Calculations of Premiums in Group Health Insurance

A group mediclaim policy is a health insurance policy that protects a specific group of people, usually company employees. The policy provides coverage to the employees and can be extended to family members.

Group health insurance benefits both employees and employers. It provides financial support to employees who need medical coverage, and for employers, it can help improve employee retention rates and employee productivity.

In most group health insurance, the employer pays policy premiums. Thus, it becomes crucial for an organisation to know the factors that can affect the policy premium rates.

Employee’s Average Age

Employee age is a crucial factor in determining the group health insurance premium rates. It is usually assumed that if an organisation has more young employees, say employees in their 20s, they are more likely to be healthy and fit. Young employees mean fewer health insurance claims, as they are less likely to develop chronic diseases.

On the other hand, organisations with older employees might have to pay more for insurance premiums as employees in their later years may suffer from chronic diseases or have to go for frequent health check-ups.

Health History and Lifestyle Habits

The health history and lifestyle habits of employees can also affect the premium calculation. For example, if employees of an organisation have a habit of smoking, it can indicate a higher risk towards developing chronic illnesses in the future. Thus, their policy premium calculation might be high.

If an organisation's employees have no or little history of health problems and maintain healthy lifestyle habits, then their policy premium rates would be significantly low.

Type of Occupation and Industry

Group health insurance is there to provide medical assistance to employees in case of emergencies; it also includes workplace-related hazards. The work and the industry employees for whom the insurance is being brought also affect the premium calculation.

For instance, employees working in stressful work environments may face mental health issues and physical ailments that result from high stress. Thus, they may require good health coverage leading to higher premium rates.

Similarly, workers who are frequently exposed to large machines or chemicals are at risk of injuries and hazardous accidents. Thus, the premium calculation of such employees will include high insurance premiums compared to people doing simple desk jobs or working in non-hazardous environments.

Total Sum Insured

The total sum insured by a group mediclaim policy is a crucial factor to consider before buying a policy. The total sum insured value means the upper limit amount the insurance company can pay in case of employee hospitalisation.

The higher the sum insured, the higher the policy premium. Thus, employers should choose the correct sum insured and consider the factors involved, such as network hospitals, coverage scope and other inclusions in the plan.

Although the sum insured is a factor to consider, employers are advised not to skimp on insurance. Look for insurance that serves your employees and provides them with optimal protection.

Number of Employees Covered Under Group Health Insurance

Group health insurance provides coverage to employees irrespective of their existing personal health insurance plans or health status. To ensure appropriate coverage for every employee.

The initial premium calculation is based on the number of employees covered and whether or not the policy extends to cover their families as well. This calculation helps determine the right insurance coverage that satisfies employees' protection needs and also if the policy is within the company's budget.

Plan Type and Coverage Level

The type of plan also affects the group health insurance premium. Various types of group health insurance are available in India, such as EDLI insurance, employee compensation insurance, HMO, or PPO insurance. All these insurances have policy structure network restrictions that affect the premium rates.

While the coverage level is another thing to consider before purchasing any group health insurance. Policies with extensive coverage and additional medical services tend to have higher insurance premiums.

Type of Coverage

Usually, a group mediclaim policy provides coverage for employees only. However, coverage can be extended to family members of employees. This can be beneficial for both the employee and the employer, as the employee spends less on a personal health plan, and the employer can get tax benefits.

In general, there are 3 coverage types offered:

E-Plan: It provides coverage only for the employee.

ESC Plan: It has coverage for the employee, their spouse and up to four dependent children.

ESCP Plan: The plan provides coverage for the employee, their spouse, up to four dependent children and two parents.

These plans are customisable. For example, the organisation can pick an ESCP plan for senior or top-level employees and an ESC plan for junior and middle-level employees. The premium cost will be calculated according to the plans chosen and the number of dependents you add; the more dependents, the higher the premium cost will be.

Claim History

If an organisation is buying group health insurance for the first time from an insurer, then their claim history might not be considered. But if you renew your insurance, then the insurer will consider the organisation's claim history.

If the number of claims in the past is relatively high and frequent, then the insurer will quote higher premiums. But if the organisation follows workplace safety guidelines and has employees with fewer health issues then the insurer will quote a lower insurance premium.

Add-on Covers

Often, employees are looking for more than just standard group health insurance. They want insurance that can cover some of their other health-related expenses outside of emergencies. In such situations, having add-on covers can help a lot.

Employers can choose to include add-on covers, such as dental and eye check-up covers if the insurer offers them under the chosen plan. These covers expand the base coverage and provide additional medical coverage.

However, adding add-on covers does affect the premium calculation depending on the number of add-ons and their price.

There are several methods for premium calculation. One way is to use mediclaim policy calculators to get a rough estimate or ballpark figure. This is because health insurance premium calculators are able to offer real-time, accurate estimates of premium rates for the coverage required.

However, other than mediclaim premium calculators, these are some standard methods insurers use for calculating group health insurance premiums.

Experience Rating System: In this system, the insurance company calculates the premiums based on the group’s previous health insurance claims. If the group has had high claim cases in the past, its premium price will go up, and vice versa.

Community Rating System: In the community rating system, the insurance company calculates the premium based on the group's overall health status and the demographics of its location.

Group health insurance is a type of business insurance in India that assures employees that they are protected and secure in case of an emergency. Insurers like Tata AIG offer benefits like comprehensive coverage, family coverage, and maternity coverage from day one.

In this policy, the employers pay the insurance premium. In some cases, the premium payment can also be split between the employer and employee if the employee needs additional coverage under the plan.

With the points discussed here, employers can get an idea about the factors they need to consider before buying a group mediclaim insurance policy for their employees.

What is the minimum number of employees for group health insurance in India?

An organisation becomes eligible to buy group health insurance when it has at least 20 employees.

Is group insurance mandatory for employees?

Yes, every law-abiding company operating in India has to provide health insurance to their employees.