What is group health insurance?

Group health insurance is a single health insurance policy that covers a defined group of people — most commonly the employees of an organisation, and often their dependents — under one master contract held by the employer. The employer is the policyholder; employees are the insured members. In India, group health insurance is regulated by the Insurance Regulatory and Development Authority of India (IRDAI) and is the most common form of employer-provided healthcare benefit.

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A group plan typically covers hospitalisation expenses, day-care procedures, pre- and post-hospitalisation costs, and — depending on the policy — maternity, OPD, mental health, and wellness benefits. Coverage applies from the date of joining, with no individual medical underwriting for each employee.

How is group health insurance different from individual health insurance?

The two products differ on seven material points:

The waiver of waiting periods and the absence of individual underwriting are the two features employees value most, because both are unavailable on a comparable retail plan.

Who can buy group health insurance in India?

Under IRDAI's group insurance guidelines, a group must be a pre-existing, homogenous group formed for a purpose other than availing insurance. Eligible groups include employer-employee groups, professional associations, cooperative societies, and customers of a financial institution.

For employer-employee group health insurance through Plum, the minimum group size is 7 employees for a registered organisation. Below this threshold, employees are typically covered through individual or family floater policies rather than a group plan.

What does a typical group health insurance policy cover?

A standard group health insurance policy in India covers the following on a cashless or reimbursement basis:

• In-patient hospitalisation for illness or accident, requiring a minimum 24-hour stay (waived for listed day-care procedures)
• Pre-hospitalisation expenses for 30–60 days before admission
• Post-hospitalisation expenses for 60–90 days after discharge
• Day-care procedures that do not require 24-hour admission (cataract, dialysis, chemotherapy, etc.)
• Room rent up to a defined sub-limit or category (single private, shared, etc.)
• ICU charges typically up to 2x the room rent limit or as per policy
• Pre-existing diseases covered from day one in most group policies
• Maternity benefit with a defined sub-limit, often ₹50,000–₹1,00,000 for normal delivery and ₹75,000–₹1,50,000 for caesarean
• Newborn cover from day one until policy expiry
• Ambulance charges up to a per-event sub-limit
• AYUSH treatments in recognised hospitals as per the IRDAI Master Circular on Health Insurance Business dated 29 May 2024

What a policy does not cover by default — and which an employer can add as riders or top-ups — includes OPD consultations, dental and vision care, mental health therapy, and routine diagnostics.

How is the sum insured structured?

Group plans use one of three sum insured structures:

1. Individual sum insured per member: Each employee gets a fixed sum insured (e.g., ₹3 lakh), and dependents share or have their own. Most common in mid-market policies.
2. Family floater: A single sum insured (e.g., ₹5 lakh) is shared across the employee and registered dependents.
3. Graded by designation or grade: Sum insured varies by employee level (e.g., ₹3 lakh for staff, ₹5 lakh for managers, ₹10 lakh for senior leadership).

Common dependent definitions include spouse, up to two dependent children, and — in some policies — parents or parents-in-law. Coverage of parents typically increases premium materially because of higher claim frequency in older age bands.

How are claims processed?

A group health insurance claim follows one of two paths:

Cashless claims are processed at network hospitals, where the insurer settles the bill directly with the hospital. The employee shows their health card or e-card at admission, the hospital sends a pre-authorisation request to the insurer's third-party administrator (TPA), and treatment proceeds without upfront payment for covered expenses. Under the IRDAI Master Circular on Health Insurance Business, 29 May 2024, insurers must decide on cashless authorisation within one hour of receiving the request, and provide final authorisation within three hours of a discharge request from the hospital. The size of the cashless network depends on the partner insurer; Plum's plans run on the networks of its partner insurers, which vary by plan.

Reimbursement claims apply at non-network hospitals or where pre-authorisation was not obtained. The employee pays out of pocket and submits original bills, discharge summary, prescriptions, and the claim form to the insurer or TPA, typically within 30 days of discharge. The IRDAI's stated objective in the May 2024 master circular is that 100% cashless settlement should be the goal, with reimbursement reserved for exceptional circumstances.

A practical proxy for claims experience is the insurer's claims net promoter score (NPS) and claims settlement ratio (CSR). For context, Plum reports a claims NPS of 79.

What is the tax treatment of group health insurance in India?

Group health insurance has distinct tax implications for the employer and the employee, and the rules changed materially in September 2025.

