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What is Group Health Insurance? All You Need to Know

Group Health Insurance is designed to offer comprehensive healthcare coverage to people belonging to a particular group at much lower premiums.

According to the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI), groups formed for this purpose could be either employer-employee groups or non-employer-employee groups. 

It is for this reason that even credit card holders, bank account holders and members of alumni, clubs and other such groups are formed to avail the benefits of a group health insurance

Benefits of a Group Health Insurance plan

  • Lower premiums
  • No waiting period
  • No medical screenings required
  • Comprehensive, guaranteed cover
  • Faster turnaround times
  • Tax incentive for the employer

Coverage Features of a Group Health Insurance Plan

A group health insurance offers a wide coverage at significantly lower premiums to a pool of individuals that are covered under it. It also offers various benefits over an individual health plan like lower premiums, faster claims, extended coverage to family members, and much more. Here are some of the coverage features of a typical group health insurance policy that makes them the perfect ‘value for money’ insurance product:

  • Coverage for boarding costs other than anesthetist, surgeon, and consultation charges is generally offered by group health insurance policies. Expenses incurred due to oxygen, anesthesia, and diagnostic materials are also covered under group health insurance policies.  Dialysis expenses, X-rays, and some other diagnostic tests are also generally covered under the policy.
  • All the policyholders under the group health insurance policy get the cashless hospitalization benefit. This means that the insurance company settles the claim amount directly with the hospital. Hence, it is very important to select an insurance company with a wide network of hospitals where the policyholders can avail cashless hospitalization.
  • In some cases, the patient cannot be transferred to a hospital because of their health condition. Furthermore, many a time the patient cannot be hospitalized due to non-availability of accommodation. In these cases, the patient needs to be treated at home, which is referred to as domiciliary hospitalization. Most group health insurance plans also offer coverage for the expenses incurred due to domiciliary hospitalization.
  • Daycare procedures are also covered under group health insurance policies. These are procedures and treatments that take less than 24 hours of hospitalization. Some of the daycare procedures included under a group health insurance plan are eye surgery, chemotherapy, tonsillectomy, etc.
  • Group health insurance policies also offer coverage for pre-hospitalization and post-hospitalization expenses for a certain period of time. Typically, the coverage period for pre-hospitalization expenses is 30 days prior to admission to hospital and the coverage period for post-hospitalization expenses is 60 days after discharge from the hospital.
  • Group health insurance plans also provide critical illness cover for specified life-threatening conditions. Some of these include cancer, first heart attack, open chest CABG, coma, etc. Group health insurance plans are also known to be very flexible when it comes to covering critical illnesses. They extend coverage for specific critical illnesses above the hospitalization cover.
  • Some of the group health insurance plans also provide maternity coverage and cover maternity-related expenses.

Key differences between an Individual Health Insurance and a Group Health Insurance

Individual health insuranceGroup health insurance
Coverage for self and familyYesYes
Coverage against pre-existing conditionsNoYes
PremiumHigherLower
Waiting periodYesNo
Flexibility in customizing coverageYesNo, plan is purchased and owned by the employer
Control over benefits, co-pay limits, and deductiblesYesNo, limits and benefits are determined by employer
Portability Yes, coverage continues regardless of employment statusNo, employees may lose coverage when job changes

Unlike an individual health insurance plan, which is designed to offer coverage to an individual, a group health insurance is for a group of people. The most common form of group health insurance is the one that is offered by an employer to its employees. In this, the employer offers healthcare coverage to the employees, their spouse, parents, and children up to a certain age. 

  • In case of individual health insurance plans, the renewal date is different for every individual whereas under a group health insurance, there’s a single renewal date. 
  • There is a higher degree of customisation possible with individual plans, but this also entails costs, which may not always work in their favour.
  • When it comes to group health insurance, premiums are reasonable and you are not asked to submit any medical reports. 
  • There is no waiting period and you also get coverage against pre-existing conditions, which make group health insurance the most sought after plan.

