Difference Between Individual (Personal) & Employer based Health Insurance Plans – Pros & Cons

Health Insurance is an important form of financial protection which will provide a cushion effect in case of uncertain or planned hospitalization expenses. The majority of Indians does not have a health insurance cover while the others do not have an adequate health cover under the bought health insurance policy.

With the uprising health care costs, it is important to have a financial arrangement to combat the growing medical inflation resulting in huge medical bills.

There are individual health insurance plans where a policy is taken by the individual person to cover himself against the medical exigencies rising cost as per his/her requirement and budget.

On the other hand,many of us who are salaried, have the benefit of getting a health insurance cover from the employer under a group mediclaim policy. Employer based health insurance policy is a single master policy which covers the people working in the organization. The policyholder under such regime is the employer and the beneficiary is the employee.

However the similarity between both types of health insurance plans discussed above offers financial aid during the uncertain or projected medical health care requirements.

But is the framework of both types of health insurance plan actually similar apart from the main objective of offering financial support during medical exigencies? Not really ! Let us understand how both kinds of health insurance plans are different from one another through this article.

Employer based Health Insurance Plans Vs Individual Health Insurance Plans

Employer based Health Insurance Plans Vs Individual Health Insurance pics

Following are the parameters which create a distinction between Individual Health Insurance & Group Health Insurance cover;

1. Underwriting

Underwriting is the process of assessing risk in the life or health of the person taking an insurance plan. Underwriting for employee based health insurance plans is different from individual health insurance plan.

Individual Health Insurance Plan: For individual health insurance plans the different underwriting aspects such as pre-existing disease, current medical condition, residing place, annual income, age, etc. is considered individually for granting a policy or not and deciding the premium cost. In case of higher sum insured, any pre existing disease, or any other adversity, the insured has to undergo medical test screening. The insurance company will either grant, reject or load (charging extra premium) the policy.

Employer based Health Plan :For employer based group health insurance plan, the criteria for underwriting is based on the group overall rather than scrutinizing the risk in an individual employee or case. The parameters for underwriting are size of the group, profile of the group members, demographic details like occupation, age, Income and also the basic and add on benefits opted by the employer under the master policy.

The insurance company also ask for the past claims experience under previous group health insurance policies taken by the employer. There is a single proposal form which needs to be filled by the employer on behalf of the employees. The group members are not required to undergo any medical screening to be a part of employer based health insurance policy. The cover is granted irrespective of any preexisting disease or other adversity. It is easy to obtain a health cover under employer based group health insurance as compared to seeking it on individual basis.

2. Waiting Period

The waiting period is the time frame within which the insurance company does not accept any claims regarding the policy coverage. The waiting period needs to be surpassed to avail the policy benefits in a health insurance policy, except for a few exclusions like accidental claims.

Individual Health Insurance Plan:The individual health insurance policy cover begins after the waiting period in an individual health insurance policy. There is an initial waiting period in the individual health insurance policy which is usually for 30 days from the policy inception. The policy coverage begins after 30 days apart from any accident claims. There are other waiting periods in an individual health policy like the maternity waiting period, which range from 9 months to 36 months basis the plan opted. Also, individual health plans have a specific waiting period to undergo some specified surgeries or treatments which range from 1 year to 2 years from the policy inception date.

Employer based Health Plan: The policy benefits usually begin from day 1. There are no stringent waiting periods under employer based health insurance plan. Even if there is a waiting period clause under the policies “Waiver of waiting period” add-on benefit can be taken by the employer to get the coverage started right from the issuance of the policy. The maternity benefits can be availed without the long waiting period under employer group health policy.

3. Control and Flexibility

Individual Health Insurance Plan:The individual health insurance plans offer a great degree of control and flexibility. The insured can decide upon the amount of health insurance cover (sum assured), Policy tenure, Optional covers to customize your plan as per your requirement and budget. The entire control is in your hands as a policyholder. You may also swap the insurance provider under portability guidelines. You can steer the health plan as per your specifications .

Employer based Health Plan:The employer is the prime policyholder under an employer based health plan. The sum assured, plan additions, inclusion of employee’s family members or not rest in the hands of the employer. The policy coverage may not be same every policy year. The employer may upgrade or degrade the health insurance cover as per its requirement, budget and tax saving requirements. The cover is restricted and managed by the employer primarily.

