Group Health Insurance

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In an employer-employee context, group health insurance is when an employer buys medical insurance that covers their employees. However, the number of employees in an organization can change frequently, with people leaving the firm as well as joining it. Organizations have to update corporate health insurance policies to reflect these changes. This addition and deletion of employees and their dependents are referred to as endorsements in the insurance industry. Therefore, needed for 30-day enrolment for new hires.

Frequency of endorsement

In each company, employees join and leave at different times during the month. Most insurers take 10-15 days to process endorsement requests. During the pandemic, this has become even longer. Hence, companies usually do not submit endorsement requests to insurers or insurance brokers for each individual case, opting instead for a combined number at the end of each month. This saves time and effort for both the insurer and the company’s HR team. The insured can make claims even when an endorsement is underway if you intimate your insurance broker.

To better understand this process, let us consider an example. Company X sees the following changes in the first half of January:

02 Jan – 2 employees join the firm
05 Jan – 1 employee leaves the firm
07 Jan – 1 employee gets married and wants to add their spouse to the policy
10 Jan – 4 employees join the firm
13 Jan – 1 employee has a child and wants to add it to the policy
15 Jan – 2 employees leave the firm

Individual endorsements would mean six separate tasks and six different processing dates. This is sure to cause confusion and increase the likelihood of errors.

Insurers thus introduced the monthly endorsement process that considers all individual requests jointly at the end of the month. This allows managing the endorsement process efficiently. This process suits the corporate HR team since it gives them the flexibility to collate information and send it as a single list.

Cash deposit requirement

However, as per the Indian Insurance Act Sec. 64 VB, an insurer can provide cover only after receiving the premium. To stay compliant with this law, organisations have to maintain a Cash Deposit (CD) balance. This should be sufficient to allow the processing of additional premium for specific endorsements. A good rule of thumb is to maintain a CD balance of about 5% of the total premium. The insurer refunds any unused CD amounts to the organisation at the time of policy renewal.

Meanwhile, if a new employee has a claim, HR can contact the broker or the insurer to facilitate reimbursement by sharing relevant details. The insurer honors such requests and provides adequate medical insurance coverage to the employee.