Group health insurance is a type of health insurance policy taken by an employer or organization to cover the Medicare costs of their employees and their family members. The group health insurance premium is paid by the employer or organization, which is usually taken care of by the HR or administration of the organization. Group health insurance is offered as a part of employee benefits to the employees working in the organization.
Group health insurance is a tailor-made policy that can be customized as per the needs and requirements of the insured customer. A group health insurance policy provides an option to cover the family members of the insured member mid term subject to certain terms and conditions.
It is advisable to have a group health insurance policy from an insurance broker who can guide you through the nitty-gritty of the policy and it is to be noted that an insurance broker is equally liable for the deficiency in service rendered to their customers whereas other insurance intermediaries are not directly liable.
It is important to understand the factors that decide the premium to be paid under the group health insurance policy before taking the policy:-
1. Number of Lives:
The number of Lives to be covered under the group health insurance policy plays an important role in deciding the Premium to be paid by the customer. The higher the number of Lives, the higher would be the premium to be paid by the customer.
The number of Lives under the group health insurance may include the spouse, children, parents, parents, or any other dependents in addition to the employees working in the organization.
The number of Lives to be covered under the group Health Insurance policy would be decided by the HR or Admin of the employer/organization. The data of lives to be covered under the group health insurance policy should be shared with the insurance broker who in turn shares the same with an insurance company to avail the quote.
The more the number of lives, the more the chance of occurrence of claim in the group health insurance policy. More Lives means an increase in the sum insured under the group health insurance policy.
The group health insurance policy premium depends on the total number of Lives mentioned under the policy.
2. Number of Self:
The number of self in the group health insurance also decides the premium to be paid by the organization. Self are the employees to be covered under the group health insurance policy. Higher the number of self, higher would be the premium to be paid under the group health insurance.
This is due to the increase in the sum insured under the group policy which increases the premium to be paid exponentially. The number of employees covered under the group health insurance policy is considered by the insurance company at the time of quoting for the same.
The number of employees to be covered under the group insurance is decided by the organization. Few companies cover only on-roll employees while few other companies cover off-roll as well as on-roll employees under the group health insurance.
The group health insurance premium can be calculated on per per-person as well as per-family basis. When the premium is being calculated on per family basis then the number of self would make an impact on the overall premium to be paid under the group health insurance policy since the employee is considered as a family and the premium would be higher for the family when compared to a per person basis.
3. Self to Parents Ratio:
The ratio of the number of employees to the number of parents under the group health insurance also decides the premium to be paid by an organization. The least self to parents ratio required by the insurance companies would be 1:1.5 which means for 10 employees there should be at least 15 parents present in the group health insurance policy.
If the ratio is less than the prescribed limit then there would be queries raised by the underwriter of an insurance company.
Less number of parents might mean cherry picking where only the high-risk members are added to the group insurance policy and the other members are left out. There might be genuine reasons such as the parents of the employees are dead and the ratio is less than the required ratio which would be accepted by the insurance companies.
Insurance doesn’t allow cherry picking where only the risk-tolerant people are taking insurance while the risk-averse people are avoiding insurance which leads to high claim ratio. Insurance is a pool where the risk averse and risk tolerant people should be more or less in an equal ratio to balance the claims loss ratio.
If there is a lower self to parents ratio then the insurance company will load the premium of the group health insurance policy due to the anticipation that there would be more number of claims under the policy.
The lower the self-to-parent ratio, the higher the premium to be paid under the group health insurance policy. So it is advisable to maintain the self to parents ratio in any group health insurance policy to reduce the unnecessary loading of premium.
4. Self to Dependents Ratio:
The ratio of the number of self/ employees to the number of dependents is called the self to dependents ratio in the group health insurance policy. Most of the insurance companies require the ratio around 1:2/1:3 which means that for one employee there should be at least 2 or 3 dependents.
If the self to dependents ratio is less than the required limit then there might be loading on the premium to be paid by the organization under the group health insurance policy. The self to dependents ratio impacts the premium to be paid by an organization under the group health insurance policy.
Less Self to dependents ratio might mean that there is anti selection in the group health insurance policy, it might give an impression that only those people who require insurance are covered under the group health insurance policy thereby lowering the ratio.
It is important for the HR/Admin of an organization to maintain the Self to Dependents Ratio so that the loading is avoided in the group health insurance policy.
As the number of self/employees increase in the group health insurance policy so should the dependents ratio without which the overall ratio would get impacted.
5. Sum insured opted:
The sum insured or the coverage opted under the group health insurance policy influences the Premium to be paid by an organization.
Higher sum insured means higher premium, likewise lower sum insured means lower premium.
Most of the insurance companies offer sum insured in the range of ₹50k to ₹10lacs over and above this limit would require special Underwriting guidelines to be followed.
The sum insured under the group health insurance policy varies in the multiples of ₹50k and graded sum insured is allowed, which means that there can be different sum insured slabs for different members covered under the group health insurance policy.
The premium to be paid by an organization depends on the sum insured chosen under the group health insurance policy. A higher sum insured means higher coverage and higher premium to be paid.
It is important for the HR/Admin of an organization to strike a balance between the required sum insured and the premium to be paid.
Normally organizations have different sum insured for different members i.e, front level employees might have the lowest sum insured while the top management is covered under the highest slab. The coverage opted under the group health insurance policy decides the premium to be paid by an organization.
The maximum Liability of an insurance company under the group health insurance policy would be the sum insured mentioned under the policy and sometimes the liability may also be extended to the corporate buffer available under the policy.
