Difference between group insurance and ESI

Get to know the difference between group insurance and Employee State Insurance - two schemes that are focused on providing medical benefits.

Group insurance and Employee State Insurance (ESI) - difference

What is ESI?

Employee state insurance is a scheme for employees to help with medical expenses. ESIC stands for Employees’ State Insurance Cooperation. This scheme is regulated by ESIC, a labour welfare organization that operates under the Ministry of Labour and Employment.

ESI Act

ESIC rolled out the ESI act of 1948 to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto.

How does ESI work?

Registration

A factory/establishment that wants to provide ESI has to get registered under the ESI act. This can be done in the online portal www.esic.in. By providing all the details of the organization and employees, PAN,  state, etc., one can get registered. Registration is mandatory under section 2A of the ESI act to avail of ESI benefits.

Contribution

The contribution for ESI is built out of the monthly wages of employees. Employers and employees pay monthly at a fixed percentage of 3.25 and 0.75 of the wage. The State Governments bears 1/8th share of the cost of Medical Benefit.

💡 To make employers employ more people with disabilities, employers are exempted from paying their share towards employees with disabilities.

Benefits under ESI act

Employees and their dependents get the “pehchan card” which acts as an Identity card for them to get verified and get benefits and treatment at network hospitals. ESI offers a plethora of benefits for employees and their dependents. Here are some of them.

Medical Benefit

Starts from day one of joining insurable employment. Gets comprehensive medical cover and clinical investigation.

Sickness Benefit under ESI act

Must have contributed at least 78 days. Gets 70% of average daily wages when absent from work due to sickness.

Temporary and permanent disablement

Can be availed from day 1. Gets 90% of daily wage based on the loss of earning capacity.

Maternity benefits under ESI act

Must have paid 70 days of wages. Gets 100% average daily wages for up to 26 weeks for 2 children.

Read: Maternity insurance in India

Retired

If retired, employees can pay Rs 120 on a yearly basis to cover themselves and spouse and continue getting the benefits.

What is group insurance?

Any employer or association can buy group insurance for employees/members. Group insurance can be group health insurance, group personal accident insurance, group term life insurance or group travel insurance and many more. Employers buy it from insurers or insurtech companies. Now, what’s covered in a group insurance policy is based on what policy is bought by the employer.

Insurance, including group insurance, is regulated by IRDAI, Insurance Regulatory and Development Authority.

How does group insurance work?

We are taking an example of an employer buying group health insurance for easy understanding and comparison.

Purchase policy

Employers can state their requirements and buy an insurance policy. They can decide the sum insured and what to cover (maternity, dental, vision, etc). Based on this, the insurer will give a premium that the employer has to pay once a year for an insurance policy that lasts one year. It is up to the organization to decide if they want to pay the full premium or ask employees to pay a share. This is called copay in health insurance where the employer and employee share equal or unequal percentages of the premium.

Benefits of group health insurance

Employees get a health insurance ID card with a policy number that they can use to get insurance in hospitals. For example, if the sum insured is 5 Lakhs, the employee can get medical expenses worth 5 Lakh covered with cashless and reimbursement facility. However, what’s covered, inclusions and exclusions in a policy are different for each and are based on the underwriting of the policy.

Pre-existing diseases

All pre-existing diseases, that is. diseases employees already have before they are insured by the organization are covered in the policy. Employees can cover medical expenses for the treatment taken for the diseases they already have.

Waiting period

There is no waiting period, whatsoever.

Hospitalization

All hospitalization expenses are covered, including Covid-19. Even expenses during pre-hospitalization and post-hospitalization are covered.

Which is better? ESI or Group insurance

Although the purpose of ESI and GHI are similar, they work in completely different ways. It is not a level playing field to compare these two and call out one better. Both have different sets of advantages and disadvantages from both employer and employee perspectives.

Difference between ESI and group insurance

Parameters ESI Group health insurance
Minimum employees 10 7
Minimum salary 21,000 INR per month None specified
Employees’ contribution 0.75% of the salary A percentage of the premium if required by the organization. Otherwise, no monetary contribution made.
Sum Insured Not fixed and no limit Fixed sum insured. Decided by the employer
Cashless claim facility Available. Less network hospitals Available. More network hospitals
Waiting period 2 years for critical ailment treatment. 2 days for sickness. No waiting period
Maternity 26 weeks of salary in case of childbirth and 6 weeks of salary in case of miscarriage. The female employee should have worked for 6 months in the company If the employer buys a policy with maternity, it is given both to male and female employees. Male employees can cover their spouse. Delivery and newborn baby (up to 90 days after birth) are covered.
Disability benefits 90% pension of the last salary in case accident that results in permanent disability when in service Not available in GHI
Death Benefit Family gets a pension from ESI fund Not available in GHI
Employers’ contribution 3.25% of the employee’s salary Generally fully paid by the employer
Payment Monthly Yearly
Dependents Covered by default Covered if employers choose to add dependents in the policy. Otherwise, only employees are covered.
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