Multiple individual plans or one group health plan?
A group health insurance plan is an effective tool to increase employee motivation. Most employers avail of a single group mediclaim policy that covers all their employees. However, you could also opt for a different approach and have multiple individual insurances for employees. While such a decision could have some benefits, it has many downsides. It is important to understand these to make a balanced choice.
Advantages of multiple individual plans
Substitute cover
Multiple individual health insurance plans ensure diverse benefits for employees. For example, one plan may have a one-year waiting period for cancer coverage but another may not. An employee who has not completed a year with an organization but needs treatment for cancer can rely on the second health plan. In this approach, the individual health plan has to be customized for each employee, which is an elaborate process.
Increased specialized coverage
Multiple individual health plans offer more scope for specialized treatments like dental and vision check-ups and remedies. These are most relevant in individual plans that offer OPD coverage as well.
Tax benefits
According to section 80D of the Income Tax Act, premiums for group health insurance plans are eligible for a tax deduction. If employees are paying for the insurance and then getting reimbursed, then the employees will be eligible for tax benefits. If the company is paying for the insurance, then it could claim this as an employee expense.
Lifelong cover
Individual insurance is renewable lifelong. This means that employees can benefit even if they leave the company, by paying the premiums themselves. While this benefits employees, it means that insurance is not being used as a retention tool.
Multiple health insurance plans may be recommended for individuals who want to maximize their health coverage and minimize out-of-pocket expenses. For example, if an individual has coverage through their employer and also purchases an individual health insurance plan, they may be able to use both plans to cover their medical expenses. Additionally, individuals who have specific health needs that are not covered under their primary insurance plan may consider purchasing a supplemental plan to provide additional coverage. It’s important to note that coordinating benefits between multiple insurance plans can be complex, and individuals should carefully review their policies and consult with their insurance providers to ensure they are maximizing their coverage and minimizing their costs.
Disadvantages of multiple individual plans
The disadvantages of individual plans outweigh the advantages.
Difficult to manage
Multiple individual health plans can be really difficult to manage. The concerned department would have to keep track of different due dates for premium payment and renewal, especially if the plans are from different insurers. Helping an employee with the claims process will also be challenging if different insurers have different processes.
Increased administrative costs
Availing of multiple plans will drastically increase administrative costs. The significant increase in premium costs makes this option impractical for small- or medium-sized enterprises.
Health insurance does not act as a retention tool
In individual plans, the employee can opt to pay the premium themselves if they leave the company. So, the retention benefit of an individual plan is less than group plans which cannot be bought individually.
Limited coverage
It can be disappointing if employees find that in spite of individual policies, insurance companies reject their claims. Individual plans always have some restrictions, such as waiting periods that vary between two and four years. Insurers waive these waiting periods in group plans.
So, in most cases, a well-researched employee group health insurance plan that meets most of the requirements of an organization’s employees is a better option than multiple individual plans.
Additional Read: How to buy a Group Health Policy?
Written By-
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.
