Is group medical insurance mandatory for employees in india

What is group medical insurance in India?

Group medical insurance, also commonly known as group medical insurance, is a health coverage plan provided by employers to protect  their employees’ health and financial well-being. It covers a wide range of medical expenses including hospitalization, day-care procedures, ambulance charges, and in many cases, even pre-existing illnesses depending on the policy’s coverage terms.

What makes group medical insurance stand out is the collective benefit it offers?

 Since it’s purchased in bulk for an entire workforce, the cost per person tends to be lower than individual plans, making it a win-win for both employers and employees. Employees not only get access to quality care without worrying about the premium, but some policies also offer extended protection to their families, including spouses, children, and sometimes even dependent parents.

With healthcare costs rising sharply in India, group medical insurance has become a powerful employee benefit that ensures peace of mind and financial security, not just for the employee, but for their entire household.

Legal framework of group medical insurance in India

The legal mandate around group medical insurance in India took a firm turn post-COVID. According to the IRDAI’s (Insurance Regulatory and Development Authority of India) circular dated April 1, 2020, it became mandatory for all employers, resuming operations after the lockdown, to provide group medical insurance to their employees.

Circular No. IRDAI/HLT/REG/CIR/054/03/2020: Employers shall be mandatorily required to provide a medical insurance cover to their employees upon reopening their offices.

However, once the lockdown restrictions eased, this directive wasn’t enforced stringently. Today, offering group medical insurance policy for employees is not legally mandatory for all private companies across the board, but it has become a de facto standard in employee benefits, especially in startups, tech companies, and mid-sized businesses aiming to attract and retain top talent.

Is group medical insurance mandatory for employees in India?

Technically speaking, no, group medical insurance is not yet mandatory for all private sector employers in India under the current labour laws. However, the conversation isn’t as straightforward as a simple yes or no. While not legally enforced across all industries, many companies now treat group health insurance as an essential part of employee compensation, especially post-COVID and with healthcare costs skyrocketing. If you're a startup founder or HR leader, especially in a competitive industry, here’s why skipping group medical insurance could be a costly mistake:

• Talent acquisition is tougher than ever: With startups and SMEs competing for the same skilled workforce, offering a robust group medical insurance policy for employees gives your job a strong edge.
  
  
• Health risks are no longer limited to older employees: Sedentary lifestyles, erratic work hours, and high stress levels have made even 25-year-olds vulnerable to diabetes, hypertension, and mental health issues. Having no insurance coverage in place leaves your workforce, and your organisation, exposed.
  
  
• Modern tech platforms have made it easier: Platforms like Pazcare have simplified the process of managing group health insurance. From easy onboarding to digital claims tracking, it’s become incredibly hassle-free for both employers and employees.

Why is group medical insurance necessary for companies in India?

Group medical insurance is a strategic business decision. As healthcare costs rise and employee expectations evolve, offering a group health insurance policy helps companies stay competitive and build a resilient workforce. Here’s why it matters:

Financial protection for employees: A group medical insurance policy for employees helps cover hospitalisation expenses, surgeries, and treatments. This reduces out-of-pocket costs for employees and offers them financial security during medical emergencies.

Improved talent retention: Group medical insurance is a core part of compensation packages today. Employees are more likely to stay with organisations that prioritise their well-being, especially when benefits include coverage for their dependents.

Compliance with evolving regulations: While not mandated under national labour law for all sectors, several state governments and regulatory bodies have, at times, required companies to offer group medical insurance policy. Having a group medical insurance policy in place helps businesses stay aligned with local norms and avoid compliance risks. 

Boosts morale and productivity: When employees feel supported during health-related challenges, it reflects in their performance and loyalty. A strong health insurance policy shows the company values its workforce beyond payroll.

Key features of a good group medical insurance plan

Not all group medical insurance policies are created equal. A well-designed plan should go beyond basic hospitalisation to truly support your employees’ health and well-being. Here’s what a comprehensive group health insurance policy should include:

Cashless hospitalisation: Access to a wide network of hospitals where employees can get treated without paying upfront. This removes the hassle of reimbursement and ensures timely care.

Coverage for pre-existing diseases from day one: Unlike individual health plans that may have a waiting period, a good group plan should offer immediate coverage for common pre-existing conditions like diabetes or hypertension.

Maternity and newborn care: Coverage for maternity expenses (normal or C-section) along with newborn cover from day one is increasingly expected in employee insurance plans.

Mental health support and teleconsultations: Modern group medical insurance should include mental health counselling, therapy sessions, and unlimited online doctor consultations, especially important for today’s remote and hybrid workforce.

Wellness and OPD benefits: Annual health check-ups, OPD consultations, dental/eye care, and fitness-related rewards can encourage preventive healthcare and boost employee engagement.

When you work with a tech-enabled platform like Pazcare, you also get:

• 24/7 claims assistance: so employees aren’t left struggling during emergencies.
• A clean digital dashboard: to manage all policies, claims, and member data.
• Zero paperwork onboarding: enrol your team with a few clicks.
• Transparent customisation: tailor benefits to your team’s needs, no hidden clauses.
  

A good group medical insurance policy for employees is one that’s proactive, easy to use, and genuinely helpful, both for HR teams and the employees they care for.

The growing demand for group medical insurance in India

In a post-pandemic world, the Indian workforce is prioritising health like never before. A report by NASSCOM and Indeed shows that 70% of Indian employees value health benefits over pay raises.

Group medical insurance is no longer a perk. It’s an expectation.

This is especially true in startups and SMEs, where employees often juggle multiple roles and burnout risks are high. A well-designed group medical insurance policy offers peace of mind and becomes a differentiator in competitive hiring environments.

Final thoughts

Group medical insurance has become a strategic necessity in today’s competitive and health-conscious workplace. The real cost of skipping it shows up in high attrition, low morale, and a weakened employer brand.

For HR leaders, founders, and business owners, the message is clear, your people expect more than just a salary slip. They expect security, support, and care.

So whether you’re hiring your next 50 employees or managing a lean, high-performing team, invest in a group health insurance policy that delivers value, not just coverage.

Need help choosing the right group medical insurance policy for employees?
Explore Pazcare’s Group Health Insurance plans tailored for startups and SMEs.