Employer-provided health insurance today forms a key expectation among individuals joining a new workplace. But why? If you’re thinking about health insurance through employer and how does it work, the short answer is that it provides financial support to an employee and their dependents during health crises.
Rising medical inflation and the need for long-term financial security, furthermore, have made employer-provided health insurance a sought-after solution. These types of insurance schemes stand out for reasons other than their effectiveness as a financial safeguard, too. They are being increasingly adopted by employers to improve employee retention and enhance company reputation. This article explores how relevant these plans are in the contemporary medical landscape and why.
What is Health Insurance Through Employer?
Purchased by employers for their employees, the employer-provided health insurance is a type of group health insurance. Known as employer-sponsored health insurance as well, it is linked to the job and provided to employees as a part of their benefits package, usually at the time of hiring.
Similar to most health insurance plans, it provides medical coverage for an array of health-related concerns and a sum assured to support employees during health emergencies. Coverage can include hospitalisation costs, expenses incurred in the purchase of medicines and consumables, doctors’ consultation fees, etc. The scope of coverage does not extend to employees alone but also to their families/dependents/beneficiaries.
How Does It Work?
The employer generally purchases a master policy from an insurance company. Employees get automatically enrolled in the purchased policy. Most employer-sponsored insurance schemes do not make medical underwriting or tests a precondition for enrolment.
- Premiums are determined on a group level
- Coverage begins on an employee’s first day of work or, in the case of existing employees, on the day the policy was bought
- Claims can be filed digitally for cashless settlement or reimbursements
Since the risk is distributed across employees, premiums for these health insurance plans are lower than those for individual health plans.
Eligibility
Generally, individuals employed by these types of employers can access medical coverage benefits:
- Enterprises with a minimum of 7 employees
- Sole proprietorships
- Corporate firms
- Big corporations or conglomerates
- Partnership firms
- Multinational Corporations
- Micro, Small, and Medium Enterprises
Most employer-provided health insurance plans in India come with the following eligibility criteria for employees:
- The employee must be above the age of 18 years and below the age of 60 years
- The employer and employee must have an authentic and documented relationship
- The employer must have an insurable interest in purchasing the scheme
- Employees must be receiving regular compensation
An employer-provided health insurance typically extends coverage to dependents of the employee, such as the spouse, children, parents, or other beneficiaries.
Types of Health Insurance Through Employer in India
Here are the common plan types offered within an employer-sponsored health insurance in India:
Type A: Non-Contributory Scheme
In these types of health plans, the employees are not required to contribute to the payment of premiums for the health insurance scheme. The employer carries the full expense of premium payments for the employees.
- The employer acts as the proposer
- The employee (and their dependents, as may apply) acts as the insured
- The insurance policy is assigned for a limited period
- The firm/enterprise enjoys tax benefits for the premium payments
Type B: Contributory Scheme
As the name suggests, contributory schemes or the Type B employer-provided health insurance schemes require employees to contribute partially toward premium payments. The employer may deduct contributions from the total compensation package of the employee.
- The employee acts as the proposer and the insured
- Dependents are covered based on policy terms
- Policy assignment isn’t required since the employee is the policyholder
Additional Employer-Provided Health Covers
Employer-provided health insurance is meant to serve as a complete toolkit that comes to the aid of employees when faced with health risks. While the contributory and non-contributory schemes may be adequate, certain enterprises enable employees to exercise more flexibility.
The two main add-on covers that may be provided by employers are as follows:
Personal Accident Cover
An important add-on, it ensures that employees get medical coverage if they meet with an accident. It may provide financial benefits in cases where:
- The employee has sustained severe injuries
- The employee has become permanently partially disabled
- The employee has become permanently totally disabled
- The employee is deceased (death benefit extended to beneficiaries)
Top-Up & Super Top-Up Plans
Employers may extend top-up and super top-up plans to employees for comprehensive protection against lengthy medical bills. Top-up and super top-up plans ensure:
- The employee gets higher medical coverage when the base policy has been exhausted
- The employee is protected against unexpected medical costs
- The employee and their beneficiaries can access affordable healthcare
Common Inclusions
Employer-provided health insurance typically comes with the following inclusions:
- Expenses incurred in inpatient and outpatient hospitalisation
- Room charges, surgical expenses, and ICU charges
- Pre-hospitalisation expenses, such as those incurred in diagnostic tests and consultations
- Post-hospitalisation expenses, such as those incurred in the purchase of medicines, consumables and follow-up care
- Ambulance charges, nursing charges, and other ancillary expenses
- Daycare procedures and critical illness treatments (depending on add-ons)
Common Exclusions
An employer-provided health insurance plan may not provide coverage for the following:
- Cosmetic surgeries, such as Botox, liposuction and other plastic surgeries
- Routine dental care, unless required due to accidental injury
- Injuries from self-harm, substance abuse, and drinking and driving
- Infertility treatments, naturopathy, and homoeopathy
- Specific Pre-Existing Diseases (PEDs) may be excluded
Steps to Enrol in an Employer-Sponsored Health Scheme
Usually, the HR leaders in your enterprise are responsible for onboarding employees on the employer-sponsored health insurance plan. Here are the steps enrolment entails for an employee:
Step 1: Understand the Policy
The HR leader reaches out to employees regarding the health insurance policy being offered by the enterprise. As a potential policyholder or insured, it’s essential to participate during this stage.