4. Validity

Individual Health Insurance Plan:The individual health insurance plans are valid and applicable as long as you renew it after the completion of the covered policy term. The health plan is valid as long you prefer to remain covered under the policy by payment of the due premium amount.

Employer based Health Plan :The employer health insurance policy is valid till the time you are employed with your employer. Once you leave the organization, the benefits of the group health plan are no more valid. Buying a new plan at a later stage will attract higher premiums. In case of any adverse medical condition you may also fall into a higher premium bracket or a denial from the insurance company for granting you health insurance.

You may get it converted into an individual health insurance policy under the portability guidelines. However, there will be major changes in your policy framework in terms of cost, scope of benefits, waiting period, pre existing disease cover, etc. and you might also have to undergo medical test too. Also, there could be fair chances that the new employer might not offer any employer based health insurance cover.

5. No claim Bonus

No claim bonus is a benefit given to the insured in the form of either increase in the sum assured or reduction in the premium cost in the event of no claim towards the health insurance policy. The insurance company rewards the customer for keeping good health and not filing any claim.

Individual Health Insurance Plan:Individual health insurance plans offer ‘no claim bonus’ ranging from 5% to 10% per annum up to a maximum of 50% to 100% of the sum insured. No claim bonus enhance your health insurance cover at no additional premium cost. Also, the benefit is transferable in case you wish to port your health policy to some other insurer.

Examples:

  • Religare’s – Care Health Insurance Plan offers a super increase of 50% bonus in your health cover every claim free year in addition to 10% extra. Your bonus keeps building up to 100% of Sum Insured in their Super No Claim Bonus Plans.
  • Bajaj Allianz General – Health Guard Plan offers No claim Cumulative bonus of 10% on the basic sum insured up to a maximum of 50% of the sum insured up to 5 claim free years.
  • Star Health – Family Health Optima Plan offers a Cumulative bonus of 25% on the expiring sum insured in the second year and additional 10% of the expiring sum insured in the third year up to a maximum of 35% of the sum insured.
  • Cigna TTK- ProHealth Plus Plan offers a 10% increase in the Sum Insured to the maximum of 100%. The optional cover can be taken to raise the bonus by 25% annually.

Employer based Health Plan :There is no such benefit available under employer based health insurance plans. The employees who are part of the group mediclaim policy are not entitled for any addition in the sum assured on account of no claim filed by them towards the insurance company. In case of employer based group health plans, if any, other member or members of the group makes a claim towards the policy, the insurance company may reduce the sum insured for the next policy year or increase the premium basis the overall claim experience of the group as a whole.

6. Premium Cost

Individual Health Insurance Plan:Last but not the least, the cost of the health insurance policy is the major determinant which forms the basis of whether to buy a plan or not. If we talk about the premium cost, the stand-alone health insurance plans are costly as compared to the group health insurance plan. The premium is entirely paid by the individual seeking insurance.

Employer based Health Plan :The employer health insurance policy comes at contrasting cheaper premium rates. The reason being the group health insurance plans offer basic coverage with no fancy inbuilt benefits. Also, insurance companies have lower servicing cost under group health plans as compared to individual plans.

The entire employees covered under the employer based health plan will not make claim in the same policy year. So, the claim paid by the insurance company for some insureds get offset by the insureds who did not make any claim during the policy year. Larger the group size, the higher the premium discount the employer gets from the insurance company in case of a favorable claim history. The premium is either fully payable by the employer or deducted (partly / fully) from the employee’s salary.

7. Tax Benefit

Individual Health Insurance Plan: The tax benefit under the individual health insurance plans accrue to the policyholder under section 80D of the Income Tax Act,1961. The total deduction under section 80D is maximum upto Rs 60,000. It includes premium paid for self, spouse or dependent kids upto Rs 25,000 can be claimed as tax deduction limit. Also, premium paid for parents below age 60 is tax deductible upto Rs 25,000 and for age more than 60, the tax deduction limit is Rs 30,000.

In case you fall under age bracket greater than 60 and also pays the premium for your elderly parents, the total tax deduction limit is Rs 60,000 (Rs 30,000 for your own health policy plus Rs 30,000 for parents health policy). The medical check up expenses up to Rs 5,000 can be claimed as tax deduction too but all inclusive of the overall limits under section 80D. (Read : ‘Medical Insurance Premium & Income Tax Benefits u/s 80D‘)

Employer based Health Plan :Under group health insurance plan, the tax benefits accrue to the employer and this is another significant reason why employers offer insurance schemes to the employees. The health plans where the part of the premiums are paid by the employee, that part of the premium can be claimed under tax deduction limits by the employee.

