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. 

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

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.

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.

  1. No waiting period

Group Mediclaim policies have minimal or no waiting period for pre-existing illness. They are covered from day one itself.

  1. Coverage for dependents

The plan generally offers extended benefits to the dependents of the employees as well, i.e. the coverage of a group insurance policy can be further extended to the employee’s spouse, children and dependent parents. A small premium is charged for such extended coverage or it may be part of a comprehensive plan.     

  1. Pre-entrance medical check-ups

At the time of purchasing an insurance policy, a pre-medical screening is usually conducted to make sure if any disease is pre-existing. However, with a group insurance plan, no such pre-testing is required. The policy is valid from Day 1.

  1. Tax incentive for the employer

The individual cannot claim the amount the premium paid on a group health insurance policy as a deduction under section 80D of the Income Tax Act, 1961. This benefit is available to the organization buy the insurance on behalf of its employees.

What are the limitations?

  1. Standard policy coverage

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

In case you leave the organization, you are not entitled to get the benefits from the group insurance policy. This is effective from the date of your relieving from the organization or the date of resignation, as the case may be. The policy is only valid for the current employees and continues to stay valid until the day you are working in the organization. 

  1. Small businesses

Group Insurance is a cost to the company; therefore, they are very conscious of the amount of premium that they must pay. The premium amount depends on the coverage of the policy as well as the number of employees covered. Insurance companies in general work on the probability of claim rather than the amount of claim. 

For example, 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

Since the policy is standard and common for all the employees, the coverage may be insufficient for a few employees. In case of an individual plan, you can decide the amount of coverage and the benefits and types of ailments to be covered in your health insurance policy. 

  1. Retired employees 

As mentioned, the policy ceases to exist once you leave the organization. Retirement is one such form of termination of employment, leading to discontinuation of the group insurance plan. 

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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