- Review the policy details carefully
- Evaluate whether the policy aligns with your needs
- Understand how simple or complex the claims process is
- Assess the claim settlement ratio of the company
- Communicate queries and gain clarity
Step 2: Document Submission
Once policy terms are clarified, the HR leader may ask you to submit the following documents.
- ID proof (Aadhaar card, PAN card, passport, etc.)
- Proof of employment, such as a company ID card or salary slips
- Details of dependents being enrolled in the plan (birth or marriage certificate)
- Declaration form for PEDs
- Passport-sized photos of the employee and their dependents
Step 3: Confirmation
On your confirmation and completion of enrolment, the company shares a copy of the policy document with the employees. Certain enterprises may also issue a physical insured card or e-card for ease of filing claims.
Benefits of Health Insurance Through Employer
Employees are more likely to opt for employers who offer health insurance as a workplace benefit. That is because of the advantages they gain through such a plan.
No Waiting Period
Health insurance schemes provided by the employer usually do not come with a waiting period. Coverage is applicable from the first day of the policy issuance. Additionally, employees are not required to undergo medical check-ups before the policy is issued. In rare cases, such as for maternity benefits or pre-specified PEDs, a waiting period may be applicable.
Family Coverage
Employer-sponsored health insurance policies take the edge off budgeting for medical expenses. It typically covers family members of the employee, such as the spouse, children, and parents, ensuring overall protection of the family. In the long run, that is a big weight taken off the shoulders of the employee.
Cashless Treatment
Health insurance plans offered by corporate employers enable employees to access cashless services at hospitals within the insurer’s network. This means they are able to access medical attention without paying expenses upfront or out of their own pocket. Bills are directly settled between the hospital and the insurer, making the overall process smooth and convenient for the insured employee.
Cost-Effectiveness
Cost-effectiveness is one of the top benefits of these health insurance schemes. Due to the financial risk remaining distributed among multiple insured/policyholders, these plans come with low premium payments. Employees with multiple family members are not required to opt for separate health plans or pay multiple premiums. It ensures affordability and coverage in one plan.
Drawbacks of Employer-Sponsored Health Insurance
While the perks are several, employer-sponsored health insurance comes with a few drawbacks.
Conditional Tenure
Employer-sponsored health insurance plans are tied to the job/organisation that an employee is working for. This means they get medical coverage as long as they are working in the organisation. The health insurance policy and the financial protection that comes with it collapse when the employee resigns from the organisation.
Limited Sum Assured
Since health insurance plans offered by corporate employers charge low premiums, they may not provide a high sum assured. The coverage, therefore, may prove inadequate for families with PEDs or facing expensive medical treatments. Certain plans may come with strict room-rent limits. During emergency situations, this translates into heavy out-of-pocket expenses.
Employer-Provided Health Insurance – Tax Benefits
As per Section 80D of the Income Tax Act, 1961, employees can claim deductions for the premiums paid toward medical insurance annually.
- An employee contributing to premium payments for themselves and their dependents can avail a deduction of upto ₹25,000
- If dependents, such as parents, included in the policy are above 60 years of age, a deduction of upto ₹50,000 can be availed
Note: The deduction can only be availed by an employee, in part or in full, based on the contribution being made by the employee toward premium payments. Type A plans or Non-Contributory health insurance schemes extend tax benefits to the employer alone.
Wrapping Up
When considering an offer by an organisation, professionals seek to understand health insurance through employer and how does it work. In a nutshell, the health insurance plan offered by your potential employer typically covers a range of common medical expenses. It may come with additional features to ensure a medical crisis does not lead to financial distress. However, conditions differ between insurance companies and vary based on the employer/enterprise.
It’s important to inquire about the policy details of the health insurance plan you’ll be covered by before saying yes. If options are available, seek professional advice or suggestions from a friend receiving coverage under similar plans. An informed decision guarantees your future financial stability.
FAQs
1. Which type of group health insurance is best for employed professionals?
The best type of group health insurance for an employed professional will depend on their unique medical history and financial needs. Typically, employers automatically enrol new employees in a group health insurance plan at the time of joining. These plans provide basic coverage and may allow for supplementation with add-on covers depending on employee needs.
2. Are thyroid and pancreatitis covered under corporate health insurance?
Thyroid disorders and pancreatitis are usually covered as PEDs under corporate health insurance plans provided by employers. However, a waiting period between 2 and 4 years may be applicable, depending on the terms of the insurer.
3. Do employer-provided health schemes cover expenses for cancer treatments?
Employer-sponsored health insurance schemes typically cover a range of medical expenses for cancer treatment. The policy may pay for diagnostic tests, surgery costs, hospitalisation expenses, chemotherapy and radiotherapy costs. They may or may not come with a waiting period, depending on the insurer opted for by an employer.
4. What is an effective alternative to enrolment in an employer-provided health insurance plan?
Individual health insurance plans or mediclaim policies can be a good alternative for employed professionals. These provide adequate medical coverage and can be supplemented with add-ons based on the discretion of the policyholder/employee. However, when you compare them to employer-provided health insurance, their premium costs are higher.
5. Which type of PEDs are covered by corporate health insurance schemes?
Typically, PEDs such as diabetes, thyroid disorders, hypertension, chronic heart conditions, and high cholesterol issues are covered under corporate health insurance schemes. It’s important to note that coverage for PEDs may come with waiting periods ranging from 2 to 4 years.