Key Takeaways

  • Employer based Health insurance plan is of course beneficial and is the most cost effective health insurance schemes. The price and benefits offered under it is far stretchable as it allows employers to bargain more with the insurance company and is more lucrative. There is no (or) less waiting period under the plan which ensures your scope of policy coverage to begin from the policy inception date. But such policies last till the time you are employed with your employer.
  • On the other hand the individual health insurance plans offer you customized coverage as per your requirement and budget. Individual policies might be costlier than the employer based health plans, but it allows you to the flexibility and control over your actual need for health cover.
  • There are pros & cons for both kinds of health insurance plans. However the bottom line is that you need to be covered adequately with the right amount of the sum insured to combat the medical exigencies without worrying about the financial aspect for the line of treatment.
  • There could be ways where in you could get the right amount of sum assured for the adequate protection for your financial worries. Best Super Top Up health insurance plans picYou may opt for top up or super top up plans over and above your individual health insurance cover. Such pans offer health cover at an economical price as compared to buying a new health insurance policy. But such plans come into action after a threshold limit only which means beyond a particular amount pre decided by the insured, the top ups and super top up plans come into existence. (Read : ‘What are Super Top-up Health Insurance plans? How do they work?‘)

It is imperative to assess your health insurance coverage periodically basis your income, health condition, existing health covers, medical inflation, family structure,etc.

This is a guest post byShikha Verma.

About the Author :

Shikha Verma - ComparePolicy

Shikha is an author & insurance professional, currently employed withComparePolicy.com

She is an Author of 4 books on the subject matter of Insurance & Taxation for the Pondicherry University, Puducherry and Narsee Monjee University, Mumbai. She is a seasoned insurance professional with an experience of more than 9 years in varied domains which include insurance underwriting, training and content development. She holds a Management degree in Insurance and is currently working as a Lead Content Developer with Comparepolicy.com, which is an IRDAI approved insurance web aggregator.

(Disclaimer: Comparepolicy.com is not biased towards any insurance company. Examples given in the blog are for the knowledge of users only.)

Kindly note that Relakhs.com is not associated with Comparepolicy. This post is for information purposes only. This is a guest post and NOT a sponsored one. We have not received any monetary benefit for publishing this article.

(Image courtesy of digitalart at FreeDigitalPhotos.net) (Post published on 26-December-2016)

  • VIPAN KUMAR VERMA says:

    I AM RETIRED FROM FCI AS MANAGER(MOVT) ,IN OUR DEPARTMENT ONE MONTH BASIC PAY+DA IS DEDUCTED DURING SERVICE+AT THE TIME OF RETIREMENT.THIS AMOUNT DEDUCTED FROM SALARY IN 36 INSTALLMENT PLUS FINAL (BASIC+DA) ON RETRIAL PAYMENT FOR POST RETIREMENT CASH LESS IN DOOR MEDICAL FACILITIES FROM SELECTED HOSPITAL FOR SELF & DEPENDENT IN INDIA AFTER RETIRED FROM SERVICE . RETIREMENT AGE IN FCI IS 60 YEARS. CAN I CLAIM AMOUNT DEDUCTED FROM SALARY & PRETRIAL PAYMENT UNDER SECTION 80D . I AM AT PRESENTED SR.CITIZEN & WIFE IS 54 YEARS .HOW MUCH AMOUNT I CAN CLAIM U/S 80D KINDLY REPLY AT THE EARLIEST.

  • A M says:

    If a provider rejects an application, then does it share that data with IRDA or any other authority for other providers to verify? Can you guide?

    Thanks

  • Divya says:

    Dear Sreekanth, Shikha,
    can you plz confirm:
    1) is there any difference in health insurance and term insurance
    2) me n my husband, both are in private company so plz suggest few plans with avg premium cost.
    3) plz share few more links for further articles

    • Dear Divya,
      1 – Term insurance is a life insurance cover.
      Term insurance is the simplest and most fundamental insurance product. Term insurance plans are designed to ensure that in the event of the policyholder’s death, the family gets the sum assured (the cover amount). Term plan provides risk coverage for a certain period of time (policy term/duration). If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. It is the cheapest form of Life insurance in terms of premium.
      Whereas, health insurance is taken out to take care of medical expenses/treatments.

