As the same suggests, group health insurance is insurance provided to a formal group like employees working in an organization or members of society. Group health insurance is most commonly used by companies for their employees, which is why you’d often find people using the word ‘group health insurance’ and ‘employee health insurance’ interchangeably.
Group health insurance can be also 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.
Group health insurance is a suitable choice both for employees and employers. One of the most basic benefits you can provide to your employees is adequate health insurance coverage. 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.
Adverse selection is defined as an increase in the chance for a person/organization to take an insurance because they believe their immediate health risk is higher than what they would pay as 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 to go for a surgery which is quite expensive. Looking at the problematic situation, he/she would choose to buy a health insurance policy without disclosing the disease and get the treatment covered under insurance.
Waiting periods to solve adverse selection
To avoid this problem of adverse selection, retail insurance products add waiting periods. A waiting period is the amount of 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 the four types of waiting periods, i.e. one can make a claim on day 1 for any condition. The reason insurance companies provide above benefits for group cover is that it assumes that the group will have no selection in terms of who is getting covered in the policy.
When faced with the choice of providing an umbrella cover for all their employees as opposed to letting employees choose individual plans and reimbursing for it, group health insurance is a better choice.
Group health insurance is more beneficial for both employees as well as employers as they are more holistic in coverage, provide a lot more customization, and have 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 a bulk purchase, they are much cheaper than individual plans.
Another dilemma that companies often have while deciding on health cover for their employees is whether to simply reimburse those employees who incur some medical costs or to provide insurance cover 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:
There are 6 key factors that decide that premium costs for health insurance plans you buy for your employees:
Section 17 of the Income Tax Act defines the health insurance premium that employers pay as a ‘profit in lieu of salary”. That means that the premium you pay would be considered as a business expense and you don’t have to pay any tax on that amount.
However, if your employee is bearing some cost of the premium, then 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 up to ₹25,000 per year for any installments they pay as health insurance premiums. In addition to that, if they pay a premium for guardians/parents, they are additionally qualified for deduction up to ₹25,000 every financial year.
Health insurance has become a norm in developed countries like the US. Infact, the US government mandates all employers who have 50 or more employees to provide a 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 of Covid-19.
On April 15th 2020, the government took another bold step towards that goal of 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 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.
One disadvantage that group health insurance 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.