Hence it is important for the HR/Admin of an organization to decide the sum insured for their members as per their premium paying capacity.
6. Maternity Coverage:
The maternity section under the group health insurance policy covers the hospitalization expenses of the members due to childbirth or related events.
There would be a seperate sum insured under the group health insurance policy under which maternity is covered. The maternity Coverage opted under the group health insurance policy decides the premium to be paid by an organization.
The maternity covers the normal and cesarean delivery and the sum insured would be different for both. There are different slabs in the maternity section from which the customer can opt as per their requirements and premium paying capacity.
Higher the sum insured, higher would be the premium to be paid under the group health insurance policy.
There are 2 types of Maternity coverage that is available under the group health insurance policy which is mentioned below:-
Maternity cover with waiting period:- In this option the customer can have the maternity cover with 9 months waiting period which means that after addition of a member in the group health insurance policy they need to wait for a period of 9 months before making a claim under the policy.
The premium to be paid under this option would be less than the other option as there is a waiting period which needs to be satisfied before a claim is made.
Maternity cover without waiting period: Under this option the maternity benefit can be claimed from day 1 without the need to wait for 9 months as in the first option.
The insured member can claim under the maternity section immediately after taking the group health insurance policy. Most of the organizations opt this option as their employees would be benefitted from day 1 coverage.
For any member of their spouses to be covered under the group health insurance policy it is important to make additions in the policy immediately after the event i.e, employee joining or marriage.
The HR/ Admin of the organization needs to exercise caution and make timely additions in the group health insurance policy so that the members can claim under the policy hassle-free.
7. Corporate Floater:
The corporate Floater or corporate buffer is the extra sum insured or coverage taken under the group health insurance policy by an organization to compensate the employees requiring higher coverage than their limit due to certain unavoidable circumstances. The right to allocate the corporate Floater vests with the organization.
The organization can provide the floater to the member who is in need of it after the base sum insured is exhausted under the group health insurance policy.
Corporate Floater can be assigned to the members as per the wish of the organization and is therefore priced at a higher level. Opting for corporate Floater under the group health insurance policy can increase the premium drastically.
It is important to note that the corporate buffer cannot be carried forward at the time of renewal. Corporate buffer validity would expire at the end of the policy period.
Hence it is important for the organizations to make a calculative decision before taking the corporate buffer in a group health insurance policy.
Corporate buffer amount should be finalized after taking into consideration factors such as future requirements of employees for extra sum insured, increasing Health care costs etc.
Opting for a corporate buffer can increase the group health insurance premium by at least 20%. Corporate Floater can be even extended to cover certain conditions which are otherwise not covered under the base health insurance policy.
As mentioned earlier, a group health insurance policy is a customized plan which can be designed as per the needs and requirements of the customer. Deviations of certain sorts can be made under the group health insurance policy.
8. Previous year Claim Ratio/ Loss Ratio:
The previous year Claim Ratio or the loss ratio from the previous group health insurance policy and affects the premium to be paid under the group health insurance policy.
For instance if the claim ratio in the previous year is more than 100%, then the minimum premium quoted by insurance companies this year would be more or equal to the claim ratio.
Claim ratio can be defined as the quantum of claims settled to the total premium received under the group health insurance policy. Higher the quantum of claim higher would be the claim loss ratio under the group health insurance.
Organizations with lower loss ratio are considered profitable by the insurance companies and less premium is charged. Companies that have a high claim loss ratio might end up paying more premium as the insurance companies anticipate future claims.
For organizations which have more number of lives it would be difficult to manage the claim loss ratio as the chance of occurrence of hospitalization increases with increase in number of members in the group health insurance policy.
Organizations can advise their members to refrain from making petty claims which affect the overall loss ratio of the organization.
Higher the claim loss ratio in the previous year group health insurance policy, higher would be the premium to be paid at the time of renewal.
9. Nature of the business/insured:
The nature of business of insured also decides the premium to be paid under the group health insurance policy.
There are certain occupations which are considered to be hazardous such as people working in boiler plants, chemical plants etc. are exposed to higher levels of risk compared to a software engineer.
A person employed in hazardous occupation has a higher chance of making a group health insurance claim when compared to a person employed in a desk job.
Insurance companies charge a premium based on the occupation of the customer and the hazardous occupation attracts a high premium. Insurance works on the concept of previous claims data available and forecast for future claims.
There are certain occupations where the insurance companies would avoid altogether such as stunt industry, racing industry etc. where the claim loss ratio would be high.
10. Floater cover/ Non floater cover:
The nature of cover opted by the customer also decides the premium to be paid under the group health insurance policy. Floater sum insured is an option where the entire family of the member can utilize it without any per person restrictions.
Non-floater sum insured is when each individual is given the same sum insured to utilize in case of hospitalization. For example if a member takes ₹5 lacs floater cover for his family, it means that the ₹5 lacs can be utilized by anyone in the family without any limit.
The combined sum insured for the family would be ₹5lacs in the group health insurance policy. Similarly if a member opts for ₹5 lacs mom floater cover, then each member in the family would get ₹5lacs cover which can be utilized as per their requirements.
The premium to be paid by the organization under the floater option would be less when compared to the non floater option as the non floater option increases the overall sum insured under the group health insurance policy.
It is advisable for the HR/Admin of an organization to decide on the floater or non floater cover to reduce the premium under the group health insurance policy.
