A group health insurance policy benefits a group of employees of a company. Everyone in the insured group is eligible for availing the benefits mentioned in the policy document.
The company pays the premium
The responsibility of paying the premium for group health insurance lies on the small business or company. It pays the amount to the insurer on behalf of the employees. There are some instances where the company deducts the premium paid to the insurer through a payroll deduction model. It is very common for the employer to pay the premium for employees and have the employees fund the cost for including their dependents in the policy. It can be either fully funded by the employee or sometimes partly funded by the employer with the balance being paid by the employee. Dependents in the policy can include :
- Dependent Children – Normally restricted up to 2 children. Some insurers can cover up to 4 dependent children.
- Dependent parents
Before buying the insurance, you should be fully aware of the amount.
The frequency of paying the premium is important
It is essential to know the frequency at which the small business should pay the premium amount to the insurer. It is an annual payment in many cases. In some cases, the payment can be done on an installment basis. In general insurers provide up to 3 installments for the employer to pay the premium.
Calculation of insurance premium
The calculation of health group insurance premium is dependent on a wide range of factors. The insurer takes into account all the relevant factors while determining a suitable amount of the premium. The following factors determine the premiums for a Group Health Insurance policy.
- Age distribution
A group policy has a certain number of employees and their dependents. The insurer calculates the age of each employee and the member to be covered in the policy for working out the total premium for the group. Age is one of the most important factors group health insurance companies use to charge the premium.
There are some common health conditions in older age including cataracts, back and neck pain, diabetes, urinary disorders, and heart related diseases. There are very high chances of slip and fall in older people that can lead to injuries.
As people age, they are more likely to experience these conditions more frequently. Therefore, people in the higher age band (example > 45 yrs) are likely to use health insurance benefits more than people who are young ( < 25 yrs).
- Job Category and Industry
It is important to keep in mind that the job category or the occupation also plays a role in the process of calculating the insurance premium.
If the group of employees to be insured are engaged in a job that has low-risk, such as computer programming, then the insurance premiums can be lower. On the other hand, if the job category is under the high-risk segment, such as working in a blast furnace of a steel plant, then there is a rise in the premium amount.
For example, premiums for the same demography (age distribution) vary by occupation and industry. Technology companies looking to cover their employees will pay lower premiums than a group with a high distribution of blue-collar employees.
- Number of people covered
A crucial factor that the insurer takes into account while calculating the insurance premium is the number of people to be covered by the policy. The small business should be very clear about the number of employees to be included in the group.
Insurance is all about risk pooling and with more members in a group, the insurance company will be able to spread the risk better than in a group of less members. Hence, higher the group size, larger the discount offered which ensures the pricing is low.
- Group Type
Group insurance policies classification also plays an important part in determining the premiums. There are broadly two classifications: Non-contributory and Contributory.
Under a non-contributory group insurance policy, the employees or members do not pay any premium to avail the benefits of the policy. In a contributory group insurance policy, the employees or the members of the association have to bear the cost of the premium. It can be either partial or the entire cost of the premium. For instance -the employer may be providing the benefit of the base plan.
Since the participation of employees/members is a dependent variable, the group size may be restrictive in a contributory insurance policy as against Non-contributory insurance. Also the risk of adverse selection is high in contributory type insurance. Hence, premiums for a contributory group policy is priced higher by the insurance companies
- The coverage or sum insured
The coverage limit of the policy also plays a huge role in the calculations. Different policies have various limits as far as the coverage is concerned.
When the sum insured or coverage is lower, the premiums are lower. On the other hand, when the sum insured or coverage of the policy is higher, there is a rise in the insurance premium. The insurer takes a straightforward approach to consider this factor.
- Additional features
There are group health insurance policies that can have a wide range of added features. The features impart more value to the policy. The coverage becomes more extensive and detailed in several ways. Such a factor is vital in the process of calculation. The insurer considers the number of added features while calculating the insurance premium. If the small business decides to waive the waiting periods for pre-existing diseases conditions, and specific diseases the premiums will be higher. Also if outpatient expenses are purchased the premiums tend to be very high.
- Claim history
Claim history is one of the most important factors that is considered by the insurer in calculating the insurance premium amount to be paid by the small business on behalf of its employees. Claim history is simply a record of receiving claims from the insurer.
When the particular number of claims in the previous tenure of the insurance policy is supposedly on the lower side, the premiums will be lower.
Check out the exclusions
It is also very important to check out the exclusions in the policy that are not considered in the calculation of the premium amount. Do not hesitate to ask about the factors that are not considered in the procedure of calculating the insurance premium amount.
Buy a reliable group health insurance policy
PlanCover is a reputed insurance broker that offers a wide range of reliable group health insurance policies to various small businesses. The broker has a good name in the Indian market, fulfilling the specific needs of its clients with a highly professional approach. You can consider buying a good group health insurance policy.