Health Insurance for Your Family starting at 20% Off
Health Insurance for Your Family starting at 20% Off
Can an employer contribute different amounts toward employee medical insurance?
- Author :
- TATA AIG Team
- ●
- Last Updated On :
- 14/06/2024
Medical insurance for employees is one of the best investments a company can make. Recent times have shown us again how important it is to have a health insurance plan that protects you from unexpected expenses.
Thus, the IRDAI has mandated that all commercial and industrial organisations have a group health insurance policy for their employees to protect more people from unprecedented medical emergencies.
An employer can benefit from group health insurance in many ways, one of which is the flexibility of choosing the plan, the number of employees to cover and the amounts to contribute toward it.
However, employers still wonder if they can customise their plans further and vary the coverage amounts for different employees. If you are one of them, read on to find out everything you need to know about group health insurance.
What is Group Health Insurance?
Group health insurance plans cover multiple people within a single plan, offering the same benefits to the entire group. The group included in this policy is selected irrespective of their gender, age, or socio-economic status and is usually an employee of a company.
The plan also extends its coverage to the employees’ family members. Since the insurance is provided to a group, the employee health insurance cost is much less than the individual plans, and the cost is spread out among the group members.
What are the Laws for Group Health Insurance for Corporates?
Every employer that offers medical insurance for employees is governed by the rules stated in the Employees’ State Insurance (ESI) Act of 1948 and the Insurance Regulatory and Development Authority of India (IRDAI). Let us understand these laws and their implications:
Under these laws, employers with more than 10 or 20 (in some states) employees are legally bound to provide health insurance to the employees and their families. The insurance must protect the employees against the financial impact caused by sickness, disablement, maternity, injury or death due to employment injury.
The employer and the employee both contribute to the health insurance plan to benefit from its financial assistance during hospitalisation and treatment of illness or injury.
Companies that do not fall under the ESI Act can offer voluntary employee medical policy coverage. This helps them retain valuable resources and offer help during critical times.
Small businesses like startups with less than 10 employees don't need to provide health insurance for their employees. They can offer these plans voluntarily.
Employers can choose plans flexibly based on their group’s best interests, specific needs, and affordability. They can opt for plans that are best suited to their eligible employees and offer different types of plans for different levels of employees.
What is the Employer’s Contribution to the Employee Medical Policy?
Every employer that offers medical insurance for employees is governed by the rules stated in the Employees’ State Insurance (ESI) Act of 1948 and the Insurance Regulatory and Development Authority of India (IRDAI). Let us understand these laws and their implications:
Under these laws, employers with more than 10 or 20 (in some states) employees are legally bound to provide health insurance to the employees and their families. The insurance must protect the employees against the financial impact caused by sickness, disablement, maternity, injury or death due to employment injury.
The employer and the employee both contribute to the health insurance plan to benefit from its financial assistance during hospitalisation and treatment of illness or injury.
Companies that do not fall under the ESI Act can offer voluntary employee medical policy coverage. This helps them retain valuable resources and offer help during critical times.
Small businesses like startups with less than 10 employees don't need to provide health insurance for their employees. They can offer these plans voluntarily.
Employers can choose plans flexibly based on their group’s best interests, specific needs, and affordability. They can opt for plans that are best suited to their eligible employees and offer different types of plans for different levels of employees.
What is the Employer’s Contribution to the Employee Medical Policy?
There are two ways in which an employer can contribute to the employee medical policy :
| Type A | Type B |
|---|---|
| This is the most common type of arrangement, where the employer contributes the entire premium amount. | In this type, the employer and the employee contribute to the premium costs either entirely or partially. |
| There is no scope for customisation in this type as the employer buys the same policy for the entire group. | The employer offers a basic plan, but the employee can choose extra features from the policy and pay the extra premium. |
| Only the employer can avail of the tax benefits as they bear the premium costs. | Both the employer and the employee can benefit from tax deductions. |
The employer can vary its contribution for different employees via one of the schemes that offer the most flexibility and customisation options.
Can Employers Contribute Differently for Different Employees?
