What small business owners need to know about health insurance plans

Most employees expect their employers to provide health insurance policies. For employers, providing health insurance brings good employer reputation, helps attract and retain talent, and keeps employees financially secured against health emergencies. For employees, they build more loyalty and trust towards their employers and experience a sense of wellbeing.

Health insurance for businesses is a win-win for both parties. However, it is easier for corporate companies to provide health insurance to employees. Small businesses may find it a little difficult. But it’s not as complex as most small business owners assume. 

Are you a small business owner? Are you looking to provide health insurance to your employees? You’re at the right place. We’ll help you with all the information you need to know about health insurance plans for your business.

What is group health insurance?

Group health insurance is insurance purchased by a business to provide healthcare coverage to a group of its employees. Here, the company, not the employee, pays the premium and the employee receives the coverage. In a number of cases, the employee’s family, too, is protected under the same policy. In group insurance, there’s more than meets the eye. 

Benefits of group health insurance for employers

Helps attract talent

Believe it or not, health insurance is top on the list of benefits that professionals look for when making job decisions. The recruitment industry has seen a growing trend of small businesses providing key benefits to employees in order to attract and retain talent. After all, a good workforce is the key to the success of any business. 

Helps retain good employees

When organizations give reasons for employees to stay with them, employees stay. The cost of hiring, onboarding and training a new employee is exceptionally high for businesses. Employers can avoid these recurring costs if they can incentivize employees to stay with them longer. One way to do so is by providing perks such as health insurance, which otherwise would be a huge expenditure for employees.

Tax benefits to employers

Group health insurance provides tax deduction benefits to employers under Section 80D of the Income Tax Act. 

Motivated employees

Job satisfaction and motivation are key in today’s work environment. By having health insurance sorted for them, employers take away a huge financial burden from the shoulders of their employees. Employees consider health insurance as an added benefit, which indirectly plays a huge role in keeping employees motivated, which in turn has a positive effect on their work performance and the company success. 

Should small business owners buy health insurance for employees?

The answer to this is quite simply, yes, small business owners must buy health insurance for their employees. But, there are a lot of things to be considered for buying group health insurance. Employers should ensure that their employees can gain the maximum benefits from the health insurance provided by them. How do you do so? Let’s find out.

Key points to consider when buying group health insurance for employees

Provide adequate sum insured

Medical inflation and expenditure are on the rise. Combined with the increasing incidence of lifestyle, profession-related and vector-borne diseases, healthcare can be a serious setback for workers. Hence, for businesses, it is important to provide adequate sum insured. 

A sum insured of Rs 1 lakh or Rs 2 lakh is as good as nothing. E.g. the average cost of COVID-19 hospitalization in urban centres is approximately Rs 4 lakh to 5 lakh.

Pro tip: do a healthcare market analysis, calculate the average cost and then decide the sum insured. You could even involve employees in taking this decision and understand their healthcare needs.

Make sure the employees’ family is covered, too

Many group health insurance plans provided by businesses extend coverage to the family members of the employees – spouse and children. Some even include the parents of the employees. 

If any of the employees’ family members are not included in the health insurance plan, it becomes a financial burden for the employee. Group health insurance has the facility to cover more family members at an affordable cost, and employers should make use of this feature.

Keep out-of-pocket expenses of employees low

Many group health insurance plans might have clauses such as sub-limit and deductibles. This means the employees would have to pay a part of the expenses incurred from their own pockets. This can prove to be a huge financial worry for them. At times, if they may not be aware of such clauses, it may come as a shock to them.

Ensure that the group health policy does not have features such as co-payment, sub-limits and caps on expenses. If it is not possible to completely avoid these clauses, depending on the health insurance company chosen, ensure that these clauses and the amounts are aligned with the average costs of hospitalization in the city where your employees work. E.g. the per day room rent in a good private hospital in cities like Mumbai or Bangalore would be at least Rs 4000, whereas the same could be lesser in a tier-two city, around Rs 2000.

Provide health insurance from day 1 of them joining the company

Many companies start the health insurance plan process only a few months into a new employee’s time at the organization. But health emergencies can knock on anyone’s door at any time. Besides, there may be a waiting period in the group health policy chosen by you.

To avoid any complex situations and to make the employee feel like a part of the organization from day 1, make sure they are covered from the day that they join the office.

Make them co-owners of the health insurance policy

The key to a good health insurance plan is that it should sufficiently cover the policyholder. Moreover, it should be comprehensive enough to provide overall healthcare security to different employees. Otherwise it is pointless.

Small business owners may find it difficult to pay high premiums for comprehensive health insurance plans. The solution – make your employees co-owners of the health insurance. What does this mean? It means the employees would pay a part of the premium from their salaries. This way, they can have a better health insurance plan for them, and employers would be able to provide sufficient coverage.

If you’re the owner of a small business and planning on purchasing health insurance for your employees, you’ve made a good decision. To ensure the best purchase and to choose the best group health insurance plans, get started by reaching out to IIFL.