Difference between Group Insurance and Employee State Insurance

How ESI Operates

Registration

Entities, including factories and establishments, seeking to offer ESI benefits must undergo registration under the ESI Act. This can be completed through the online portal www.esic.in. Registration necessitates the submission of organizational and employee details, PAN information, state of operation, and more. Compliance with registration is obligatory, as stipulated in Section 2A of the ESI Act, to access ESI benefits.

Contribution

The ESI program is funded through contributions from both employers and employees, which are based on a fixed percentage of their monthly wages. Employers contribute 3.25%, while employees contribute 0.75% of their wages. Additionally, State Governments bear 1/8th of the cost of Medical Benefits.

Employers enjoy an exemption from paying their share for employees with disabilities, fostering increased employment opportunities for individuals with disabilities.

Benefits under ESI

Benefits Provided by ESI Act Employees and their dependents receive a "pehchan card," serving as an identity card to facilitate verification and access to benefits and treatment at network hospitals. ESI offers a wide array of benefits to employees and their dependents, some of which are highlighted below:

• Medical Benefit: Commences from the first day of insurable employment, providing comprehensive medical coverage and clinical investigations.
• Sickness Benefit under ESI Act: Accessible after contributing for at least 78 days, it offers 70% of the average daily wages when employees are absent from work due to sickness.
• Temporary and Permanent Disablement: Available from day one, this benefit provides 90% of daily wages based on the loss of earning capacity.
• Maternity Benefits under ESI Act: Requires a minimum contribution of 70 days of wages, granting 100% of the average daily wages for up to 26 weeks for two children.
• Retirement: Retired employees can continue receiving benefits by paying an annual fee of Rs 120, which covers both themselves and their spouse.

What is Group Insurance?

Group insurance refers to insurance coverage purchased collectively by employers or associations for their employees or members. It encompasses various types of insurance, such as group health insurance, group personal accident insurance, group term life insurance, group travel insurance, and more. Employers typically acquire these insurance policies from insurance companies. The extent of coverage within a group insurance policy depends on the specific policy chosen by the employer.

It's important to note that the insurance industry, including group insurance, is subject to regulation by the Insurance Regulatory and Development Authority of India (IRDAI).

Purchasing a Policy

Employers have the flexibility to outline their insurance needs and acquire a policy tailored to those requirements. They can determine the sum insured and the specific coverage elements, which may encompass maternity, dental, vision, and more. Based on these specifications, the insurer will provide an annual premium amount, payable by the employer to secure coverage for a one-year policy term. 

The organization can choose whether to bear the full premium cost or allocate a portion of it to employees, known as a copayment. In health insurance, copayment involves the employer and employees sharing either equal or varying percentages of the premium.

Advantages of Group Health Insurance

Under a group health insurance policy, employees receive a health insurance ID card bearing a unique policy number, which they can utilize to access healthcare services in hospitals. For instance, if the sum insured is 5 Lakhs, the employee can avail medical expenses coverage up to 5 Lakhs, including cashless and reimbursement options. However, the extent of coverage, inclusions, and exclusions varies among policies and is determined during the underwriting process.

• Coverage for Pre-Existing Conditions: Group health insurance policies encompass pre-existing diseases, meaning that medical expenses related to conditions employees already have before obtaining coverage from the organization are included in the policy.
• No Waiting Period: Group health insurance policies typically impose no waiting period.
• Comprehensive Hospitalization Coverage: All hospitalization expenses, including those associated with conditions like Covid-19, are covered. This coverage extends to both pre-hospitalization and post-hospitalization expenses.

ESI vs. Group Insurance: A Comparative Perspective

While both Employee State Insurance (ESI) and Group Health Insurance (GHI) share the common goal of providing healthcare coverage, they operate on distinct principles. Comparing and declaring one as superior to the other is not straightforward, as each has its unique advantages and disadvantages, both from the employer's and employee's perspectives.

Conclusion

The choice between ESI and Group Health Insurance depends on the specific needs and circumstances of both employers and employees. Each option offers its own set of advantages and drawbacks, making it essential for organizations to carefully evaluate their requirements and priorities before making a decision. Ultimately, the goal is to provide effective healthcare coverage that meets the diverse needs of the workforce.