How Are Premiums Calculated For Employee Health Insurance Plans?

Group Health Insurance is one of the most sought after perks in an employee’s benefits package. That being said, not all employers are keen on offering employee health insurance. More than 28% of employers cited cost as an obstacle for offering health insurance to their employees.

Before jumping to a conclusion like this, you should rather understand the factors that determine the value of the premium you need to pay for group health insurance. More often than not, you can try to work around with these factors and get a premium that fits your budget. 

How are group health insurance premiums calculated?

There are six key factors that affect your group health insurance premium rates: 

Average Age of your employees

First and foremost, the average age of your workforce helps an insurer decide the premium amount. This is based on the understanding that the number of claims for a younger workforce is likely to be lesser than a relatively older group. Younger members are more likely to be healthier, have less chronic diseases, and have relatively better immunity. 

So, if most of your workforce is in the age group 19-25, then your premium cost would be much lesser than a group with average age better 36-45. 

Type of Coverage

There are three types of group health insurance that you can offer to your employees. These are: 

  • E-plan: Covers employees only.
  • ESC-plan: Covers employees, spouse, and up to 4 dependent children.
  • ESCP-plan: Covers employees, spouse, up to 4 dependent children, and 2 parents.

Depending on which one you go for, your premium gets calculated. Needless to say, the more dependents you add, the most the cost will be. Because premiums take into account the total number of lives that will be covered in the insurance. So, and ESCP-plan will cost you the most and E-plan will cost you the least. 

Add-Ons To The Coverage

A basic health insurance plan covers hospitalization and ICU charges for your employees. But insurers also give you the option of adding additional health benefits for your employees, at a charge, of course. These add-ons could include health-checkups, dental and eye care, OPD consultations, and even fitness and nutrition benefits. Depending on which ones you choose, the premium cost varies. 

Total Sum Insured

Sum insured refers to the upper limit for a year that the insurance company can pay in case any of your employees are hospitalized. The higher this amount is, the higher would be the premium charged for it. We’d recommend that you decide the sum insured based on what kind of hospitals your employees visit and the family coverage you are providing. You can understand more about designing the right group health insurance for your team here.  

Past-Claim Experience

If you are a company that’s going to offer employee health insurance for the first time, you can skip this point. But if you are looking for a new group health insurance, your new plan will take into account your company’s previous claim history. If the frequency and the number of claims are high, your premium will be slightly higher too. On the contrary, insurers might offer you a discount, if the number of claims previously has been low. 

Nature of the Job

The occupation of your employees also gets considered in premium costs. But it’s not a primary deciding factor. While most occupations are treated similarly if your company is into a sector that involves high health risk, your premium may be higher than the rest of the lot. For instance, the premium offered to a petrochemical or mining company would be higher than an IT company.  

How We Do It At Plum

At Plum, we’ve automated the process of calculating premiums for companies. All you’d need to do is “Get Started” at https://www.plumhq.com/ and select the options you’d like to choose for your employees and we’d immediately send a customized quote for your organization. 

For instance, as you can see in the above images, we added details for a hypothetical company with 10 employees in the age group 19-15. We went for an ESC plan with 10 employees, 5 spouses, and 4 children insuring a sum of 3 lacs each, with health checkup and personal accident as add-ons. Automatically, we got the premium amount for the company. 

If you too are skeptical about group health insurance and want to know how much it would cost for your team, try our instant premium calculator now.