full Process Explained

Group health insurance follows a defined six-step process from policy purchase to claim settlement. Each step has specific rules under the IRDAI Insurance Products Regulations, 2024 and the IRDAI Master Circular on Health Insurance, May 2024.

Step 1: The Employer Buys a Master Policy

A registered legal entity — typically a company with at least seven employees — purchases a single master policy from an IRDAI-licensed insurer. The policyholder is the company; the beneficiaries are the employees and their declared dependants. Annual premiums for group plans in India typically range from ₹3,000 to ₹15,000 per employee for basic family floater cover at a ₹3 lakh to ₹5 lakh sum insured.

Step 2: Risk Is Pooled Across the Group

Unlike retail health insurance, group plans do not underwrite individuals. The insurer assesses risk across the full workforce: average age, dependant mix, industry classification, and geographic distribution. This pooling is why group plans typically cover pre-existing diseases from Day 1, while retail policies impose a waiting period of up to 36 months under IRDAI 2024 rules.

Step 3: Employees Are Enrolled

• Automatic enrolment. All eligible employees are covered from their first day of employment, with no medical check-up.
• Dependant declaration. Employees confirm spouse, children, and (where covered) parent details through an HR portal or benefits platform.
• E-cards are issued. Digital health cards are typically available within 2 to 5 working days of policy issuance.
• Mid-term additions. New joiners during the policy year are added through endorsements at the next monthly cycle.

Step 4: Employees Use the Policy

When hospitalisation is needed, the employee has two routes:

• Cashless treatment at network hospitals. The hospital sends a pre-authorisation request to the insurer or TPA. Under the IRDAI Master Circular of May 2024, insurers must issue cashless pre-authorisation within one hour of receiving a complete request and discharge approval within three hours.
• Reimbursement at non-network hospitals. The employee pays first, then submits documents. IRDAI mandates settlement within 30 days of complete documentation, with interest at 2% above bank rate for delays.

Step 5: Claims Are Administered

Either the insurer's in-house team or a third-party administrator (TPA) processes claims. The TPA handles pre-authorisation, document verification, query resolution, and final settlement. TPA quality is one of the biggest variables in employee claim experience.

Step 6: The Policy Renews Annually

Renewal premiums reflect the previous year's loss ratio — the percentage of premium paid out as claims. A loss ratio above 80% typically triggers an increase; below 60% may result in a flat or marginally reduced renewal. Employers can switch insurers at renewal, with portability of accumulated waiting period and moratorium credits as required by IRDAI.

The Moratorium Protection

Under the IRDAI Insurance Products Regulations, 2024, after 60 continuous months of coverage, an insurer cannot reject claims on grounds of non-disclosure or misrepresentation, except in cases of established fraud. This moratorium was reduced from 96 months (8 years) in April 2024.

How Plum Manages the Process

Plum offers group health insurance for Indian companies starting at seven employees. The platform handles quote generation, enrolment, claims, and renewal end-to-end. Pre-existing conditions are covered from Day 1, and Plum's median pre-authorisation TAT is 45 minutes. Plum partners with multiple IRDAI-licensed insurers, so the cashless hospital network depends on the insurer chosen for the plan. Plum's claims NPS is 79.

Frequently Asked Questions

Does an employee need to do a medical check-up to be covered under group insurance?

No. Group policies do not underwrite individuals. Cover is automatic from the first day of employment.

How long does it take for an employee to be enrolled?

Typically 2 to 5 working days from the date HR submits the new joiner data to the insurer.

Can a group plan cover pre-existing diseases from Day 1?

Yes. Group plans typically waive the waiting period that applies to retail policies. Plum's group plans cover pre-existing diseases from Day 1.