10 Reasons Why Group Health Insurance is a Game-Changer for Small Businesses


10 Reasons Why Group Health Insurance is a Game-Changer for Small Businesses

Group health insurance provides health insurance coverage for all the members insured under a single policy. The employer generally pays the premium for Group health insurance

Small-scale businesses form the foundation of our economy because they offer local jobs, thus contributing to our local economies. Of late, there has been a renewed thrust towards developing small businesses as these can potentially develop the economy. Small businesses have very few employees and work together as a family, sharing the work in the organisation. At times, it is difficult for small business owners to retain their employees as the wages are not at par with big businesses, and the only thing that keeps the employees from quitting is the family feeling. It therefore becomes all the more important for the head of the family (Owner) to take a health insurance policy for the family members (employees) and ensure that adequate medicare coverage is given to them to help them face unforeseen circumstances as a result of accident, illness or disease-related hospitalisation.

Here’s a list of 10 reasons why group health insurance could be the game changer if you own a small or medium business –

One Policy for all:

The major advantage of group health insurance for small businesses is that it provides one policy for all employees instead of individual policies for each employee. This allows employers to manage any health coverage provided to employees. It also reduces the administrative problems that can result due to different policies. Employers have higher control of the employees’ healthcare, which could be extremely critical because most employees working with SMEs struggle with financial literacy. Group insurance plans do not have the requirement for waiting periods which are otherwise applicable in individual health insurance plans. One group insurance policy can be customised per the employer’s needs and requirements. In contrast, individual health insurance plans cannot be tailored to the needs of the employees. Under one policy in group health insurance, the family members of the employees can also be covered, thereby extending the health insurance coverage to the immediate family members.

Boosts Morale:

A group health insurance policy is a great morale booster. Employees can concentrate on their work without worrying about how to take care of their medical expenses, if and when need be. Group health insurance is a game-changer for small businesses as employee productivity has improved considerably when they don’t have to bother about medical issues. Research has also confirmed the direct correlation between employee benefits and employee retention.

Tax Benefits:

Most Did you know that you could claim tax exemption on the premium you beat for the group health policies for your employees? That is correct. This classifies as a business expense and is therefore tax-exempt. In addition, if an employee bears a premium towards their group health insurance, they can also claim income tax benefits under Section 80D of the Income tax act.

Low Premiums:

The other game changer for small businesses is that they could get higher coverage at low premiums. Group health insurance plans are affordable to employers as they have lower administrative costs for insurers. The lower premiums of group health insurance policies can also be attributed to the bulk premium received by the insurance companies. Moreover, you can bargain for lower premiums if you insure your other assets, like your machinery and plants.

Low premiums also depend on the previous year’s claim ratio of the group. Another reason for low premiums is that the group health insurance plans are not binding on the employer. If you do not like the services of an insurer, you can switch your policy at the time of renewal. This keeps the insurance companies on their toes and thereby reduces the premium to a great extent. For example, if we consider a male aged 25 years who wants to take health insurance coverage for Rs.5 Lakhs, he needs to shell out at least Rs. 7000/- under Individual health insurance plans, whereas he would be charged around Rs. 4000-6000/- under group health insurance plans. In addition to the low premiums, group health insurance plans offer various other benefits such as no waiting periods, copayment, sub-limits, etc.

Also Read: The Importance of Personal Health Insurance: A Guide for Young Persons


The other advantage of group health insurance is that they offer customisation for their customers. Small businesses wishing to take group health insurance plans can customise the plans as per their needs and requirements. If you want a copayment to reduce the premium outgo, it is possible under the group health insurance plans. One can not only add add-ons as per their requirements but can also delete covers not suitable to them. Group health insurance is a plan where one can choose whatever they want and build it. Unlike individual health insurance plans, which are prepacked and difficult to customise, group health insurance plans provide customers with a platform to tailor their policies. Group health insurance plans are underwritten based on their merits, so one can choose any available coverage, making the policy effective. For example, you might want to have ₹2000 as a daily hospitalisation cash benefit and a copayment of 10%, it would be possible in the case of group health insurance plans and the premium would be charged accordingly. It is in the hands of the customer to decide on the coverage required. The customisation option is available only in group health insurance as many members are covered under it, and it would be impossible to have fixed options for everyone.

Various Sum Insured Options:

The other game-changing element for small businesses in group health insurance has multiple sum-insured options. For example, the employer can decide on a higher sum insured for executives, the next for middle management, and the lowest for entry-level employees. Alternatively, the employer can have a single sum insured across all employment levels. In addition, the sum insured can be taken on an individual and floater basis. In individual sum insured, each member of the group health insurance plan would get a different sum insured or the same sum insured, which can be utilised only by them, whereas in the case of family floater sum insured, one sum insured would be assigned to the entire family and anyone can use it without any restrictions. Various sum-insured options are provided so employees can opt for their desired sum insured. It is important to remember there is only one choice that can be picked for the employee, i.e. the sum insured by an individual or family floating sum insured.

Easy Premium Payment Options:

Group health insurance plans can be expensive. Insurance companies, therefore, offer the option of instalments in premium payments. India’s insurance regulation and development authorities have developed an instalment option for premium group health insurance payments. The insured can choose the frequency of premium payments and pay accordingly. The easy premium payment option allows small businesses to contribute the premium amount periodically. There could be a small business where the employees share the premium amount for the group health insurance coverage, and the premium is paid after collecting the amount from all the participating employees. In such cases, the instalment premium paying options helps both the small business owners as well as the employees who can pay the premium amount in instalments.

Shifts Employer Liability:

If an employee is injured in the workplace, the responsibility for his care falls with the employer. If the employer does not have an insurance policy, then the employer should pay financial compensation to the employee in case of any injury. A group health policy shifts this liability to the Insurer. The other advantage of group health insurance is that the employee need not worry about the repayment of healthcare expenses as the health expenses up to the sum insured would be borne by the group health insurance plan. Employees can claim the hospitalisation expenses up to the sum insured available under the policy.

No Waiting Periods:

The other advantage of group health insurance is that there are no waiting periods under it. It means that employees can claim hospitalisation from day 1. No waiting periods mean that employees with existing health conditions can also get treatment without delay. The only health insurance that pays for pre-existing conditions from day 1 is the group health insurance policy. It increases the retention rate of employees who have pre-existing conditions. Employees or their family members with pre-existing conditions can benefit from group health insurance plans. No waiting periods mean that employees can continue their existing treatments under the group health insurance policy without worrying about healthcare expenses.

Preventive Healthcare Benefits:

The other advantage of group health insurance for small businesses is that the policy provides preventive healthcare benefits for its members. Preventive healthcare benefits such as wellness benefits, health checkups, etc. It could play an important role in identifying illnesses or conditions in the early stages, thereby preventing the last stage of hospitalisation. Employees can take preventive measures if they find something inappropriate with their bodies. Such detection in the early stages can be a gift of life. Preventive Health checks can also reduce employee sickness and absenteeism.

For more information on small business group health insurance, please book a call with our health insurance experts at Ethika insurance broking.

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Management.