How to Calculate Employee Health Insurance Premium?

Group health insurance premiums are among the key expenditures for employers in India. These premiums provide coverage for the medical needs of employees and their families. Therefore, it's crucial for employers to grasp the mechanics behind premium calculations. This article explores different methods employed to determine group health insurance premiums and any potential exemptions that may apply.

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Parameters to Consider in Premium Calculation of Group Health Insurance

When considering group health insurance as an entrepreneur, it provides a reliable means to cover medical expenses without having to bear them individually. Premiums for group health insurance are determined by factors such as the employee's age, gender, and occupation. Various group plans offer different rates, so selecting the appropriate one for your workforce is crucial prior to procurement.

It's important to thoroughly comprehend your policy before making a purchase, as group insurance policies can undergo frequent revisions. If you seek enhanced coverage, group health insurance serves as an effective means to manage medical treatment expenses.

Here are key parameters to evaluate in group health insurance premium calculations.

  1. Average Age of the Employees

    Age is a significant determinant in group health insurance premium calculations. Typically, employees in their twenties and thirties incur lower insurance costs compared to older individuals. This discrepancy can be attributed to the higher prevalence of health issues and accidents among older age groups.

    Gender also plays a role in premium calculation. In India, women generally receive lower health insurance premiums compared to men. Additionally, geographic location can impact policy costs, with certain areas experiencing higher premiums due to prevalent medical conditions like cancer among residents.

  2. Nature of Job

    The nature of the job plays a vital role in deciding the insurance premium. Some jobs have a huge risk associated, while some are risk-averse. Therefore, the higher the risk associated with the job, the higher the premium will be.

    For example- A group health insurance company will offer low premium rates to insure the employees of the digital marketing agency because it is a desk job. While the premium for the production company will be more as the nature of the job is a floor job and the risk associated is more.

  3. Type of Coverage

    The scope of coverage under a single plan will decide the premium rate. In a group health insurance policy, the policyholder can widen the coverage by adding their immediate family members to their plans. Generally, there are three types of group insurance plans offered by home insurance companies-

    1. E-plan- for employees only,
    2. ESC-plan- for employee + spouse + up to 4 dependent children, and
    3. ESCP-plan- for employee + spouse + up to 4 dependent children + 2 parents

    Hence, the premium for ESC coverage will be lower than the ESCP plan.

  4. Total Sum Insured

    Sum insured means the upper limit amount your group health insurance company can pay in case your employee is hospitalised. The higher the total sum insured, the higher the premium rate charged for it. For an employer, it is advised to choose the correct sum insured and check other related factors like scope of coverage, network hospital, and inclusions of a plan offered by the insurer.

    For example- if there are two plans offered - Plan A (a sum insured up to Rs .3 lakh) and Plan B (a sum insured up to Rs. 6 lakh). Here, the premium for Plan B will be higher than the premium for Plan A because the total sum insured amount is more. However, it is advised to the employers to not purchase an group health plan just because it is cost-effective but to purchase an insurance plan that actually serves value to the employee in case of a medical emergency.

    Let us also tell you the factors you should consider while choosing the right sum insured:

    • Check your coverage to know what's included in each category and decide which benefits matter most to you.
    • Keep your group size below a set limit to reduce premium costs.
    • Premiums for group health insurance are based on factors like age, gender, and health conditions. Riskier members might pay more.
    • Remember, higher premiums don't always mean riskier members are more of a threat to public safety or health goals.
  5. Add-on Covers

    A standard group insurance policy covers hospitalisation expenses and ICU charges. In case you want to enhance the coverage, you can buy add-on covers available with it by paying an additional premium amount. These add-on covers can be dental care, OPD consultations, or dietitian's consultation. Moreover, the premium for any add-on cover you choose varies.

    For example- If an employer increases the coverage by adding the OPD consultation cover and dental care in the basic plan, it will increase the premium rate.

  6. Raised Claim History

    When a company is offering a group health insurance policy for the first time, it will not be covered under this factor. But if it is not their first time, the insurer will consider the previously raised claim history by the insured. In case the number of raised claims is high, the premium amount will also be higher. On the contrary, the insurance provider might offer you a discount if the number of raised claims is low in the past.

    For example- Company X has raised fewer claims during the policy period compared to Company Y, whose claim history is not good. In this situation, the insurer might consider increasing the premium amount for Company Y based on its previous claim records.

  7. Number of Employer-Employees Covered under Group Health Insurance

    The number of employer-employees covered is a crucial aspect of group health insurance, contributing to workplace health and safety. This insurance extends medical coverage to employees, irrespective of their individual health status or existing personal health plans. To ascertain the appropriate level of coverage for your company's workforce, you must initially calculate premiums based on the number of individuals within each classification.

    This calculation aids in determining the coverage that aligns with both your workforce's needs and your budget constraints. Once you've identified the classes requiring coverage and computed premium rates accordingly, it's essential to enroll all affected individuals promptly.

    Group insurance policies can be procured through participating companies or agencies. It's imperative to meticulously compare quotes to secure the most advantageous deal for your business.

Conclusion

An ideal group insurance plan covers the employees and their immediate family members at an affordable premium rate. Moreover, as an employer, you must check the claim-settlement process and customer services of a group health insurance company before buying group insurance from them.

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Written By: PolicyBazaar - Updated: 15 March 2024

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3.8 April 09, 2023
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When it came to selcting the right Group Health Insurance, Policybazaar offered an impressive range of options from reputable insurers. I appreciated the comprehensive details avalable for each policy which helped me to take the better decisions. Thankyou.
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4.3 March 15, 2023
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I recently had the pleasure of securing a Group Health Insurance policy throug PolicyBazaar and I must say the Entire process exceeded my expectations! From start to finish, their service werw great. Thankyou.
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Satya
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Policybazaar's efficient claims process was impressive. In case of any medical emergencies, my employees were able to get their claims settled swiftly, allowing them to focus on their health and recovery without worrying about financial aspects.Thankyou
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4.3 January 22, 2023
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Thankyou PolicyBazaar for providing such a great plan at affordable premium rates. It was a budget-freindly purchase.
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4.3 January 09, 2023
Abhash
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I purchased Group health Insurance which offered me plans with affordable rates Thankyou PB.
Pune