Skip to main content
Group Health Insurance

Can small businesses group together for health insurance?

When a small business wants to create a more attractive profile to potential employees, it needs to have the provision of health insurance. The facility of a health insurance policy makes a small business more effective, in terms of employee retention. But, the big question is, can small businesses group together to buy a comprehensive health insurance policy?

Group insurance is one of the most important business segments for insurance companies. There have been tremendous growth opportunities and Insurance companies are excited with the potential this business presents. There is similar excitement among the businesses with respect to group insurance. They benefit significantly by taking the advantage of customised products/coverages, pricing discounts and convenience. 

Group policies can broadly be categorised under the following: 

  • Formal Group: Also referred to as Employer-Employee groups, these groups have common interests where an employer will provide insurance to a group of people who are employed with their organisation. These groups are created to achieve a specific goal and are built by management. These are formulated based on a certain organized structure, in hierarchical form. In these groups the employer purchases the insurance policy to insure its employees. 
  • Informal Group: As the name suggests these groups do not have a relationship of employer- employee. They are naturally created based on the basis of interest, social behavior and similar psychology and commonality of interests among the members and the group. Such groups have loose structure.These groups include welfare, culture and social associations, where the head of the associations purchase the insurance for their members.

Before we start discussing how small businesses can come together to take benefits of group insurance, let us understand a few guidelines that are sacrosanct for any group insurance program in india. 

Group insurance business is regulated by the insurance regulatory body ( IRDAI) in India through their guidelines on Group Insurance policies issued in 2005. Please click the link below for the guidelines.

The basic criteria is companies/organisations cannot form a group for purchasing insurance. There has to be a commonality of interest and purpose for which the members have formed a group. The economic interests or the activity should be much more than just purchasing insurance. Formal employer-employee groups qualify automatically for group insurance as there is a common interest and relationship. 

There are some instances when it is possible

When the businesses or corporations are members of the same association, it is possible to purchase and avail the benefits of a health insurance policy with broader applications. There are certain conditions that should be considered. 

For non employer-employee groups, there has to be an entity/organisation or an association that will act as the group manager or the administrator who can offer the group insurance policies for all the members who are part of the group. 

For example, when a bank purchases group insurance for their customers, the bank  will be the group administrator or the group manager purchasing the policy. They will take the policy on their name and provide the option to all customers to enrol in the group plan. 

The group managers can be a bank for providing insurance for their customers, depositors, loan customers, companies offering insurance for their customers, associations for their members etc. The important criteria is that the group manager/administrator should be  any formal association which is a registered entity as per The Companies Act in India. 

The core premise

It is crucial to note that companies should not form a group merely to buy a health insurance policy. There should be a wider horizon to form a group, taking into account common business objectives in the industry. Such business goals should be given more priority than simply purchasing a health insurance policy from a service provider.  

Factors to consider during purchase    

Determining the insurer

The key point to consider is determination of the insurer. Keep in mind that the insurer should have goodwill in the market. On the other hand, the small businesses together can choose a top-rated insurance broker instead of a single service provider. It helps in exploring more flexible options. 

Going through the terms and conditions 

When you represent a particular company in matters of buying or recommending a health insurance policy, it is your duty to go through the complete terms and conditions mentioned in the policy document. In the case of availing an association health plan, many others like you need to sit together to discuss the different aspects of the plan. 

Check out the coverage

One of the obvious things to check out about the policy is its coverage. The policy document will have the necessary details. Still, you need to ask the insurer about it to remain doubly sure of the amount. Moreover, it is crucial to know regarding the applicability of the coverage. 

Know about the premium to be paid

Another very important fact to be aware of is the amount of premium you need to pay to the insurer. It helps you to take into account the related budget. Remain clear about the relevant calculations related to premium payment.

Administration of the policy 

Companies purchasing group insurance, the employer will be responsible for administration of the program. This is pretty simple and easy to manage. 

In a non-employer-employee group, the individual group member is to be considered as a beneficiary under the group insurance policy and the entity which is purchasing the policy will be responsible for administration of the program. The insurance company will issue a master policy document in the name of the group administrator or the group manager. Individual members of the group will only receive a certificate of insurance from the insurance company through the group administrator. So it is imperative for the members and smaller groups to ensure that they have the certificate of insurance from the insurer. 

Check out the specific benefits

It is a huge priority to check out the list of benefits that the policy promises to cover. Go through the issues mentioned in the policy document that the plan addresses. You must have clear ideas about each benefit. Applicability of the insurance coverage is of prime importance in this context.

Group together and buy a top plan

Talk to small businesses in your domain. Together, you can approach PlanCover to purchase a suitable health insurance policy that has broad and effective applicability. It is a reputable insurance broker operating in the Indian market, providing comprehensive services to hundreds of small businesses, with a professional approach. 

Leave a Reply