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Group Health Insurance
Group health insurance for large companies can be an essential element of their employee benefits package and would benefit employees tremendously. Such policies cover hospitalization expenses incurred during an accident, illness or disease covered under their policy period – this ensures no surprise bills. Group health insurance premiums may be paid either directly by insured members, their employers or shared equally between both groups. In cases in which all insured members contribute equally, the premium would be divided among employees while acting as policy steward for coordinated activities. Employer contributions alone determine terms and conditions while in cases involving both employer and employee contributions they can be jointly agreed upon by both parties involved. There may be certain distinctions between self-funded group health plans and fully funded group health insurance plans; those interested should inquire further to learn more.
Difference Between Self funded & Fully-funded
|In case of self funded policies, the entire premium or a part of premium would be contributed by the employees. Employer would collect the premium and deposit it with the insurer and act as the guardian of the policy.
|In case of fully funded policies, the entire premium would be contributed by the employer and there would be no contributions made by the employees. Employers would bear the cost of the policy and employees would enjoy the health insurance benefits.
|In case of self funded plans, the employee’s share of the premium would either be deducted from the salary of the employee in installments or the employee would pay it upfront. In general employees would opt for monthly deduction towards the group health insurance premium.
|In case of employer funded group health insurance plans, no premium is deducted from the employee’s accounts. Total premium would be borne by the employer with an option to pay in installments or have a one-time settlement.
|A master policy would be issued in the name of the employer and the insured members would be the employees and or their family members.
|A master policy would be issued in the name of the employer and the employees would be added as the insured members, family members could be added depending on the type of the policy.
|Income tax exemption
|Since a part or entire premium is contributed by the employees, they would be eligible to claim income tax exemption under Section 80D of the income tax act. The income tax exemption would be available only towards the premium paid by the employees and would not be applicable for the premium paid by the employer. In short, employees cannot claim income tax exemption for the premium paid by the employer on their behalf.
|In fully funded plans the entire premium is paid by the employer and therefore the employees would not have any option to claim the income tax benefits as they are not paying the premium towards health insurance cover. Employers can claim income tax exemption towards the group health insurance premiums paid as a part of the employee benefits or the expenditure incurred on the employees.
|Customization of policy
|Group health insurance plans are customizable, but the decision to customize in self-funded plans would usually rest with the employees or their union in concurrence with the management. Employees can decide on the coverage and exclusions under the policy including the sum insured, add-ons, value added services etc. But the decision of the insurance intermediary mostly lies with the employer who would be co-ordinating for any service related issues.
|In fully funded group health insurance plans, the decision to customize the group health insurance plan rests with the employer who is paying the premium. Employers can decide on the terms and conditions of the policy including the addition of parents, family members, sum insured, add-ons etc. Employers would decide on the coverage of the policy and the employees need to accept it without any resistance.
|Inclusion of Parents/Family
|In self funded plans, the decision to include parents or family members rests with the employees who contribute the premium and are the decision makers. Group health insurance plan has to be taken on an individual basis or on a family floater basis, once it is taken it cannot be altered during the policy period. So, the employees can decide whether to include their family members or not.
|In case of fully-funded plans, the decision to include family members including parents would be with the employer who contributes the entire premium. If a plan is taken on an individual basis, then family members cannot be included during the policy period. Family floater plans permit to include family members only during a specified event such as marriage or child birth during the policy period.
|The decision to purchase add-ons rests with the employers working in the organization who would contribute the premium. They can decide on taking add-ons such as maternity benefits, corporate buffers etc.
|In case of fully funded plans the decision to include add-ons rests with the employer who would be contributing the entire premium. Employers would decide on the types of add-ons to be taken as the premium would be paid by the employer. Corporate buffer purchase and allocation would depend on the decision of the employer.
|The decision to renew the group health insurance policy lies with the employees who are contributing the premium. If the employees are not satisfied with the service of the company, they can opt for another insurance company at the time of renewal. The decision to renew the policy can be taken in concurrence with the employer.
|In case of the fully-funded plans, the decision to renew the policy rests with the employer. Employers can decide to renew with the same insurance company or with a different one after considering many factors. Renewal decision would be taken before the expiry of the existing policy to prevent the break-in of the existing group health insurance cover.
|There would be no need to migrate the policy as you are free to renew with the same insurer or with a different insurer.
|The decision to migrate the group health insurance policy lies with the employer in case of fully funded plans. Employers can decide to continue with the same insurer or shift to a new insurer without much hassle in case of group health insurance plans.
|Additions or deletion would be necessitated in case of certain events such as marriage, child birth and death of the insured member. Addition would happen in case of child birth and marriage whereas deletion of members would happen in case of death of the insured members. The additional premium in case of member addition has to be paid by the respective insured member whereas the deletion premium would be paid to the insured member directly.
|In case of employer funded group health insurance plans the decision to add or delete the insured members would be with the employer. Employers can decide to add or delete the members under the policy. The premium for additions of employees would be paid by the employer whereas the refund premium in case of death of the employee would be refunded to the employer. Employers can maintain a cash deposit account with the insurance company to carry out regular additions or deletions.
|No claim bonus
|In case of self funded group health insurance plans, there would be no concept of no claim bonus as the group health insurance plans do not come with any bonus option for no claims reported in the previous year.
|There is no concept of no claim bonus in the employer funded group health insurance plans. One can negotiate the premium at the time of renewal if the claims ratio is good during the previous year.
Are you confused between self-funded and employer-funded group health plans for your organization? Book a call with our health insurance experts so they can perform risk analysis and advise the most suitable plan for employees.