The Impact of Group Health Insurance on Employee Wellness and Productivity


The Impact of Group Health Insurance on Employee Wellness and Productivity

Group health insurance increases employee wellness and productivity to a certain extent while keeping the other factors constant. Employee productivity cannot be measured directly as it involves many factors contributing to an employee’s productivity. These factors could be organizational culture, perks and salary benefits, job role, team cohesion, reporting supervisor, and employee benefits such as retirement, insurance etc. Employee wellness would also depend on several factors, such as the health and well-being of the employee, the health and well-being of the colleagues in the organization etc. Group health insurance can impact the wellness and productivity of the employees working in an organization. There are instances where the employee attrition rate has been reduced due to the insurance benefits offered by the insurance company.

Here are the Impacts of Group Health Insurance Policy on Employee Wellness and Productivity;-

Reduces Absenteeism

The major impact of group health insurance policy is that it reduces the absenteeism of the employees. Absenteeism is a counterproductive work behavior where an employee marks absence frequently and skips the office. Frequent absence of an employee without any valid reason would hinder the organization’s work as the employees need to work in cohesion. Absenteeism will happen if the employees are unsatisfied with the organization. For example, let us assume that one of your employees was not satisfied with the group health insurance coverage offered by you. Then, they would look for new opportunities to avail of group health insurance coverage and engage in absenteeism, leading to decreased productivity. This behavior of employees would also hamper the employee wellness benefits offered by the organization as employees would be looking for better opportunities elsewhere.

Absenteeism is related to production deviance, viewed as minor and organizationally directed in the counterproductive work behavior graph. Absenteeism is not intrinsic behavior; unlike political deviance, it arises from external factors such as deficiency in group health insurance services offered by the organization. Absenteeism can be reduced by identifying the individual reasons behind it, such as the efficient group health insurance plan and addressing the issue on a war footing basis.

Increases Confidence

The other impact of group health insurance on employee wellness and productivity is the increase in confidence among the employees working in an organization. A good group health insurance plan can increase the confidence of the employees working in an organization. Employees would be confident that the group health insurance policy would cover their hospitalization expenses up to the sum insured limit, reducing the stress on the employees to take a health insurance plan beyond their affordability. Employees would even be more confident if the group health insurance plan would cover their parents and provide other benefits such as maternity coverage. The increase in confidence of the employees can be seen in the increased productivity of the employees as well as the employee wellness. Happy employees, in turn, would increase the productivity of the organization to a certain extent, and this would, in turn, reduce employee attrition.

The confidence is built by various factors among the employees, and group health insurance is one among them. Having an active and decent group health insurance plan with coverage for parents, maternity coverage etc., would increase the employee’s confidence, leading to increased productivity at the workplace.

Reduces Employee’s Fear

The other impact of the group health insurance plan is that it reduces the employee’s fear of financial impact in case of hospitalization. Employees could be in fear, thinking of the consequences that could arise out of the hospitalization without a proper group health insurance plan. If a group health insurance plan is in place, it would reduce the employee’s fear of financial loss in case of hospitalization due to an illness or accident. Employee fear would be high in industries classified as dangerous or have high chances of accidents resulting in hospitalization of employees. Chemical industries, the Mining industry, the Petroleum industry etc., have a high chance of accidents happening and employees in these organizations would fear for their lives and medical expenses that could arise from an accident leading to hospitalization. If the organizations can provide a proper health insurance plan for the employees, the fear could be reduced to a certain extent.

Also, employees’ fear depends on various factors such as the level of dangerous work, chances of accidents occurring etc. and the aftermath fear of an accident can be reduced with a good group health insurance plan. For employees working in hazardous industries it is necessary to have a high health insurance coverage. Since it is costly to take a high-sum insured group health insurance coverage for all the employees working in these hazardous industries, employers often prefer a super top-up group health insurance plan in addition to the basic group health insurance plan. The super top-up health insurance plan acts as a shock absorber by absorbing the exorbitant claim amount in case of abnormal hospitalizations.

Reduced CWB

The other impact of the group health insurance plan is that it reduces the counterproductive work behavior of the employees. It reduces the CWB by preventing the employees from engaging in other activities during office hours. CWB includes browsing, applying for new jobs, usage of electronic gadgets etc. Employees who think that their group health insurance policy is ineffective might engage in counterproductive work behavior throughout their service in an organization. To prevent the employees from engaging in CWB, it is important to have a well-designed group health insurance policy. Employees can sometimes engage in theft, sabotage and vandalism, a serious concern directed at the organization resulting in its damage due to the CWB. Group health insurance is seen as an important factor in developed countries due to the high Medicare expenses in those countries, and employees prefer to work with organizations that provide them with adequate group health insurance cover.

Increased Productivity

The most required impact of the group health insurance for an organization is the increased productivity of the employees which could contribute to the increased productivity of the employees. Productivity can be measured directly by the increase in revenue contributed per employee which in turn adds to the overall increase in revenue of the organization. Employee productivity would increase and add to the organization’s overall productivity. For example, if the employees are satisfied with the organizational culture, employee benefits and job role they would indulge less in CWB leading to increased productivity. The increase in employees’ productivity would snowball into the whole team’s productivity increases, leading to the overall productivity increase of the organization.

Why is Employee Wellness and Productivity Important?

Employee wellness and productivity are important parameters when considering the growth of an organization. If an organization needs to grow, it should have the resources to ensure employee wellness and productivity are increasing. Employee productivity is directly related to organizational growth. Employee productivity can be measured through various factors such as the revenue per employee etc. which have a direct impact on the productivity of the organization. To increase the productivity of the employees, organizations should make sure that they satisfy the requirements of the employees. There are manageable resources such as employee benefits including group health insurance and unmanageable resources such as organizational culture, job role etc. Employers should handle the manageable things immediately to ensure employees maintain their productivity and reduce engagement in CWB.

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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.