How to ask for customisation in your group health insurance policy

One way is to make the group health insurance benefit more flexible. Such schemes are called 'flexi' GMC (group medical cover). Under this scheme, employees pick and choose benefits they like. Such plans then get much higher appreciation from employees, with limited incremental cost to the company.

The most common form of flexi GMC is to allow employees to upgrade coverage at their own cost. The firm fixes a baseline coverage and pays for it. The employees are given an option to choose from a bouquet of benefits with a pre-defined cost. Once the employee chooses these benefits, the corresponding cost is deducted from the employee’s payroll.

Another form of flexi GMC is where if the employee does not want to opt for the baseline coverage, then the corresponding cash is paid out to the employee in the form of vouchers or added to the monthly payroll.

However, the opt-out form of group health insurance is not popular in India for two reasons. First, the person’s absolute cost is not significant compared to the cost to company (CTC) of the employee. So, instead of giving a real benefit to the employee, it tends to undervalue the benefit offered by the employer.

Second, a large number of young employees and those in the low-income group do not have a personal insurance. Yet, they may opt-out of company insurance because of generally low appreciation for insurance in the country. This makes the group highly vulnerable. So, organisations are wary of encouraging such behaviour. Below are some common ways of offering benefit enhancements.

Also read: How much health insurance cover do you need?

Option to enhance cover at an additional cost 

One of the most common options to offer flexibility in benefits is to allow enhancement of sum assured (SA). Let’s say, if the company offers an SA of Rs 3 lakh for its employees, it could give an option to increase the coverage to Rs 5 lakh, 7.5 lakh or 10 lakh.

For each option, the premium would be predefined. It could be based on age, or a flat premium, irrespective of age. Normally, it is mandatory to enhance the SA for all family members. Such an option is a highly cost-effective way for employees to enhance coverage.

The cost of incremental coverage in a group policy is significantly lower than buying such coverage in the open market. Additionally, the benefits would be significantly superior. Employers can offer this benefit via a separate top-up plan or from within the plan itself. The former helps to establish a clear demarcation of the claims cost for policy renewals.

Another common feature is to offer an option to include more dependents in the family definition. A popular option is to provide coverage for parents. Companies generally offer a different benefit structure for parents and administer this as a separate plan. Increasingly, some companies also offer coverage for specially-abled siblings.

Covers for diagnostic tests, pharmacy bills 

The third coverage which is becoming popular is to offer the out-patient department (OPD) benefit. This has several components, including wellness, pharmacy, dental, vision and diagnostics. The most common benefit is wellness. Here, employees can choose from a range of preventive health check-ups. Since these are negotiated at the group level, employees are able to get it at a significantly lower cost than directly from the market.

The other components of OPD are slowly picking up. To avoid fraudulent practices, insurers generally offer OPD benefits in a closed network of hospitals and clinics. This allows for greater control. A few providers are able to offer this benefit on a cashless basis as well.

The fourth type of flexibility is offered within the core benefit structure. This would entail changing the sub-limits or conditions within the policy, including room rent, maternity limit, disease-wise limits, and co-pay. Generally, changes in these benefits are bundled with changes in the SA. So, someone who opts for a higher SA automatically gets higher sub-limits. The relevance and design of such benefits is highly contingent on the base plan.

For example, if the base plan has no disease-wise limits, an upgraded option would be irrelevant. Apart from this, there are several add-ons that could be offered, such as daily hospital cash, a fixed pay-out for critical illness, etc.

While the flexi plan has a lot of appeal, there are three challenges that impede a wider uptake. First, there needs to be a critical mass covered under each option offered, so that insurers can price it reasonably. Without that, the pricing would not be attractive for the employee. That’s why flexi plans are common in larger corporations, where enough headcount is available under each option.

Challenges for employers 

The second challenge is of anti-selection. Employees would want to enhance coverage when they need it the most. This can however, lead to unsustainable costs for the insurers. For example, an employee may want to opt for a higher SA, when a claim is imminent or after an illness is diagnosed.

To counter this, employers generally put in a lock-in clause. This ensures that once an employee opts for a coverage, the employee is required to remain enrolled for a predefined time, say three to four years. This requires employees to plan in advance; it averages out the cost impact over multiple years.

The third challenge is that of administration. A strong technology platform is required to administer these benefits. Employees would expect clear guidelines around benefits, costing, and enrolment conditions. Once they are enrolled, they would need access to their chosen benefit structure seamlessly. Employers work with insurance broking firms with strong technology to help with the administration.

Customised group insurance plans, the way forward

Flexi GMC is the next frontier for group health insurance. Employees are increasingly asking for more democratic participation of the benefit design, which is most relevant for them. The one size fits all has its limitations. The forward-looking employers are conscious of this. That’s why they are pushing this strongly to position themselves as employers of choice and increase their employee retention rate.

A high level of awareness is important for both employers and employees, especially with regard to the variety of ways in which a group insurance plan can be customised to make it more relevant.