      2 & 3 – Kindly read :
      Best portals to compare health insurance plans.
      Important factors to evaluate before buying health insurance plans
      Best Family floater health insurance plans

    • Divya says:

      Hi Sreekanth,
      thanks for the links.
      got query on term insurance while going through the links:
      1) If one have a policy with life cover +ADB n he dies in accident, then his nominee will get life cover + ADB benefit say 50L+50L
      but if one have only simple life cover n he dies in accident.
      what will happen in this case?
      will his nominee get any benefit here?

      2) what does insurance company mean with natural death. does it exclude death due to any illness, any other mishappening like fire etc.
      3) any company offer term insurance due to natural calamities like earthquake, flood etc.

      • Dear Divya,
        1 – If death is due to accident, nominee will get Rs 50 L + Rs 50 L, if policy holder has Life cover + ADB.
        If policy holder has only life cover and unfortunately dies due to an accident then his/her nominee would receive sum assured as in life cover.
        2 – Illness – yes. But fire , it can be an accident, they may probe/investigate.
        3 – Some do offer. Have to go through the policy wordings.

  • Rupali R. Mithbaokar says:

    Very few employees nowadays stay with same employer till retirement specially in private sector. Hence, it is always better to have separate health insurance policy, that too from young age. This would enable coverage of majority of future diseases that might creep up as a person grows older.

    Whereas Government employees who generally stick with same employer till retirement, should opt for top -up plan because even employer provided insurance may not be enough in the wake of galloping medical inflation.

  • RAJ says:

    Dear Sreekanth
    very good article from Shikha. What is your openion on Group Health Insurance Plans provided by the banks for their account holders, ex; CANMEDICLAIM, SYNDAROGYA etc. They offer protection at less premium and also cover senior citizens at relatively lesser premium. are they worth buying? why its premium is so low? any hidden costs involved? Kindly share your valuable openion

    regards

    RAJ

    • RAJ says:

      Hi Sreekanth,
      Waiting for your openion, i wanted to buy CAN MEDICLAIM/CORP MEDICLAIM covering my mother.

      regards
      RAJ

  • This post could include so much more 🙁 Please write more about
    it soon?

    • Manja says:

      personalloancomparson,
      I think the post concisely covers all pointers one needs to be know. A post is never a replacement for actual policy documentation. It is there to get you interested and help in your research. So I am not sure what you are expecting more, why not suggest here what you expected more?

      I am not related to the author, but this statement by personalloancomparison seems to throw mud and hence I choose to revolt against. Don’t get me wrong, constructive criticism helps but that is to be backed up by specific pointers rather than just issuing blanket statements. All please ignore personalloancomparison.

  • Prakash says:

    Hi Srikanth Sir, my father created a NSC worth 38000/- in his and my name jointly (his name first), maturing this January. He deceased 4 year ago. NSC certificates and his death certificate is enough to claim the money? How is tax implications of the same on me? How will post office pay me the money,cash or cheque?

  • Dilip Khichade says:

    Thank you for the detailed blog. Very useful. However I have a question. I am leaving my present job and my new employer is not providing group health insurance. Is there a way for me to continue my existing oriental group insurance policy by paying premium on own ? Or convert existing group insurance policy to personal policy? I don’t want to go through medical check up and all other headache required to get new policy.

    • Deepesh says:

      There is concept of health insurance portability where you can port your employer policy to personal plan from the same insurer. After one year, you can port to any plan from a different insurer too. However, many things are on paper. You will have to figure out if the insurance company is willing to let you port. Porting is insurance company’s discretion. You will have to undergo fresh underwriting and that may require fresh medical tests.

      • Sreekanth Reddy says:

        Dear Deepesh..Thank you for sharing your inputs.

        Dear Dilip..This is the risk that one has to accept if an individual/employee is totally dependent on Employer’s group cover. The same has been highlighted wonderfully by dear Shikha.
        On job change, the new employer may or many not offer health cover, even if they offer the Terms can be very different.
        So, it is prudent to have one independent cover, it can be individual mediclaim for self or family floater plan, based on your requirements.

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