Group Health Insurance vs. Individual Health Insurance

Health Insurance is as important as the food on the table at the end of a long and tiring day. Although the Indian market lacked an interest in the insurance sector, Covid-19 gave it a big boost! There are primarily two types of insurances that your employees choose from:

1. Group Health Insurance -  an employer-financed insurance
2. Individual Health Insurance - a self-financed insurance

The aim of any health insurance is to provide financial coverage to the insured against hospitalization and medical bills incurred during the treatment. Although the aim of both insurances is the same, their coverage and premium vary. Medical costs in India are rising by 12–15% every year, much higher than general inflation. This means a surgery that costs ₹3 lakh today could cost ₹6–7 lakh in just 5 years.

The question is, what should one choose and how? Read this article to know the basic differences between the two, to help you make an informed decision for your employees.

What is group health insurance?

Is group health insurance part of the CTC?

Source: Bajaj Allianz

Group Health Insurance is an insurance plan that is bought for a group of people. This group can either be an association, group of friends or corporations. However, group health insurance is more common with employers (organizations) like you; and often known as corporate insurance which is bought by the employer for the staff of an organization and their dependents. The premium is comparatively less and is primarily calculated based on the number of people insured under the plan, and the group cumulative risk. This insurance is often selected by you (the employer) and the premium cost is divided between you and your employees, where you (the employer) often bear the bigger chunk. Group insurance is not forever, and the coverage ceases to exist the day your employee leaves the organization. However, it can be transferred to a new employer if they offer insurance through the same company.

Is Group Medical Insurance part of the cost to the company (CTC)?

 Yes, it is part of the CTC. The process of calculating CTC in general is to add the EPF, gratuity, house allowance, food coupons and group health insurance.

Pros of group health insurance plan:

1. Pre-existing diseases are covered from Day 1 of the policy without a medical check-up
2. Lower premium rates compared to individual health policies.
3. Maternity is covered with an upper capping
4. Pre and postnatal expenses are covered
5. No copayment required for dependants
6. Insured can make a claim in the first 30 days from enrollment in the group health insurance plan
7. Companies often have a specific point of contact to make the information and claim process relatively easier
8. No medical checkup required before getting enrolled in a policy
9. Covers LASIK surgery for +/- 6, 6.5, 7.5 D
10. Tax benefits for employers under Section 37(1) as a business expense.

Cons of group health insurance plan:

1. Limited additional benefits (riders); and can be added only by the employer
2. Doesn’t offer a no-claim bonus
3. The premium can go dearer depending upon the number of newly added members compared to the previous year
4. Not valid post-retirement (age of 60 years)
5. Coverage limits are usually lower (₹3–5 lakh on average) compared to individual policies.
6. Dependents’ coverage may be capped (especially for parents).
7. Customisation is limited since the employer chooses the insurer and features.

What is individual health insurance?

Source: Aditya Birla Capital

Individual Health Insurance is an insurance plan that employees buy for themselves and their families. Under individual insurance, the family includes parents, spouse, children. The premium is calculated based on multiple factors like age, gender, medical history, lifestyle habits, etc. The policy is often purchased after an insurance agent recommendation. The policy coverage might seem more comprehensive. Especially because the policyholder has the freedom to choose individual insurance and can be customised as well by paying a little extra for added benefits (riders). However, the premium for individual insurance is on the higher side. The policy is not affected by the employment status and remains valid until the policyholder wants.

Pros of individual health insurance plan:

1. The policyholder can customize the policy and get added benefits as per the personal health needs
2. Offers no claim bonus
3. The policyholder can continue the same policy even after retirement and the premium costs won’t burn a hole in the pocket
4. The policyholder can decide the term of the insurance
5. The policy can be used to apply for loans etc.

Cons of individual health insurance plan:

1. Pre-existing conditions are not covered
2. Employees may be denied a policy for certain diseases
3. Expensive premium costs
4. You have to scout, analyse and purchase on your own
5. Maternity is covered with a waiting period of 2-4 years
6. Covid-19 is covered with a waiting period of 15 days
7. No claim assistance
8. May need to make a copayment for dependents above 60 years
9. The insurance provider may deny dependents above 60 years, in which case, you may have to buy a separate policy for them making it very expensive
10. Medical tests may be required before enrollment, depending on age and health condition.
11. Copayments may apply for dependents above 60 years.

Summary: Group health insurance VS Individual health insurance

Pazcare for group health insurance

If you are looking to buy group health insurance for your team, then get in touch with Pazcare. We help in not only getting you the best policy but also make the whole experience hassle-free for HRs and employees with our powerful employer dashboard and employee app. HRs and employees can manage their GHI related tasks easily with Pazcare.