Key Inclusions under Group Health Insurance Plans

Group health insurance policies offer comprehensive coverage with wide-ranging benefits to its policyholders. Let us see some of the common inclusions that are provided by most of the group health insurance policies:

  • Coverage for pre-existing diseases without any waiting periods from day one.
  • All the group health insurance plans provide coverage for maternity-related expenses. However, the coverage may be subject to a waiting period of nine months.
  • Since a group health insurance plan provides extended coverage to the family members, the infant is covered from the day of his/her delivery without any waiting period.
  • Some group health insurance plans also cover ambulance charges with reasonable and customary sub-limits applicable.
  • Pre and post-hospitalization expenses for a certain period of time.
  • Domiciliary and daycare expenses.  
  • Fees of medical practitioners, specialists, and surgeons.
  • Room rent and nursing charges are also generally covered under the policy.
  • Coverage for inpatient care including surgical operations, diagnostic procedures, and therapies, operation theatre charges, cost of prosthetics, etc.
  • Expenses related to anesthesia, oxygen, blood, OT charges, medicines, drugs, and the cost of diagnostic tests such as X-rays, etc., are also typically covered under group health insurance policies.
  • Some plans also provide coverage for daycare procedures including radiotherapy, chemotherapy, hemodialysis, etc.

Key Exclusions under Group Health Insurance Plans

The common exclusions from most of the group health insurance plans are:

  • Many group health insurance plans do not provide coverage for dependent parents i.e. the extended coverage to family members is only applicable to spouse and children.
  • Non-allopathic systems of medicine are not covered in most group health insurance India. This means that you will have to bear expenses for treatment under any of the systems under AYUSH.
  • A corporate group health insurance plan for employees is only valid until the employee is working in the organization. This also applies to the policyholder in the case of retirement, after numerous years of service in the organization. Thus, the validity of a group health insurance provided by the employer is always limited.
  • Expenses incurred due to congenital diseases and all the expenses incurred in the treatment of AIDS and other related conditions.
  • Ailments or complications occurring because of alcohol or substance abuse will not be covered under the policy. Similarly, the insurer won’t be liable to pay for the expenses related to rehabilitation from addictive conditions or disorders.
  • Cosmetic surgeries, cosmetic dental treatments, experimental treatments, and OPD procedures re also typically excluded from a group health insurance policy.

Features of a typical group insurance plan

  1. No. of members

According to the proposal put forward by IRDAI on January 19, 2016, the minimum number of members required to make a valid group health insurance is 20 people. 

  1. Renewal

The policy tenure of a group health insurance is one year. After one year, the policy can be renewed. Upon renewal, fresh underwriting is done before the coverage is allowed to continue. While renewal, there is a possibility of change in the premium amount.

  1. Ownership

While purchasing the plan for the employees, the policy is in the name of the group taking up the plan, i.e. in the name of the company with the specific employee as the stated beneficiary. 

  1. Existence of a group

The general health insurance policy is only valid when the group has a real purpose of purchasing this plan. A group created randomly just for Mediclaim policy will not be covered, unless there is a specific logic to the association.

What are the Benefits?

  1. Lower premiums

These policies are affordable, as the payment is divided between the group as well as the employer. The premiums are low and hence, affordable. The employer pays the total premium in a lump-sum to the insurance company. According to a study, these policies are 30% cheaper than individual health plans. But this is not the only reason for the lower costs of group health insurance compared to individual health insurance.

The main reason for lower premiums when it comes to group health insurance is the larger risk pool that comes into play because of covering a higher number of people. In addition, when more people are included in the policy, there are more options in terms of coverage and features that would be available at a much higher price had the number of people to be covered been lower. Lower premiums have two-fold benefits in the case of group health insurance provided by the employer to its employees.

  1. No waiting period

The lower cost of covering a group because of the larger risk pool that individual coverage reflects in features as well. Apart from having much lower premiums for coverage, the group health insurance plans also offer more lucrative coverage features and benefits. In other words, they provide a significantly greater value for money than individual health plans. This can be seen in the difference between the waiting period clauses of group health insurance plans India and the individual plans.

A big impediment between getting extensive and limitless coverage is the waiting period clause that insurance providers have for covering pre-existing diseases. Under this clause, you have to wait for a few years before getting covered for a medical condition that you have been diagnosed with before buying the policy. Typically, the waiting period for getting coverage for pre-existing diseases is 3 to 4 years. Insurance providers also have this waiting period clause for maternity benefits. This is not the case with group health insurance. Group Mediclaim policies have minimal or no waiting period for pre-existing illness. They are covered from day one itself. Thus, group health insurance policies allow the policyholders to get extensive coverage even for pre-existing illnesses from day one.

