The Indian spirit of enterprise has been celebrated across the world. India is home to the one of the largest Small & Medium Enterprises (SMEs), with an estimated 35 million enterprises, constituting 80% of the total number of industrial enterprises.
Entrepreneurs and Key executives running SMEs compete with larger companies to attract and retain talent are under great pressure to benchmark remuneration and benefits, including Group Health Insurance Benefits.
On the other hand, Health Insurance has become a necessity. With the healthcare inflation skyrocketing, it’s going to become increasingly difficult for employees to take the risk of wiping off their complete savings or worse get into debt for paying the hospital bills. Entrepreneurs can balance the financial risk by benchmarking employee benefits at the same time help encourage financial coverage and prudence.
So how do you go about it?
Insurance is all about pricing the probability of risk. Insurance Companies buy risk by foreseeing a smaller loss (claims) than the premium.
Group policies being less restrictive, the smaller the group the higher the probability of claims, hence smaller groups have more expensive per unit premiums. For example if an Insurance Company covers a group of 10 employees for say Rs.40000 per year, and does not have any waiting period for ailments. Given the high costs of healthcare today, just one accident or hospitalization can wipe out the premium paid.
If in the long term, an enterprise wants to get a good product and service – like any other vendor, it has to ensure that the Insurance Company makes money out of the product/service.
Many large companies are paying the price for ignoring at the viability of the coverage. Premiums for most of the large companies in the last couple of years have grown by close to 50%.
SMEs could also fall in the same trap, and lose long term predictability of their employee benefits costs. Here are some basic level recommendations on the approach one should take when looking for a Group Health Insurance program for employees.
1. Employee size of less than 20.
A Group plan is not recommended for such a firm or organization.
A better way to handle this is to sponsor the personal policies of your employees. Create premium limits like other employee benefits and encourage the employee to buy his, own personal health insurance.
By giving a fixed amount, you are giving flexibility to the employee to get a policy that he needs, at the same time the liability of the enterprise is fixed.
Though a 10% increase in limit is recommended, it still is a more predictable cost than a group plan. The personal policy being owned individually by the employee does not bind him with the organization. It’s more of a welfare tool, than a retention one.
Though it would depend upon company to company, A Limit of Rs.5000 per employee for ground staff and Rs.8000 limit for senior employees should suffice.
The organization should help identify a specialist health insurance firm which can give good advice and service (including claims assistance) to the employees.
Market: Currently no group plans are available for such organizations.
2. Employee size of 21-50
Though Group Mediclaim Plans are available for such enterprises, it is very important to understand the long term impacts and structure them well. Everyone would agree that it is very convenient to launch a new employee benefit program, but, it is very difficult to withdraw or curtail one.
For organizations, where the health insurance plan was not structured well, Health Insurance costs have spiraled by more than 50%
1. Try to attempt, if you can convince the team about sponsoring the purchase of their personal insurance, similar to the less than 20 employees companies. It makes great sense. The point you need to sell is that they own the policy and can carry forward across their entire lives, unlike the group policies offered by large companies, but are not portable to be renewed independently.
2. If point 1 does not work out, structure the plan very carefully. Employ restrictions and exclusions wherever necessary. For example, you shouldn’t provide a pre-existing, parent’s cover or maternity cover under such a small group else, your premiums would rocket every year by a minimum of 30%. Since group plans being tailor-made, employing an expert in this field can help you understand how the structuring can happen, and have a clear tab on your future costs.
Market: Plans available with Apollo Munich, Star, Bharti etc. are available
3. Employee size of 51 to 100
Group Mediclaim Policies could be provided here, but again, these should be structured for the long term. Such policies should not cover parents and maternity benefits. In companies of this size, an intermediary who is an expert in advising a tailor made program as well as more importantly managing claims and their grievances, is pertinent. The HR or Administration department of such companies is generally managed by one or 2 staff. It would be very difficult for such a department to handle enrollments into the program and claim. A specialized health insurance expert, who manages claims, could be ideal.
Market: Plans available with ICICI Lombard, Apollo Munich, Star etc. are available
Other Important tips:
1. Unlike Group Health Insurance which is a benefit, Group Personal Accident is a must for enterprise of every size. Enterprises are at risk of liability financially and morally for any employee who is disabled or loses his life while travelling for work. Thankfully in India, Personal Accident Insurance premiums are the cheapest globally. A Rs. 5 Lakh cover for one employee will cost around Rs. 700 annually.
2. Always, identify a good advisor (preferably an Insurance Broker) with demonstrated experience in Health Insurance Advisory and Health Insurance Claims. As the no. of insurance companies and products increase, there would be more benefits, conditions and procedures – a good consultant would more than pay for his costs.
2. When you are buying a Group Insurance for less than 200 employees, be open for restrictions, which are fair and help containing unnecessary expenditure. For instance, Room Rent Limits applied (Limits on per day costs of Room Rent) are good. It has been observed that employees start taking more luxurious rooms when there is no limit. Few would know that a change in the room increases the cost of all expenses incurred. A Doctor visiting you is charged differentially in different rooms.
3. Remember you can add/delete employees by paying/getting credit of proportionate premium for the remaining year.
4. Keep a tab on the claims, and try to understand them. This will help you understand the economics of Health Insurance better, tailor a better program, and negotiate a better deal next year
Medimanage is the only Dedicated Health Insurance Broker in India. It provides expert advisory, end to end processing and administration of the policy round the year, and professional claims assistance, including cashless claims coordination to Fortune 500 companies and home grown corporate giants since 2005. Know more about Medimanage.
Medimanage, itself being an SME, recently opened up a dedicated cell to provide its services to SMEs. Here's a brief presentation of the services. Group Health Insurance for SMEs
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