For the employer:

• Premiums paid for group health insurance for employees are deductible as a business expense under Section 37(1) of the Income Tax Act, 1961.
• GST is charged at 18% on the premium of group health insurance policies. This is unchanged after the 56th GST Council reforms — while individual health insurance was exempted from GST effective 22 September 2025, the 18% rate continues to apply to employer-sponsored group health and group life policies.
• Input tax credit on health insurance premiums is generally blocked under Section 17(5)(b) of the CGST Act, 2017. The proviso allows ITC where it is obligatory for the employer to provide such insurance under any law for the time being in force, or where the inward supply is used for an outward taxable supply of the same category.

For the employee:

• Premium paid by the employer for the employee is not a taxable perquisite under Rule 3 of the Income Tax Rules.
• Premium paid by the employee directly (for a top-up or for parents not covered by employer) qualifies for deduction under Section 80D of the Income Tax Act, 1961 — up to ₹25,000 for self, spouse, and dependent children; an additional ₹25,000 for parents below 60; and an additional ₹50,000 for parents aged 60 or above. The maximum combined deduction is ₹1,00,000 per financial year. An additional ₹5,000 for preventive health check-ups is included within these overall limits.
• Section 80D is only available under the old tax regime; taxpayers under the new regime cannot claim this deduction.

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For premiums split between employer and employee: The portion paid by the employee is eligible for Section 80D deduction; the employer's share is not.

What happens to coverage when an employee leaves the company?

Group health insurance coverage typically ends on the employee's last working day. India does not have a statutory continuation regime equivalent to COBRA in the United States. However, two options exist:

• Grace period: Some employers extend coverage for 30–90 days post-exit as a notice-period or transition benefit. This is contractual, not regulatory.
• Group-to-individual portability: Under IRDAI's portability rules, an employee leaving a group plan can port to an individual plan with the same insurer (or, with conditions, a different insurer). Continuity benefits — credit for waiting periods already served — must be preserved by the new insurer for the same sum insured. Portability is governed by the IRDAI (Health Insurance) Regulations, 2016 and the IRDAI Master Circular on Health Insurance Business dated 29 May 2024, which also reduced the moratorium period from 96 months to 60 months of continuous coverage.

Employees should initiate the portability request before the existing policy expires.

How much does group health insurance cost?

Group health insurance premiums in India typically range from ₹3,000 to ₹15,000 per employee per year for a base sum insured of ₹3–5 lakh, depending on:

• Group demographics: Average age, gender mix, and number of dependents covered
• Sum insured and sub-limits: Higher cover and fewer sub-limits raise premium
• Industry: Higher-risk industries (manufacturing with hazardous processes, mining) carry loaded premiums
• Claims experience: Renewal premium reflects the previous year's incurred claims ratio
• Optional benefits: Maternity, parental cover, OPD, and mental health add to base premium
• Group size: Larger groups get better per-employee rates due to risk pooling

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Parental cover is the single largest premium driver. Adding parents typically increases premium by 40–80% depending on age band. The 18% GST applies on top of the base premium for group policies.

Is group health insurance mandatory in India?

There is no general statutory requirement for private employers to provide group health insurance. Two specific obligations exist:

• Employees' State Insurance (ESI): Mandatory under the Employees' State Insurance Act, 1948 for non-seasonal factories employing 10 or more persons under Section 1(2), with state-level extensions to shops, hotels, restaurants, cinemas, and other establishments employing 10 or more persons (20 in some Central Government extensions). Employees earning gross wages up to ₹21,000 per month (₹25,000 for persons with disabilities) are covered. Employers contribute 3.25% of wages and employees contribute 0.75%, rates that have been in force since July 2019, as set out in the ESIC coverage and contribution framework. The Social Security Code, 2020 introduces additional changes that are being implemented in stages.
• MHA COVID-19 order, April–May 2020: The Ministry of Home Affairs mandated medical insurance for workers as a condition for resuming operations during lockdown. The order has been operationally withdrawn, but it created the regulatory basis under which several employers continue to claim GST input tax credit on health insurance premiums under the Section 17(5)(b) proviso.

Outside ESI coverage, group health insurance is voluntary but near-universal among organised-sector employers because of its role in hiring, retention, and tax efficiency.

How do employers buy group health insurance?

Employers procure group health insurance through one of three channels:

1. Direct from an insurer: The employer negotiates with one or more insurers, often at renewal. Suited to large employers with in-house benefits expertise.
2. Through an IRDAI-licensed broker: The broker represents the employer and solicits quotes from multiple insurers. Brokers are paid commission by the insurer, regulated under the IRDAI (Insurance Brokers) Regulations, 2018.
3. Through a tech-enabled benefits platform: Platforms like Plum combine broker licensing with software for policy administration, claims support, and employee experience. Suited to small and mid-market employers without dedicated benefits teams.

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The procurement cycle typically begins 60–90 days before policy expiry, with quotes finalised 30 days before renewal to allow employee communication and endorsement.