Better Health Coverage Without The Burden: A Smarter Approach To Group Insurance

News18

28-05-2025

Last Updated:
Group insurance in India is now crucial for talent retention. Rising medical inflation due to healthcare costs poses challenges.
Authored by Nilanjan Roy, Head of Group Business at ManipalCigna Health Insurance Company: Over the past decade, group insurance, in India, has evolved from a standard employee benefit to a vital tool for talent retention and acquisition. Companies recognise the importance of providing comprehensive health coverage not only to meet legal requirements but also as a strategic investment in the well-being of their employees.
A study by the Indian Council for Research on International Economic Relations (ICRIER) states the significant impact of employee health on business productivity. The study suggested that Indian companies were losing considerable working days per year due to employee illnesses, resulting in substantial losses in productivity and profitability. India has witnessed a surge in prevalence of Non-Communicable Diseases (NCDs) in the last decade. According to an ICMR study, the national prevalence of diabetes is 11.4%, hypertension 35.5% and generalized obesity stands at 28.6%. In addition, our country is also facing an increase in cases of mental health ailments. A 2022 study by Deloitte indicates that one of these ailments was poor mental health among employees, which cost Indian businesses a whopping $14 billion a year. In 2019, the WHO estimated the financial losses due to mental health issues between 2012 and 2030 to be around $1.03 trillion in the country.
Underneath the surface of this lies a growing concern: the rising cost of group insurance, primarily driven by medical inflation in the country.
Unchecked Rise of Medical Inflation
In India, medical inflation has been rising at an alarming rate—doubling every six years. Healthcare services, hospital stays, advanced medical treatments—all of which have become much more expensive following COVID-19. According to industry estimates, India has one of the highest medical inflation rates worldwide at roughly 14% in 2023. Expensive diagnostics, the rising burden of lifestyle-related diseases, and increased hospitalisation expenses are among the factors contributing to this surge.
While insurers have worked hard to keep premiums competitive, the reality is that healthcare costs are rising at an unprecedented rate. This is not just a challenge but an opportunity for the industry to come together and rethink sustainable models that strike a balance between affordability and comprehensive coverage. Now is the time to engage in proactive discussions and ensure that group insurance remains a viable, long-term solution for both employers and employees.
The Sustainability Challenge
Insurance companies are working towards maintaining reasonable rates and provide sufficient coverage. However, the current model is nearing its breaking point. The sector must acknowledge that, driven by competitiveness, the ongoing under-pricing of group policies will have adverse effects. If claims cost continues to outpace premiums, insurers will eventually have to implement significant price adjustments, which could upset both employee and corporate budget planning. Insurers may also adopt a tough stance on claims, to minimise further losses.
The Role of Employer Size and Workforce Demographics
The size of an organisation and the composition of its workforce play a crucial role in determining group health insurance costs. A substantial employee base can provide greater negotiating power, allowing businesses to secure more favourable insurance premium rates. On the other hand, companies with a younger, healthier workforce typically benefit from lower premiums.
Geographical and Network Considerations
Healthcare costs vary across different locations, with state-specific regulations also influencing insurance pricing. Additionally, plans with a broader network of hospitals and clinics often come with higher premiums but ensure better accessibility for employees, which contributes to greater overall satisfaction.
Strategies for Cost Management
Employers can adopt proactive strategies to manage rising health insurance costs without compromising coverage quality by investing in wellness initiatives such as preventive health check-ups, fitness programmes, and mental health support, which can reduce long-term healthcare expenses. Businesses can opt for customisable benefits packages allowing employees to select coverage that best suits their needs. Lastly, utilising Health Reimbursement Arrangements (HRAs) and stipends provide cost-effective ways to manage healthcare expenses while giving employees more control over their medical spending. Optional negotiation to renew at a sustainable premium offers long term sustainability, adequate adjustments to medical needs and the demographic risks. To achieve this, it is advisable for large employers in India to get their portfolio assed by health actuaries.
Industry Dialogue and Innovation
As a sector, we need to change the focus of the discussion from short-term cost reduction to long-term sustainability. This calls for a multi-stakeholder strategy in which employers, insurers, and healthcare providers collaborate to identify innovative solutions, such as risk-based pricing. This approach encourages companies to adopt pricing schemes that are based on preventive care programs and employee health risk assessments. Another idea is wellness-linked insurance, where integrating wellness initiatives into group insurance policies promotes healthier workforces and lowers claims. Additionally, there is an option for data-driven underwriting, which utilises analytics and technology to maximise risk assessment and ensure equitable pricing structures. Insurance brokers can play a huge role in supporting this by helping in discovering value proposition, benefits benchmarking, premium projections as well as digital enablement of benefits. Lastly, consider cost-sharing models that enable employers and employees to share expenses in a way that maintains comprehensive coverage while keeping costs affordable.
Call to Action
The cost of group insurance cannot be separated from the rise in medical expenses and the changing populational risk. As sectoral leaders, we must acknowledge this challenge and collaborate to mutually develop sustainable models that protect the interests of both employers, employees as well as the industry at large.
It is authored by Nilanjan Roy, Head of Group Business at ManipalCigna Health Insurance Company
The views expressed in this article are those of the author and do not represent the stand of this publication.
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tags :
health insurance
Location :
New Delhi, India, India
First Published:
May 28, 2025, 14:23 IST
News business Better Health Coverage Without The Burden: A Smarter Approach To Group Insurance