  1. Coverage for dependents

A family floater insurance policy can be an expensive affair if you want to cover yourself, your spouse, your children, and your parents. Not to mention, the premium amount for a family floater policy depends on the age of the eldest member. You’ll have to pay an exorbitant premium amount for getting coverage for your whole family. Even if you cover your parents under a different senior citizen plan, the premium amounts will make a huge dent in your pocket if you go for comprehensive coverage.

A group health insurance takes you out of this pickle without additional premium payment in most cases. Most group health insurance India offers extended coverage and policy benefits to the dependents of the employees as well. It covers immediate family members (usually up to 5 members) and allows you to include your spouse, children, and dependent parents. Family coverage is generally part of a comprehensive plan. Even if the group health plan requires an additional premium payment for extended coverage, it is very small and reasonable.

  1. Pre-entrance medical check-ups

Pre-medical screening is conducted by insurance providers to determine the current health status of a person who wants to buy a health insurance plan. It is usually conducted to find out about the pre-existing conditions that the policy buyer might not have disclosed. The premium of the policy depends considerably on the results of these pre-medical screening tests. If a pre-existing condition is indicated in the results of initial screening, the premium of the policy can increase drastically.

Group health insurance plans offer a huge advantage when it comes to pre-medical screening and medical-history. It doesn’t require the employees to go through pre-medical screening tests. All the members included in the group medical insurance are covered under the policy from day one. Furthermore, it also makes sure that the premium and coverage for all the employees is similar irrespective of their health status.

  1. Tax incentive for the employer

If the employer pays the entire premium amount for a group health insurance policy, individuals under the policy cannot claim the amount of the premium paid as a deduction under section 80D of the Income Tax Act, 1961. However, this benefit is available to the organization which buys the insurance on behalf of its employees.

Any amount paid by the employers for the employees’ benefit is treated as ‘Profit in lieu of salary’ under the Income Tax Act. Since the premium for the group medical insurance policy is a benefit offered to the employees, it can be used to avail tax benefit. The whole cost of group health insurance can be claimed as a business expense in their Profit & Loss account.

If the employee bears even a partial amount of premium for group health insurance, they are eligible to avail of a tax benefit. The employees paying the entire or partial amount of premium can get a tax deduction under section 80D of the Income Tax Act. But, the tax benefit should not exceed Rs 1 lakh in a financial year.

  1. Quick and seamless claim settlement procedure

The overall customer experience in a group health insurance policy is much better than an individual health plan. Companies look for insurance providers that offer priority services to their employees which ensures instant query redressal or faster claim settlement for employees. In the case of a group health insurance plan, all you need to do is contact your employer with the claim amount and relevant bills rather than visiting office to office for your claim in an individual health plan. Your employer makes sure that your claim is settled and you are reimbursed for your medical expenses. The employees also enjoy cashless hospitalization benefit under a group health insurance plan.

What are the limitations?

  1. Standard policy coverage

The central aim of getting medical coverage is to buy health insurance that provides the perfect coverage features and benefits that cater to your distinct medical and financial needs. Hence the flexibility in a health insurance plan is one of the first things you should ask for. Flexible health insurance plans allow you to customize the plans according to your needs and get medical coverage tailor-made for your requirements.

Unfortunately, group health insurance India won’t provide you that flexibility. You will have to be covered under a standard policy coverage, as decided by the employer, with no room for customization. Thus, the scheme of things in a group insurance plan is standardized and common for all the employees. The employee cannot increase or decrease the value of benefits in a group insurance plan, i.e. no customization is possible.

  1. Out-of-job means out-of-plan

When you’re covered under a group health insurance plan, you are not entitled to get the benefits from the group insurance policy once you leave the organization. This is effective from the date of your relieving from the organization or the date of resignation, as the case may be. A group medical insurance is only for the current employees and continues to stay valid until the day you are working in the organization. 

Hence, the coverage of group health insurance is much more conditional than an individual health insurance which makes it more uncertain. An individual health insurance is much more simple in that sense. You get the certain and tailor-made medical coverage. You’re in control about all the detils of your health insurance including policy term, policy option, coverage features, and sum insured. This also gives you the ability to plan your investments in a health insurance.

  1. Small businesses

In most cases, companies pay for the full or partial cost for a group health insurance. Naturally, the premiums for covering all te employees sums up to be a massive amount that is incurred regularly. Hence, group health insurance is a huge cost to the company and they are very conscious of the amount of premium that they must pay. The premium amount for a group health insurance policy depends on the coverage of the policy as well as the number of employees covered. This is because the insurance companies are more focussed on the probability of claim rather than the amount of claim when it comes to group medical insurance.

