Employers’ Health Care Costs Expected to Rise Due to Coronavirus
In today’s time, finding employment has become as difficult as finding water in in a desert. Even though this is one way to look at this, on the other hand, organizations are trying to get the best and most qualified candidates to work in their organization. On beginning their work, they start helping the company grow, and so, it is necessary to sustain such pearl-precious employees as they help in the long run of the business.
To help keep these employees, the organization provides various perks such as giving paid leaves, offering certain meals of the day, invest in retirement plans or gratuity on behalf of their employees, and so on. Such benefits show the outside world and the employees a positive vision and image of the company.
Employee health care costs are providing insurance cover to the employees who work in the organization and share common goals. A group insurance policy helps provide coverage sponsored by the employer to their employees and is an important method of motivating the employees and to build a sense of ownership in the company.
A group insurance policy is a type of health insurance that covers a certain group of people who have come together with a common interest which is receiving health coverage. According to the Insurance Regulatory and Development Authority of India (IRDAI), a group’s formation is done on the grounds of people having the same credit card, an account with a common bank, or a social group. This type of insurance is mostly purchased by employers of organizations for their employees’ safeguard and well-being in terms of health.
Employers are the main players in the market of group insurance. The policy is issued in the name of the company and not the employee. The IRDAI had put forward a proposal on the 19th of January, 2019, stating that to apply for a valid group insurance plan the minimum number of members required is 20.
Reasons behind purchasing a group insurance plan
An employer provides a group insurance plan to their employees with the reason:
With the increasing competition between various candidates having outstanding qualifications, it has become difficult for having them continue working at a certain organization. As these employees have exceptional qualities and will always prefer to choose a better option of a workplace than the existing one, group insurance helps retain these employees by offering them such perks. In today’s time, retaining employees has become a difficult task.
Providing employee life cover gives the employee feel a sense of belongingness. Their work gets directly affected as they are induced with the feeling of being important to the organization, and thus, providing a group insurance plan helps motivate the employees.
For the company, this premium paid on the employee group insurance policy is an admissible expense and can be charged to the income statement. Thus, the tax shield on the expense makes it valuable to the company as they are providing such policies to their employees. It helps the company to increase or save their profits that in turn directly affects the company’s growth. This provides partial relief from the liability of tax exemption.
Group insurances are generally cheaper than normal health insurances and thus purchasing many such policies helps the organization for getting greater coverage at a lower cost.
Looking after the employees and providing them with their requirements indicate that the organization values their colleagues and respect them too. This helps increase the goodwill of the company, and the organization will be viewed with a positive mirror. It creates a better image in the eyes of the public and helps enhance the reputation of the firm.
Features of a Group Insurance Plan
On admission to a hospital, the insured’s bills will be covered by the insurance company. In case the hospital is included in the network of the insurance company, the insured can enjoy the benefit of a cashless facility or use the method of reimbursement.
Pre- and post-hospitalization
In case the insured is admitted due to covid-19, the test taken for detecting coronavirus will be considered, as pre-hospitalization expenses. Post-hospitalization expenses will be considered as medicines or doctor’s appointments, and so on.
During emergencies, one can avail of the service of ambulance, and that is under the coverage of the insurance policy. It differs from one company to another, and thus it is necessary to go through the terms and conditions, inclusions and exclusions of the insurance plan.
In group insurance, the premium for the policy is usually paid by the employer as it is a benefit provided to the employee. Although in some cases, the employer uses the term of co-pay, this means the employee needs to contribute a minor amount out of the total premium payable. The ratio is pre-decided, and the amount is directly deducted from the staff’s salary.
On the employer’s approval, the employee has an option of adding his/her dependents to the group insurance plan. The employee needs to pay the premium for the dependents from his pocket. The group insurance plan includes the spouse, child, or even parents of the employee of the organization.
The insured needs to serve a minimal waiting period or are waivable as it depends on the pre-existing situation one is suffering from.
