Family matters: Be clear if your employer's group health plan covers them

With a pandemic raging, you must buy your own personal health cover for your family to supplement the group cover

Recently there was a news report about a Mumbai-based retiree who was part of a post-retirement group health insurance cover offered by his employer. He was given to understand that his parents were also covered under the policy and he even paid an extra premium for this. His company even reimbursed him for his mother’s treatment sometime after his retirement. But the next time when he asked for reimbursement for his father’s treatment, the company refused to pay and even asked him to refund the money reimbursed for his mother’s treatment, saying parents are not covered by the group cover post-retirement. Thankfully, the South Mumbai District Consumer Disputes Redressal Forum came to the retiree’s rescue. It ruled in his favour and enjoined his employer to compensate him.

Who is covered?

The above story underlines the need for everyone covered by a group health policy to have complete clarity on the coverage offered, especially after retirement. “Most companies offer group health cover to employees only so long as they are working. Only a few in the public sector offer group health cover to their employees after they have retired,” says Mahavir Chopra, founder, Beshak.org, an independent research platform for retail customers.   

Three scenarios are possible after retirement. “The first is that your health insurance cover from the employer ceases. The second is that the health cover does not cease on the day of retirement but continues for the policy period. And the third is your company may have created a group policy for its retired employees which you can then join,” says S Prakash, managing director, Star Health and Allied Insurance. Whether the policy covers your parents after retirement depends on the specific design of each company’s policy, adds Prakash. Get complete clarity from your company’s Human Resource Department on exactly who among your family members is covered.   

During employment, the employer usually pays the premium for the employee, his spouse and children. The policy regarding paying the premium for parents can again vary from one company to another. “Some pay the premium for employees, and their parents. Some may pay the employee’s premium but deduct the parents’ premium from the employee's salary. In some cases, the employer may pay the parents’ premium only in case of its senior personnel,” says Prakash.  

Myriad advantages of a group policy

Despite issues (of the type described in the introduction) arising occasionally, a group health policy is a boon for employees. The entry barrier, for instance, tends to be lower than in a retail policy. “When an individual goes to buy a health policy, the insurer does a health assessment, takes into account his pre-existing diseases and habits and then decides on the premium,” says Subramanyam Brahmajosyula, head-underwriting and reinsurance, SBI General Insurance. In case of a group policy, insurers don’t do any health assessment because they are betting that in a large group the majority of people are likely to be healthy and only a few will make a claim in a given year.

In a retail policy, if the insurer agrees to cover you even though you have a health issue, it will exclude that condition from coverage for two-four years. “The waiting period is normally waived in a group policy,” says Brahmajosyula. People can get coverage even for pre-existing diseases from day one. Such relaxed terms and conditions are especially welcome for older people who tend to have health issues and find it difficult to obtain a retail cover.

In a retail family floater policy, the definition of family may at times be restricted to the employee, spouse, and children. “In a group policy, coverage may be available for parents, in-laws, and sometimes even financially dependent siblings,” says Brahmajosyula. The per-person premium tends to be lower in a group policy than in a retail one.

The retail policy from one insurer tends to have the same features for all customers. “No customisation is possible in a retail policy. But group policies are always customised according to the needs of the group,” says Prawal Kalita, employee health and benefits leader, Mercer Marsh Benefits India.  

Maternity cover and OPD benefit could be available in group policies. Neither of these benefits is available in most retail policies. “The enrolment process tends to be shorter and easier in a group policy,” says Prasun Sikdar, managing director and chief executive officer, ManipalCigna Health insurance. Chopra adds that since exclusions are fewer, the cashless experience tends to be smoother in a group policy.

Drawbacks and limitations

The biggest shortcoming of this cover is that you don’t have it once you cease to be a member of the group. This can pose a problem for people who are starting their own business, or joining a small company that does not offer a group cover, and have not yet purchased a cover of their own. If they are above the age of 45, they will have to undergo a health checkup and may experience difficulty in buying a retail policy.

The sum insured of group policies also tends to be inadequate. Most organisations don’t provide a cover exceeding Rs 2-5 lakh.

In retail policies, the premium tends to be revised every three-five years. In group policies, the premium is re-negotiated every year at the time of renewal. Imagine a scenario where there have been a large number of claims. The insurer may hike next year’s premium by 50 per cent. But the organisation may have a budgetary constraint and may be prepared to pay only 10 per cent more. “In such a scenario, the benefits of the group policy could get curtailed,” says Chopra.       

You need to have minimum seven members to buy a group health policy. Remember that you cannot form a group with the sole objective of buying a group policy. “The group members must be associated with each other in some way. For instance, they could all be working for the same organisation, or may have taken a loan from the same bank,” says Sikdar.

Exercise the portability option  

According to the Centre for Monitoring Indian Economy, about 21 million salaried employees had lost their jobs by the end of August due to the ongoing Covid crisis. This number includes white-collar employees and industrial workers. Along with employment, many of them would also have lost the group health cover provided by their employers. If they have not purchased a personal cover for their family and themselves, they will leave themselves vulnerable to a major financial risk.  

One way out for them is to take advantage of the insurance regulator’s porting norms. At the time of leaving an organisation, a person can port his policy from a group to an individual cover with the same insurer. “With porting you get continuity benefits. Suppose the retail policy has a waiting period of four years for pre-existing disease. If you have already spent three years in the group policy, then you will only have to serve a waiting period of one year for coverage of pre-existing disease in the individual policy,” says Kalita. A request for portability has to be made at least 30 days prior to the last date of employment.

However, portability requests don’t always go through smoothly. “Insurers may ask for medical tests. I have witnessed cases where because of a health declaration, the insurer has declined the portability request,” warns Chopra.       

A personal cover is a must    

Due to the reasons explained above, you cannot depend on your group health insurance policy alone. You must buy a personal cover. “Start with a small sum insured of Rs 2-3 lakh as soon as you start working and enhance it gradually. By the time you are 40, you must have a cover of Rs 15 lakh per adult in the family,” says Chopra.  So, if your family consists of two adults and two children, you must have a sum insured of at least Rs 30 lakh on your family floater cover.   
 

An individual policy offers you lifelong protection. “So long as you keep paying the premium, the insurer cannot deny renewal of your policy,” says Sikdar.   

Pros of a group health cover
 

No health assessment at the time of entry

Pre-existing diseases covered from day one

Parents, in-laws and dependent siblings can be included in the cover

Onboarding is easier

Cons of a group health policy

Cover ends the moment you quit the organisation

Sum insured may be inadequate

Benefits could get curtailed due to the organisation’s budgetary constraints