Under the rules for group health insurance, employers have the flexibility to offer coverage for employees and differ it based on the employees’ level. So, yes, employers can contribute different amounts for different employees.
They can determine that based on the following categories:
Seniority, i.e. executive or staff
Geographical location
Full-time employee
Part-time employee
Monthly/hourly Salaried
What is the Eligibility for Employees to Benefit from Employee Medical Insurance?
The employees that can benefit from the group health insurance scheme should meet the following criteria:
The employer-employee must have an established formal relationship with each other, such as an employee contract.
The employee must be receiving a monthly salary from the employer.
The employee must be working full-time with the employer. Part-time, freelancers, or contract-based employees are generally not eligible for this type of insurance.
Depending on the insurance scheme and the insurance provider, employees may also be required to complete a specified period of employment with the employer.
Employees on a probation period may have a waiting period to claim their policy, depending on the type of group health insurance.
Factors to Consider While Choosing Medical Insurance for Employees
The choice of group health insurance will bring a significant change in your employees’ well-being. Therefore, it is essential to navigate this segment of the planning process carefully, regardless of which class of employee you are covering and how much you are contributing as an employer.
These are the factors that you can consider before finalising your plan:
Coverage: Before you choose a plan, assess the needs of your employees. You can conduct a survey among your employees and figure out which are the common aspects they wish to gain a cover for.
Employee Health Insurance Cost: Whether you are choosing for your staff or the company’s executives, you must consider the plan’s costs and affordability. If the premium rate is going to be shared with the employees, then you will also need to consider their budgetary needs.
Inclusions: Once you have determined the premium costs, the next best thing is to learn about the inclusions you get with the rate. The inclusions must cover most of your employees’ needs.
Add-Ons: You can benefit from various additional inclusions by increasing the premium marginally. So, before you finalise a plan, check the add-on features available under a plan that covers your outstanding necessities.
Convenience: Ensure your chosen plan offers a convenient buying and renewal process and easy claim settlement. Many employees often skip using group policies due to lengthy buying processes and inconvenient claim processes, making this a valuable feature.
Cashless claims: The highlight among all the features is the availability of cashless claims. It offers the utmost convenience and greatly minimises the financial burden. Cashless claims do not require employees to spend money from their pockets while getting themselves or their loved ones the required treatment.
24/7 Customer Assistance: With 24/7 customer support service, your employees can get assistance during any emergency. It will also benefit in speeding up the claim settlement process without multiple follow-ups.
Conclusion
A group health insurance policy has become a crucial feature among employees when choosing their place of employment. Getting group medical insurance for employees boosts their morale, makes them feel secure, and increases their loyalty towards their employers.
It comes with multiple benefits such as affordable rates, customisable plans, family cover, tax benefits and much more.
Depending on the employee's employment classification, an employer can offer a varying contribution toward their employee’s medical insurance. This offers them better coverage and other additional benefits, which is essential with the added responsibilities and increases risks.
Opting for SME insurance from Tata AIG can give you all these benefits and tick all the required features in an employee insurance plan. Their list of features and inclusions can help you retain your valuable employees and provide them with a healthy work environment.
FAQS
What is the mandatory rate for an employer’s contribution to employee health insurance?
The contribution rates of employers and employees are declared and reviewed by the ESIC consistently. As per the latest revision made effective from 01.07.2019, the employer’s contribution is supposed to be 3.25% of the wages paid/payable.
What is the minimum number of people required to be covered in a group health insurance policy?
According to the IRDAI, a company or an organisation is eligible for group health insurance when there are at least 20 employees employed with them.
Is the health insurance premium deducted from an employee's salary?
Depending on the type of contributions the employer selects, i.e. partial or full, the deductions will vary. For example, if an employer selects to contribute fully to their employee’s premium costs, there will be no deductions from an employee’s salary.
Is TDS applicable on group health insurance premiums paid by the employer?
No, TDS is not applicable to these premiums paid by the employer. According to section 194D of the Income Tax Act, TDS is applicable when the payment is made as remuneration or reward in the form of commission.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
Related Articles
