A group medical insurance policy covers the members of a group under a single policy. Groups that are eligible to buy a group health insurance policy for their members include employer-employees, trade unions, and their members, clubs and their members, and banks and their account holders. New members are added to the group coverage either mid-way during the term of the policy or when the policy is up for renewal.
Key Takeaways
Administrative Centralization: Regardless of who ultimately “bears” the cost, the insurance company always collects the premium as a single lump sum from the group administrator. This simplifies the insurer’s accounting and keeps group rates low.
The “Master Policy” Concept: Individual members do not hold separate policies. Instead, they are beneficiaries under one master contract, which ensures uniform benefits and streamlined claim processes across the group.
Employer-Led Sponsorship: In the corporate world, Method 1 (Employer pays all) is the most common “perk,” used primarily for talent attraction and as a tax-deductible business expense for the firm.
Customizable Cost-Sharing: Hybrid models are highly effective for startups. For instance, a company might provide free cover for the employee but allow the employee to add their parents by paying the additional premium through a monthly salary deduction.
Bank/Club Facilitation: For non-employer groups like banks, the institution acts as a facilitator, deducting premiums from account holders to provide them with high-value insurance products at discounted bulk rates.
Arriving at a premium
The insurance company determines the policy’s sum insured. It underwrites the health risk of the members being covered to arrive at the allowable sum insured. Then, it calculates the premium rates for the group medical insurance policy based on the sum insured and other factors.
Paying Premiums for Group Mediclaim Insurance
Method 1: Head of the group pays the premium
In this case, members do not have to pay the premium. They enjoy free coverage. For instance, in an employer-employee corporate health insurance plan, the employer may pay the premium and the employees would enjoy group insurance coverage. Similarly, clubs or trade unions can use the group expense account to pay premiums and the members would enjoy free coverage. A bank can pay for and buy a group mediclaim policy giving its account holders free coverage.
Method 2: Group members pay a premium
In this case, every member of the group pays their own premium. Then, the group pools member contributions to pay the premium as a lump sum. For instance, in employer-employee groups, employers can deduct premiums before crediting salaries to employees. Similarly, in trade unions or clubs, members might pay their individual premiums. Banks usually deduct respective premiums from their customers’ accounts and pay the insurance company.
Method 3: Sharing premium costs
The group head and its members can share the premium in a pre-defined ratio. So, the group head would pay a part of the premium and the members the remaining. The group can fix the premium-paying ratio according to its capacity. This method of premium payment is affordable both for the group and its members.
Method 4: Other arrangements
Further, a common arrangement that companies have is that they pay for their employees’ insurance but employees pay their family’s costs. Or, the company may pay for employees’ families but recover premiums for insured parents from the employees.
Regardless of the premium payment method a group chooses, the group health insurance policy would remain unchanged. The insurance company is not concerned with how the premium is paid. It collects the premium from the group and issues a master medical insurance policy covering the members.
Summary Table: Premium Payment Models
| Payment Method | Responsibility | Benefit to Member |
| Sponsor Funded | Head of group (Employer/Union) pays 100%. | Free Coverage: No salary deductions or out-of-pocket costs. |
| Member Funded | Each member pays their specific premium. | Access: Members get “wholesale” group rates they couldn’t get individually. |
| Cost-Sharing | Defined ratio (e.g., 80% Employer / 20% Employee). | Affordability: Shared burden makes high coverage accessible. |
| Hybrid/Tiered | Employer covers employee; Employee covers family. | Flexibility: Base security is free; extended security is optional. |
| Lump Sum | Group Administrator collects and pays the insurer. | Simplicity: One single transaction for the entire group. |
At SecureNow, we can help you find the best policy to suit the needs of your group and can help you arrive at the best payment method. We have standard forms that we can use with your group members to determine if and how much they would be willing to pay for their insurance.
Frequently Asked Questions (FAQs)
1. If I pay my own premium through my employer, is it still “Group Insurance”?
A) Yes. Even if the premium is deducted from your salary, you are still part of the “Master Policy.” This allows you to benefit from group features like the waiver of pre-existing disease waiting periods and lower “wholesale” premium rates that are unavailable in the retail market.
2. Can my employer change the premium-sharing ratio mid-year?
A) Generally, no. The premium-sharing structure is usually fixed at the start of the policy year or during the renewal phase. Any changes to how costs are split typically happen during the annual renewal of the contract.
3. What happens if one member fails to pay their share in a member-funded plan?
A) Since the insurer requires a single lump-sum payment for the whole group, the group administrator (HR or the Club manager) must ensure all funds are collected before the policy inception or renewal date. If the total premium isn’t paid, the entire group’s coverage could be at risk.
4. Why do some companies pay for my spouse and kids but ask me to pay for my parents?
This is a common “Hybrid Arrangement.” Statistically, the cost of insuring elderly parents is much higher due to increased health risks. By asking employees to fund the parental portion, companies can keep the base policy affordable while still offering employees access to a group rate for their parents.
5. If the “Head of the Group” pays my premium, do I still get a tax benefit?
A) No. To claim a tax deduction under Section 80D, you must be the one paying the premium. If your employer pays 100% of the cost, they claim the tax benefit. However, if you use a “Cost-Sharing” model where a portion is deducted from your salary, you can claim a tax deduction for that specific portion.
About The Author
Mayank Sharma
MBA Finance
He is a professional who brings extensive knowledge and expertise to the field of group health insurance. He has dedicated 7years to helping individuals and businesses navigate the complexities of insurance. Having worked closely with numerous clients and insurance providers, he deeply understands the nuances of group health insurance policies. With a reputation for providing insightful and informative content, he leverages his industry experience to educate readers about the importance of group health insurance and its benefits. Through their articles, Mayank Sharma aims to empower individuals and businesses to make informed decisions about their healthcare coverage, ultimately promoting healthier and more secure communities.