Pre-existing diseases are covered since day one, which means that no medical screening is required that means the employee does not need to undergo a medical check-up.
The name of the company appears on the policy that is purchased by the employer for the employees.
Coronavirus and Group Health Insurance:
The coronavirus outbreak has led to a rapid increase in medical treatment costs. Covid-19 is yet a new disease introduced to the world, and there is not much information about this disease to date. In such a situation, one must take preventive measures from preventing the virus to spread further.
As cautiousness is most required during such an outbreak, individuals prefer to receive the best treatment possible, and so most people get themselves admitted to a hospital for curing themselves. Hospitalization is considered the best alternative as they provide a clean environment and better service.
As COVID-19 is a newly discovered coronavirus disease, there was no coverage for such an illness. In March 2020, the IRDAI asked the companies to include coronavirus under the existing health insurance policies and side-by-side also issued coronavirus insurance plans that focused solely on protecting individuals from hazardous COVID-19.
Allowing an individual to claim under personal health insurance is affordable for the company because the phase of COVID-19 went ahead; people began preferring more home treatment rather than getting admitted into the hospital. The terms and conditions of an insurance policy clearly state that for receiving coverage or filing a claim, the insured needs to get hospitalized for a minimum of 24 hours, and home treatment claims are not applicable that is the insurance company is not obliged to accept such claims.
A group insurance policy renews annually, and the premium depends on the number of claims that are made in the previous year. Fewer claims = Fewer premiums and vice versa. As one of the main factors of having group insurance is that the risk is divided among several individuals, it decreases the premium but increases the risk of the insured that they may be falling prey to such a disease.
It is expected that shortly, the number of claims will be increasing, and thus the employer can expect that there will be a 10-15% rise in their premium payments. A few insurance executives have also stated that along with the premium, the co-payment ratio will also see a rise, this means the insured will have to pay a portion of the bills from their own pockets.
There has been an observation by the insurance companies, and the employers that the employees insured have been choosing to get hospitalized for not only serious conditions but also for regular procedures; this has been resulting in the insurance companies paying higher charges. It will further lead to an increase in the number of claims and thereafter an increase in the next premium payable.
What is the waiting period in group insurance for covering pre-existing diseases?
Under a group insurance policy, the pre-existing disease of the employees is covered since day one. The waiting period for this policy is minimal and can be easily waived off, it depends on the insurance company. While adding oneself to a group insurance policy, the employee needs to notify the insurance company whether they are suffering from any pre-existing or critical illness, and accordingly, the insurer will decide if one needs to serve a waiting period. In comparison to personal health insurance, the waiting period is very less in group policies.
Is it necessary to purchase personal health insurance along with a group policy?
It depends on one person’s unique needs. The coverage in a group insurance policy is not vast enough for covering serious illness, and thus purchasing personal insurance is similar to safeguarding oneself. The medical inflation in today's time is increasing, and so treatment costs are bloating, and so, it is advised to individuals for having a back-up option always readily available. Also, the corporate coverage ceases to exist the day you resign from the job or the say you are removed from your job. Individual insurance plans have many benefits like having a free look-up period, customized benefits, and wider coverage, and are also applicable for receiving a no-claim bonus. But above all, such policies are not linked to your existing tenure of employment.
Can a small organization or a start-up purchase a group insurance policy?
Yes, it is very much possible for a small organization or a start-up to purchase a group insurance policy at an early stage of the business. It is necessary that the company shall look-out for exceptionally talented and hardworking workers for helping the organization to grow and offering a group insurance policy will help the company to attract the right type of employees one is looking for.
The minimum number of members required for a group health insurance is 20. The employer or businessman can offer this plan to the working employees, and ask them to further add their dependents in the policy for bringing the minimal requirement. This helps the lesser number of working employees to also feel welcomed and have faith in the organization and thus helps in their motivation. For adding dependents to the plan, the employer can also consult a broker in case of additional help required.