This creates a huge limitation for small businesses with lesser number of employees. In the case of large corporates, a more significant number of people are insured, allowing them to charge lower premium given the benefit of large numbers and lower probability of a claim. In the case of small businesses, the same cost of the premium is significantly higher and therefore, may not be affordable by the small businesses.

  1. Limited coverage

Every one of us have different medical and financial needs. The medical coverage that your require might be significantly different from your colleagues or other members of the policy. This poses one of the primary limitations in the case of a group health insurance policy. It provides a standard policy coverage to all the members included under the policy, regardless of their individual health insurance needs.

Since the policy is standard and common for all the employees, the coverage may be insufficient for a few employees. An individual health insurance plan offers you flexibility and customizability. You can decide the amount of coverage and the benefits and types of ailments to be covered in your health insurance policy. The best health insurance plans also offer differnt policy options to cater to the needs of different segments of customers with diverse health insurance needs.

  1. Retired employees 

Post-retirement phase is a big financial milestone in everyone’s life. Most of us work our whole lives to be financially secure and intact in this phase of life. All our savings and investments fulfill our retirement income goals and also provide the financial protection to ensure stability. This is why health insurance is one of the most essential components of one’s portfolio post retirement.

This is why relying just on the group health insurance provided by your employer is not enough, especially in the later stages of life. Since the policy ceases to exist once you leave the organization, the group health insurance will not provide you coverage after retirement. So, even if the group health insurance plan provides you ample coverage for your medical needs, it is prudent to buy another health insurance plan. You should buy an insurance plan other than the group health insurance plan a few years earlier from your retirement. This will help you avoid the waiting period for pre-existing diseases.

Is an individual health insurance plan essential even if you have a group health insurance?

Getting an individual health insurance plan other than your group health insurance plan is very essential for robust financial protection. Granted, a group health insurance plan provides you excellent coverage features for significantly lower premiums. But there are some gaps in group health insurance plans when it comes to validity, coverage, and premiums. Take a look at some of the reasons why having an individual health insurance plan is essential even if you have group health insurance:

  • Some coverage features come with a cap on coverage.
  • The policy ceases to exist when an employee leaves the organization.
  • The policy doesn’t provide any benefits to retired employees.
  • Every individual covered under the policy gets the same coverage regardless of their medical needs.
  • The high claim amount in a policy term may escalate premium costs in the following terms.

Now let’s summarize our learnings on group health insurance:

The FactorIndividual Health InsuranceGroup Health Insurance
CoveragePolicyholderMembers of the group
BenefitsCustomizable as per the needs of the policy holderStandard and common for all the employees as per the group insurance policy
Cost / PremiumHigher because of customized selectionLower because common for the members of the group
Who pays the premiumThe individualThe company 
Pre-health check-upCompulsoryNot compulsory
Waiting PeriodWaiting period applicable as per the terms of the agreementPolicy is valid from day 1
No claim bonusAn individual can feel free to claim for bonus on the happening of any medical situation.Even if the employee claims for a bonus, the employer can decline this request, as in this plan, claiming bonus is not allowed.

Now that we’ve discussed each and every aspect of group health insurance, you should be able to make an informed choice. Be sure to discuss the group health insurance with your employer/insurance advisor and get the best possible coverage.

FAQs: What is Group Health Insurance

Which is the best group health insurance policy for the employees?

There is no such thing as a best policy. It largely differs from one organization to another depending on what they are looking for in such a policy. While purchasing a group health plan some of the following things should be looked into.

Size and demography of the group;
Risks which will be covered;
Past history of the group.

On the basis of these points, a company can look for an appropriate plan which fits their requirements.

Do the group insurance policies provide coverage for wide-spread diseases?

A group health insurance provides coverage for wide-spread diseases. It will cover hospitalization and help the employee to enjoy the benefit of cashless hospitalization. The premium for coverage of wise spread diseases will be slightly higher and the room rent will be different based on public or private. For private rooms, if the cost is reasonable enough for the employer or else separate cost will have to be borne by the employee.

What about the health check-up facilities and pre-existing diseases?

Under group health insurance, pre-existing diseases are approved since Day 1. Some organizations do not even charge extra premium for these diseases. The plan will be valid for all health concerns from the first day itself. Health check-up facilities are not very frequently available. Once in 4 years a health check-up is provided. It differs from organization to organization and based on their internal agreement with the insurance provider.

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