Group Health Insurance

Group Insurance health plans provide coverage to a group of members, usually comprised of company employees or members of an organisation. Group health members usually receive insurance at a reduced cost because the insurer’s risk is spread across a group of policyholders.

A bit about history: Employer-sponsored group health insurance plans first emerged in the 1940s as a way for employers to attract employees when wartime legislation mandated flattened wages. This was a popular tax-free benefit which employers continued to offer after the war’s end, but it failed to address the needs of retirees and other non-working adults. Federal efforts to provide coverage to those groups led to the Social Security Amendments of 1965, which laid the foundation for Medicare and Medicaid.

PARTICIPATION REQUIREMENTS

Group health insurance plans are purchased by companies and organizations, and then offered to its members or employees.

All employees above 18 years and below 70 years who are employed with an organization are eligible to be covered under an organization’s Group Health Policy. Additionally, they can also add their spouse and up to 3-children, aged between 3 months to 25 years.

By requiring a certain percentage of eligible employees to sign up for the health plan, insurers aim to broaden the pool of covered employees and avoid high-risk groups. These participation requirements may mean that smaller employers are often limited to offering a single health plan.

The minimum requirement for a group health insurance is that about 70 percent of eligible employees must enroll in the plan offered by your company.

Who is considered “eligible”?

Employees who already have coverage from another source (like a spouse) aren’t usually counted in these percentages.

EXAMPLE

Let’s say you have 30 employees who are eligible for your health plan. If your insurer has a 70 percent participation requirement, that means at least 21 of your employees would need to enroll in the plan. If 21 employees enroll, you’re in the clear.

In a different scenario, let’s say 10 of your 30 employees already have coverage under their spouse’s plan. In this case, only 20 of your employees would be counted as “eligible,” because those are the ones that don’t already have health coverage.

So, in order to meet the participation requirements, 70 percent of your 20 employees would need to enroll in your health plan.

If we do the math—70 percent of 20 is 14. So, 14 of your employees would have to enroll in order for you to meet the participation requirements.

Are part-time employees counted as “eligible”?

Yes, you can offer health insurance to part-time employees. So, if you do offer health coverage to part-time employees, make sure there is enough total eligible employees (both full- and part-time) to meet the minimum enrollment requirements.

If your group won’t meet the minimum participation requirements, you can still enroll in coverage, but there’s a limited window to buy a plan.

Generally there is an initial waiting period of 15-days. Claims made before the completion of the same can’t be covered.

Benefits of a Group Health Insurance for Employers

·          Low Cost Premiums

Since a group health insurance policy is spread over a group of people, the premium for the same is a lot cheaper than other health policies.

·          Tax Benefits

According to the Income Tax Department of India, companies offering their employees with a corporate health insurance can benefit from some tax savings!

·          Company Goodwill

Organizations that offer their employees with valuable benefits lead to happier employees and happier work environments. This ultimately leads to a better goodwill for any company, big and small. After all, everyone loves a good old organization that cares about its people!

·          Financially secure them during the COVID-19 Pandemic – 

Amid the pandemic, financial security has become of utmost importance given the downfall in the economy and increasing pay cuts across sectors. Protecting your employees from treatment expenses that could arise out of this virus is the least you can do to ensure they’re both financially and medically secure.

Benefits of a Group Health Insurance for Employees

·          Default Healthcare Benefit

Most companies that offer group health insurance plans include the same as part of their employee’s annual benefits; i.e whether you opt for it or not, if your company has a group health insurance plan – you will be covered within it, without having to pay for the premium yourself. 

·          No Pre-Medical Tests Required

Generally, when you want to take up an individual health insurance, your insurer will most likely take up pre-medical tests before issuing and confirming your health insurance policy. However, in the case of a group health insurance plan the same is not required. Your policy is valid without the need to have to take any medical tests. 

·          No Premium

Most employers will typically include your health insurance plan in your annual benefits offered by the company. This means, you don’t have to pay for the premium of the same, and your company pays out the same for you. However, this could differ from employer to employer. But, whether your employer charges you for the same or not, the premium for the same is comparatively a lot less than an individual health insurance.

·          Simpler Claim Process

Since your employer is the one who has opted for the respective group health insurance plan, they would be the ones mainly maintaining all communication with the third-party administrator or insurer. Therefore, this reduces your efforts in having to communicate back and forth and instead, the claim process usually becomes a lot simpler for you.

Limitations of a Group Health Insurance

While a group health insurance is beneficial for both the employer and employee, one of its biggest limitations is that, with respect to an employee the cover may not be enough to cover for all healthcare needs, as most Group Health Insurance plans are limited and generic in nature, unlike Individual Health Insurance plans that can also be customized as per personal healthcare requirements.

• Higher claims make the cover unviable over the mid- to long-term and  could lead to higher renewal premiums or insurer’s withdrawal.
• Higher payouts could lead to insurers and group administrators introducing co-pay and other restrictions.

Mandatory cover to all members to ensure proper demographic mix as well as effective risk control measures can ensure portfolio’s sustainability.

How is a group health insurance premium calculated?

A group health insurance premium is calculated on the basis of the number of employees, their ages, location and number of their dependents you would want to cover within the respective group health insurance plan. 

Most insurers insist that all members should be covered to avoid anti selection.

Some insurers might quote a higher premium if the proportion of older members is higher or the sum assured is large.

Main differences between a Group Health insurance and a Single Health insurance policy

• An individual policy is valid for as long as an individual has paid the respective premium year on year while, a group health policy is valid for as long as the employee is part of the respective organization.
• An individual health policy is primarily dependent on an individual’s age, medical history, health conditions etc. while, a group health policy is primarily dependent on the organization’s strength; both financial and employee strength.
• Typically, in any individual health insurance the insurer will have pre-medical checkups conducted, basis which policies are issued while, in a group health insurance plan, pre-medical check-ups are not conducted by the insurer, which reduces risk on policies being declined.

Among the many learnings imparted by the coronavirus, perhaps the most relevant for India is the need for health insurance coverage. IRDAI has allowed Arogya Sanjeevani Policy to be sold as group health covers. The group will cover a major population working in manufacturing sectors, SMEs, migrant workers etc. and will contribute towards increasing the insurance penetration in India. Once insurance companies launch this policy as a group cover, organisations may soon be able to buy this cover for their employees. Among other things, the Arogya Sanjeevani Policy also covers treatment cost of COVID-19.

Reference:-

1) Investopedia

2) Economic times

3) Some other online sites