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Why you cannot rely on Group Health Cover provided by your Employer?

Health Insurance Policy Family Floater Health Insurance Portability Tips to reduce health insurance premium


Most salaried professionals are content with the group health cover provided by their employers. They think that, in case of an unfortunate hospitalization, medical expenses will be covered by the group health cover. False sense of comfort. In this post, I will list out some of the reasons why you cannot rely solely on your employer group health insurance plan.

You have little control over the coverage amount

It is your employer’s discretion. Your employer may settle for Rs 3 lacs or Rs 5 lacs. A health cover of Rs 3 lacs may be fine for a 25 year old. However, the same amount is grossly inadequate for a family of four. You cannot change the coverage amount depending upon your requirements or to account for medical inflation. And this is not it. Consider this case. Your existing employer offers a cover of Rs 5 lacs. You change jobs and your new employer offers a cover of only Rs 3 lacs. What do you do? Your insurance requirement has not gone down due to change of job. You have no control over the coverage amount.

You are without a health cover in case of job switch or job loss

Group health cover is active only so long as you are with employer. In case of job loss or in the event you take an entrepreneurial route, you will be left without cover. In case of a job change, there may be a time gap between leaving old job and joining the new one. You are without health cover in the interim period. A prolonged hospitalization during such period can seriously deplete your finances.

Difficult to buy fresh health cover after retirement

After retirement, it may become prohibitively expensive to purchase a fresh cover or the insurer can even decline to cover you. This is because by such time, you are likely to have contracted an illness that will increase the risk of payout for the insurance company (and hence a high premium).

It is an expense to your employer

To cut costs, the company may choose a plan with co-payment or room-rent sub-limit. To save on costs of rising premium, your employer may curtail benefits. Health insurance premium is an expense to your employer. Please understand the health insurance is not an obligation on part of your employer. It is just another perk. Your employer may even choose to withdraw it altogether.

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Most of us don’t know the extent of coverage

Do you know the exact terms and conditions of the group health cover? Have you read the group health insurance policy?

I worked with three different employers in the past. I never cared to go through the policy document (or the terms and conditions). Not something I should brag about. A big mistake on my part. And that is the problem with most of us. Most of us are not even aware of the extent of coverage. Are there any sub-limits? Are there any caps on treatment costs? We don’t know.  Don’t you find it surprising? You have no idea about the nature of coverage and still you sit relaxed that the group health plan will take care of your hospitalization expenses.

A few months back, a friend’s son had to be hospitalized for appendicitis. The total ran up to Rs 65,000. However, the insurance company (group health insurance) covered only Rs 20,000 since they had specific sub-limit for that operation. He was caught unawares and had to pay from his pocket. So, do contact Human Resources department in your company and request them to share insurance details with you. At the least, you must know what your employer cover offers.

Point to note: Migration from Group Health Insurance Plans to Personal Health Plans

As per IRDA Health Insurance Regulations, 2016, you have the RIGHT (not sure) to migrate from a group plan to a regular plan (individual or family floater) with the SAME insurer. In such a case, you will get continuity benefits too (waiting period). It is irrespective of whether the group plan had any pre-existing waiting period or not. You will get credit for years of continuous coverage.

Under portability cases (change of insurer), the new insurer can reject your application. The new insurer does fresh underwriting and can decline coverage based on outcome of underwriting exercise.

Even if you are staying with the SAME insurer, I believe the insurer can still reject your migration application (if your application does not meet the underwriting guidelines of the NEW plan). So, technically, you can port from your employer group health plan to a personal plan with the SAME insurer  (but I am not sure if it is your right). The insurance company enjoys a lot of discretion.

You can do this at the time of retirement too. However, please note even if the insurer does not decline your migration application, it can still load up the premium based on your erstwhile health condition. This is because migration is considered a fresh application and the insurance company will reassess its underwriting risk and charge premium accordingly.

On the other hand, if you had purchased a personal plan at a young age (or before contracting such illnesses), the insurance company cannot increase the premium based on your claim history. This is because claims based loading is not allowed as per IRDA Health Insurance Regulations.

Personally, I feel health insurance portability is a charade by the insurance companies and an ever compliant regulator. Health insurance portability, in reality, is only for young and healthy. Don’t rely on it.

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There is no denying employer health insurance plans has its benefits. However, there are certain limitations too which can leave a gap in your insurance portfolio.

You do not control the coverage amount of your employer group health insurance plan. You have no control either over the features (extent of coverage) by your employer health plan. Additionally, you can be left without cover in case of job loss or job change. Transition to a personal plan at the time of retirement may not be a simple affair either. There can be a potential premium shock. For these reasons, you cannot rely solely on your employer health insurance cover.

It is a good idea to complement it with a personal health cover. Purchase a personal health insurance plan (regular). Read this post if you are not sure whether you should pick up a family floater plan or individual plans. If you cannot afford the premium of regular health insurance plans, consider super top-up health insurance plans.

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2 thoughts on “Why you cannot rely on Group Health Cover provided by your Employer?”

  1. Dear Deepesh,

    I am 23 years old. I have been having an individual health insurance for the past 4 years. I just got my first job and I am covered under the group insurance. Should discontinue my personal insurance? The sum insured in my personal plan is than that in the group plan.

    1. Dear Aravind,
      I would suggest you continue with your personal health insurance.
      In this post, I have highlighted many reasons why your group health cover may not be enough.

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