Health insurance in India is a largely under-served and a growing market. It is characterized by an insurance premium growth rate upwards of 20% year-on-year, as per data from the Insurance Regulatory & Development Authority of India. The collective premium stood at INR 37,029 Cr for the period 2017-2018. At 89% combined, group health insurance and personal health insurance premiums are the major contributors to this growth. While group health insurance is generally provided by employers, personal health insurance plans are availed in an individual capacity. A comparison between the two types of insurance plans helps understand their burgeoning demand in the Indian health insurance market.
What is Group Health Insurance
Group health insurance is a type of medical insurance plan that is availed together by a group of persons who exist as legal entities. Such plans are typically provided by insurance companies to an organization for its employees. They form a part of the overall benefits package an employer offers to its employees and covers their and their dependents medical costs. It is characterized by a single policy that is issued to the organization, while employees get individual medical-claim numbers for claims processing.
The premium calculation for such policies takes into account the number of employees and the nature of work. Since a group of employees is involved, the risks are spread across the milieu and age brackets. This leads to an affordable, cost-effective premium, beneficial for both employers and employees. Such a premium is also tax deductible for employers and is typically part of an employee’s cost-to-company. Group health insurance plans account for 48% of the total health insurance premiums in the country and help provide health cover to a majority of India’s workforce and their dependents.
What is Personal Health Insurance
Personal health insurance plans are medical insurance plans availed in an individual capacity from insurance companies or insurance broking companies. Such plans typically cover the individual only. The coverage provided reflects in the premium to be paid which is generally higher than group insurance plans.
A personal health insurance plan is characterized by lifetime renewal and early investment in a health insurance plan, allows individuals to be immune from cost-intensive medical emergencies. The premium towards such insurance plans can also be claimed as tax deductible under section 80D of the IT act. At 41% of the total insurance premiums in the country, personal health insurance continues to be an attractive insurance vehicle among individuals and families alike.
Comparison Metrics for Group Health and Personal Health Insurance Policy
Group health insurance and personal health insurance are two distinct insurance plans designed for specific insurance requirements. While group health insurance may be a direct result of employment, availing individual health insurance indicates increasing awareness among policyholders for medical care cost planning and cover. The below sections outline the key differences between the two types of health insurance policies.
- Policy Expenses: Since a group health insurance plan is provided by an employer, it also takes care of the premiums per employee. The professional employer organization which an employer engages with to administer such insurance may include additional policy riders which employees can avail at an extra cost. A personal health insurance premium has to be borne by the policyholder. Any additional covers or benefits availed have to be paid for by the individual himself.
- Policy Coverage Offered: Group health insurance policies are typically meant for employees and may or may not cover their dependents. They may or may not cover pre-existing diseases and maternity costs. Personal health insurance plans offer a range of covers from daycare, pre and post hospitalization and critical illness cover. Individuals can also choose to include their dependents in the cover.
- Flexibility: Group health insurance is automatically availed by being an employee of an organization that provides such insurance as part of employee benefit. Employees continue to be covered under the policy until they are employed with the organization. Personal health insurance plans need to be carefully evaluated for the coverage offered to ensure they do not become a costly substitute for medical care. Such policy terms once fixed, can only be changed during renewal.
- No Claim Benefit: Some benefits are exclusive to a personal health insurance policy. No claim benefit is one such feature that includes a bonus issuance to policyholders in the event of no claim during the policy term. Such bonus may be in the form of a reduced premium at renewal or added covers. Group health insurance plans provided by employers do not have such a feature.
- Medical Checkup Requirements: Some personal health insurance plans require medical tests to determine prospective policy holder’s fitness and determine any pre-existing medical conditions. Group health insurance policies provided by employers may not have any such medical check-up requirements.
- Coverage Activation: Most personal health insurance policies provide claims servicing only after a 30-day period after the policy is purchased. No such restriction exists in a group health insurance policy. Claims can be made from the first day of policy issuance.
- Value-added services: For group health insurance plans, insurance companies generally assign a point of contact for any employee queries, reimbursements and claims processing. Employers also have systems in place along with insurance providers to provide access to free health check-ups, e-consultations and incentivize employee well-being. Personal health insurance may also have these features but in general will not have provisions to ensure a sustained ecosystem to improve policyholder health.
- Customizations: A personal health insurance offers a host of benefits to policyholders and the policy terms can be customized as per the individual’s requirements. Cover for critical illness, consultation expenses and dependents can be availed. A group health insurance generally comes with a fixed premium and policy coverage and terms. However, employers are increasingly offering options to add coverage at the employee’s personal cost.
- Employer-driven v/s employee driven: A general health insurance is typically employer-driven and is a one size fits all policy. Employers are increasingly aware of this and offer employees the flexibility to top-up their health insurance packages with need-based covers. A 35-year-old employee may prefer a critical illness cover for himself, while a 25-year-old employee seeks reimbursement for health-related activities and gadgets. Employees are increasingly considering and offering these options. A personal health insurance policy is inherently driven by the policyholder’s needs.
- Policy term & premium: A group health insurance is only applicable during the period of employment for an employee and his dependents. Since the risk is spread across a pool of employees, these policies are typically characterized by a low premium, generally paid by the employer. A personal health insurance plan, on the other hand, can be availed for life and can be renewed with adequate changes as required. The premiums of such plans generally tend to be higher than group plans.
Health insurance penetration is low with more than half the population still uninsured. Government spending on health accounts to only 3.49% of GDP and health insurance accounts for 5-10% of such spending. Group and personal health insurance plans constitute a majority of health insurance premiums across the country. With increasing digitization in the insurance sector, the administration of health insurance is set to increase. Employers will continue to provide attractive options with traditional group insurance to ensure employee health coverage needs are met. Personal health insurance will also continue to evolve to meet the insurance needs of employees, small business owners, freelancers, and India’s largely rural population. If you have any queries related to group or personal health insurance, get in touch with PlanCover.