What is the Minimum Employee Count Required for Group Health Insurance?

Group health insurance is a type of health coverage that employers provide to their employees. It is a collective policy that covers all eligible employees. It eliminates the need for individuals to purchase separate health insurance plans. Group health insurance plans sometimes also cover employees’ family members.

One of the key advantages of corporate insurance is cost efficiency. As the risk is shared among multiple individuals, insurance companies can offer lower premiums compared to individual health policies. Employees also benefit from broader coverage, which may include hospitalisation expenses, day-care procedures, maternity benefits, preventive health check-ups, and cashless treatment at authorised hospitals.

Group health insurance is beneficial for employers as well. It enhances employee satisfaction, strengthens retention, and improves the company’s ability to attract skilled professionals. In addition, organisations that offer health coverage often build a reputation as responsible employers that prioritise employee well-being.

However, before issuing a policy, insurers typically evaluate whether a company meets certain eligibility requirements. One of the most important requirements is the minimum number of employees for group health insurance.

Also Read: Group health Insurance Eligibility

In India, the eligibility criteria for group health insurance are influenced by guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI). While insurance companies may set their own underwriting rules, they must operate within the regulatory framework established by this authority.

Under IRDAI regulations, a group health insurance policy based on an employer-employee relationship requires a minimum of 7 lives. This means that you are eligible for group insurance for employees if you have 7 lives to include under the policy.

IRDAI also distinguishes between employer-employee groups and non-employer groups. Non-employer groups include organisations such as:

• Trade associations

• Professional bodies

• Clubs or societies

• Financial institution customers

For these types of groups, the minimum group size is around 20 members. The higher requirement helps ensure that the group is genuine and not created solely to obtain insurance coverage.

Understanding the Difference Between Employees and Lives

An important aspect to understand here before proceeding is the difference between employees and lives covered.

• Employees refer only to individuals working for the organisation.

• Lives refer to the total number of people covered under the policy. This includes employees and their dependents, such as spouses, children, or parents.

• Many insurance companies evaluate group health policies based on the total number of lives insured, rather than just the number of employees.

For instance, suppose your company has 5 employees. To buy group health insurance, you require at least 7 lives. You can add the parents or spouses of 2 employees to meet the minimum requirement.

This distinction is important because some insurers define eligibility based on the number of lives covered. Therefore, smaller companies may still qualify for group insurance if employees include dependents in the policy.

Flexibility in Insurer Requirements

Although IRDAI sets the regulatory framework, individual insurers retain flexibility in their underwriting guidelines. Therefore, companies planning to purchase group health insurance should review the insurer’s specific eligibility criteria or consult an insurance advisor.

• A group of 100 or more lives is preferred by public sector insurance companies.

• Private insurance companies start providing coverage for 50 lives.

• Insurers focused on startups and SMEs offer group health insurance to a group comprising 7 to 10 lives.

Insurance companies establish minimum employee limits for several practical reasons related to risk management and policy sustainability.

Risk distribution

Insurance is most effective when risk is shared among many individuals. With a small group size, a single large medical claim can significantly affect the insurer’s costs. Therefore, a minimum group size helps spread risk more evenly.

Premium Stability

Larger groups allow insurers to estimate claims more accurately. This helps maintain stable premium rates and prevents sudden increases in policy costs.

Administrative Efficiency

Managing group policies involves administrative work such as documentation, enrolment, and claims processing. A minimum group size ensures that the administrative effort remains economically feasible for insurers.

Long-term Policy Stability

With a sufficient number of participants, the policy is more likely to remain stable across renewal periods. This benefits both insurers and employers by reducing uncertainty.

These factors explain why most insurance companies maintain an employee threshold for group insurance before offering health coverage.

Apart from meeting the requirement for the minimum number of employees for group health insurance, organisations must satisfy several additional eligibility conditions.

1. Registered Business Entity

The company should be a legally registered organisation. This can include private limited companies, partnerships, limited liability partnerships (LLPs), or registered institutions.

2. Active Workforce

Employees included in the policy must generally be active members of the organisation. Insurers may request documentation such as employee lists, identification details, or payroll records.

3. Uniform Coverage

Many insurers require that all eligible employees be offered coverage under the group health insurance plan. This prevents selective enrollment where only individuals expecting medical expenses join the policy.

4. Participation Requirements

Some insurers also require a minimum participation percentage of employees. This ensures the policy represents the overall workforce and maintains a balanced risk pool.

If your organisation meets these requirements, it can successfully obtain group health insurance and maintain compliance with insurer policies.

Group health insurance provides advantages for both employees and employers.

Benefits for Employees

Employees receive financial protection against medical expenses, which can otherwise be difficult to manage. Group policies often cover hospitalisation costs, surgeries, medications, and preventive healthcare services.

Many plans also provide cashless treatment at authorised hospitals, allowing employees to receive medical care without paying upfront.

Benefits for Employers

For employers, group health insurance helps create a supportive workplace environment that prioritises employee welfare.

It also improves employee retention and job satisfaction. Workers are more likely to stay with companies that provide meaningful benefits.

Additionally, healthier employees contribute to higher productivity and reduced absenteeism, which supports overall business growth.

The minimum employee count required for a group medical insurance policy in India starts at around 7 lives for employer-employee groups, as guided by regulations from the Insurance Regulatory and Development Authority of India (IRDAI). However, the exact requirement may vary depending on the insurer and the type of group.

When evaluating eligibility, understanding concepts such as employees versus lives covered is equally important. If you learn these guidelines and explore available options, you can make informed decisions, regardless of the size of your organisation, and provide effective health protection for your workforce.

TATA AIG offers group health small business insurance, covering members or employees of the organisation. We ensure that you are safeguarded against illnesses, accidents, and medical emergencies.