1. Composition:
1.1 Employees only:
The welfare and well being of the employees definitely affects the work atmosphere. It is the basic necessity to nsure employees for medical emergency for a start up organization or an organization of a limited size. Covering only employees is a very cost effective mode of passing on the benefits to them. Recommended where the employee strength is between 25 to 100.
1.2 Employees + Family Members:
Once an organization grows to a decent size and has established itself, it is the time to consider medical benefits for the family of the members of employees. Family means spouse and children only. Recommended where the employee strength is between 100 to 500.
1.3 Employee Plus Family Plus Parents:
The coverage for dependent parents is sought for generally by most employees as because of their higher age and medical history it is difficult to obtain individual policies for them. An organization which has established itself and has large number of employees can consider extending the medical benefits to the employees’ parents also. As this is the most expensive cover and is viable only for organization on large employee count preferably exceeding five hundred employees. Recommended where the employee strength exceeds 500.
2. Sum Insured: How to decide a sum insured for a Group Mediclaim Policy? There are basically two methods:
2.1 Graded: Sum insured for employees can be given based on their management
2.2 Flat: A flat sum insured for all employees across the organization can also be grades. This would be appropriate where the living standards amongst employees are substantially different across the organization. considered. This will be a good option where most of the employees fall in similar grades and they have a similar standard of living.
2.3 Amount: Though medical products are available for a sum insured starting from Rs. 1 Lakh, it is advisable to have a minimum sum assured, of at least Rs.2 lakhs for employees. This is because mediclaim policies generally have a room rent capping of 1% of the sum insured i.e. if there is a policy for sum insured of Rs. 2 lakhs, the insured is eligible for a hospital room rent of not more than Rs. 2000 per day. In case the employee chooses to have a room with a higher room rent, in that case the employee will not only have to bear the difference in room rent charges but also the proportionate medical expenses, which can be substantial at times and could lead to dis-satisfaction and disputes between the employees and the organization or HR. To decide the sum assured the organization can estimate, considering the life style of the employees, if they were to get admitted to a hospital what would be the hospital room rent applicable to them, if it is say Rs. 5000 then the sum insured to be opted for should be at least Rs.5 lakhs. Doing this exercise would help maintain amicable employer employee relationship.
3. Additional covers / waivers: A Group Mediclaim Policy is not a readymade product but a customized solution to suit the needs of every organization unlike the individual Mediclaim policy where additional covers or customization is not possible. To take the full benefit of a Group Mediclaim Policy, the organization needs to choose what additional covers like maternity, pre-existing diseases etc. needs to be taken and what standard conditions / warranties needs to be deleted or waive so that no claims put up by the employees are denied and at the same time the claims ratio is also kept in control.
4. TPA: Most insurance companies settle their claims through TPA (Third Party Administrators) i.e. they do not themselves get involved in the claims settlement process. Only very few insurance companies do not use TPAs and settle the claims in-house. Considering the fact that the TPA is a claim settlement agency it is very important to evaluate the services and check a reputation and network of hospitals of the TPA. It will be interesting to note that as an insured you can choose the insurance
company to buy a mediclaim policy and you can also choose the TPA that you want. Under a Group Mediclaim Policy the insurance company has a flexibility to appoint a TPA of the insured’s choice. More than choosing the insurance company the insured should also evaluate the services of the TPA before taking a Group Mediclaim Policy for better service for claims.
5. Insurance Company: There are many insurance players in the market today and the customer is spoiled for choice. There are four Government companies and about 20 private insurance companies and a few stand alone health insurance companies. The insured should not only consider the premium charged by the insurance company for a Group Mediclaim Policy but also the policy terms and conditions, reputation, service levels and flexibility of the insurance company / TPA before taking a call on purchasing the policy.
Generally insurance is purchased as a commodity based purely on the low quotation but once a policy is purchased it is an insurance company which services the policy for next twelve months. This service factor should be considered paramount rather than the premium charged as it is not possible to change the insurance company or the policy till the expiry of next twelve months. Relationships of the intermediatery with the insurance company will also decide what kind of support you would get from the insurance company in times of need.
6. Renewal Premium: Unlike individual policies, where the premium rates are fixed based on the sum insured and age of the insured, there is no predefined premium chart available for group policies. The renewal premium for the group insurance policies are based on the past claims experienced on the policy. The quantum of claims taken in the current policy year will have a direct relationship with the renewal premium for the succeeding policy year.
Claims ratio: Claims ratio is the ratio of the claims paid by the insurance company to the net amount of premium received by them, excluding service tax. Should this ratio be maintained below 70 or 80% the insurance company would look at it positively, giving you an opportunity to further negotiate the renewal premiums but should the claims ratio exceed 100% or more, the insurance company will look look at the renewal adversely, and the renewal premium would also be impacted adversly.
Thus it is in the insured’s interest to control the claims on the policy to a reasonable level so that the renewal premiums are maintained at reasonable levels. Considering this all it will always be in the interest of the insured to avoid providing covers to parents of the employees where the probability of claims is very high. So also it is better to avoid the directors / owners with extremely higher sum insured compared to the entire group, as one major claim can distort the claims ratio for the entire group and it will have adverse effect on the renewal premium in the succeeding policy year. Directors / owners should ideally be issued a separate individual policy with the substantially large cover separately.
7. Anti-selection: The group policies are based on an assumption that all employees or all family members or all parents are covered as the insurance itself is based on probability of large numbers. Selectively covering employees or family members or parents will be against the basic principles of insurance. Hence, it is always advisable to cover the entire category of beneficiaries rather than covering them selectively for cover under group mediclaim policy.
To explain the concept further, the employees are given a choice to cover their parents. It is only those employees whose parents have an adverse medical history, will enroll their parents definitely and very few employees whose parents do not have an adverse medical history, will enroll their parents.