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How are Group Health Insurance Premiums Calculated?

Team AckoJan 17, 2024

In insurance, premium and risk are correlated. The insurance premium is directly dependent on the risk covered. However, several other factors also play a role in deciding the premium for a particular policy. These factors depend upon the category of insurance, such as vehicle, travel, health, etc. This article will focus on the health insurance category, specifically, Group Health Insurance, which insures a group of people under a cover. Read ahead to know how Group Health Insurance premiums are calculated when it comes to a policy offered by an employer to cover their employees.




How are Group Health Insurance Premiums Calculated?

Here’s a list of factors that influence the premium calculation of a Group Insurance Scheme. These factors are considered during the insurance company’s underwriting process, which ultimately decides the premium charged to the employer to insure their employees.

1. Average Age

The average age of the people being insured shall be considered to determine the premium. This factor is associated with ascertaining the risk. Generally, as young people have better immunity and are not yet diagnosed with chronic illnesses compared to the older generation, they pose fewer health risks. As a result, the premium would be on the lower side. 

Example: Two software companies are looking to insure their employees. The average age of employees in company A is 25, and that of company B is 35. Here, the Group Mediclaim Policy’s premium for company A will be less than company B due to lower age, if other factors remain similar for both the companies.

2. Type of Job

Some jobs are risk-averse, while some have a huge element of risk. Therefore, the nature of the job is a vital factor in determining the insurance premium. The higher the risk associated with the job performed by the employees, the higher the premium required to insure them.

Example: The insurer receives applications from two companies for a Group Health Insurance Policy. One’s an advertising agency while the other is a manufacturing company looking to insure its employees working in a factory. As the risk in a desk job (advertising company) is less than that of a floor job (factory), the premium for the advertising company will be less than the premium for the manufacturing company.

3. People Covered

The scope of coverage of Group Health Insurance Plans can be widened with respect to the people covered by the policy. For instance, there are policies that cover employees and their immediate family members, and there are policies that even cover in-laws.

Example: Coverage option 1 offers insurance for the employee + spouse + parents. Coverage option 2 offers insurance for the employee + spouse + parents + parents-in-law. Here, the premium for coverage option 1 will be less than coverage option 2 as the scope of coverage is less in option 1 than option 2.

4. Sum Insured

Sum insured of a policy is the monetary limit up to which the insurer can cover the health-related expenses of the employee. The employer and the insurance company can discuss and select the sum insured of the policy. This will be applicable across all employees. The higher the sum insured, the higher the premium.

Example: Company A opts for a sum insured of Rs. 3 lakhs for each of its employees. On the other hand, company B opts for a sum insured of Rs. 5 lakhs. Here, the premium for company B will be higher as compared to company A.

5. Add-on Covers

Usually, there is a standard Group Insurance Policy that is offered to the employers. If the employers feel the need to enhance the policy’s coverage, they can pick suitable group health add-on covers. These additions will increase the premium of the Employer-provided Health Insurance Policy. Popular add-on covers include OPD (Outpatient Department) Coverage, Consumables Cover, etc.

Example: Company A is being offered a policy with standard coverage. The employer increases the coverage by adding the OPD Cover to the standard coverage. Thus, the payable premium is more than what it would have been if the employer had only chosen standard coverage.

6. Claim History

Claim history is taken into consideration to calculate premium while renewing the policy from the same insurer. If several claims have been raised during the policy period, the insurer might want to revisit the chargeable premium while renewing the policy.

Example: Company A raised less frequent and fewer than expected claims during the policy period. Company B raised more frequent and almost double the expected claims during the policy period. Thus, the insurer might consider increasing company B’s premium based on past claim history.

Group Health Insurance Premium Calculation by ACKO

ACKO’s Group Medical Cover (GMC) is a contemporary health insurance plan designed to make things easier for employers as well as employees. ACKO does not follow a one-size-fits-all approach for the GMC plans. Also, it is best suited even for those employees who do not raise a claim due to features such as free teleconsultations with doctors, discounts on lab tests, etc.

While the above-mentioned factors do play a role, there’s a lot more to premium calculation. For example, ACKO enables the employees to customise their plan by choosing add-ons that are only applicable to their policy. As the employees are making this choice, the premium is also paid by the employees.

Also, Check: Health Insurance Premium Calculator

New-age Group Mediclaim Insurance

There’s no discounting the importance of a wide-ranging Group Health Insurance plan for employees. A good plan covers the employee and the family members, offers a decent sum insured, and comes at an affordable premium for the employer. A great plan includes these points and offers hassle-free claims along with extra features and services. Thus, ACKO’s tech-based Group Medical Cover is a great plan for employee-first organisations, as it offers much more than a generic Group Medical Cover.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

Frequently Asked Questions

Common questions about Group Health Insurance premium calculation.

Employer-related Questions


Do extra features increase the premium?

Nowadays, new-age insurers are offering exciting features along with the standard Employee Health Scheme. These features can include free teleconsultations, discounts on lab tests, etc. Such features can have an impact on the overall premium. However, ACKO’s Group Medical Cover includes certain beneficial extra features without extra costs.

How much does it cost to buy Group Health Insurance for a team of fifty employees?

The health insurance premium depends upon several factors as shared in the above article. Thus, the cost to insure fifty employees under a Group Health Insurance policy differs, primarily based on the chosen coverage.

How much of the premium payment for a Group Health Insurance Policy is paid by the employer?

In India, generally, the entire payment for a Group Health Policy or Employee-Employer Insurance Policy is paid by the employer. This does not include individual-based add-ons chosen by the employees. For such covers, the payment is made by the employees.

Employee-related Questions


Do the employees need to contribute towards Group Health Insurance offered by their employer?

Usually, employees do not have to contribute towards Group Health Insurance offered by their employer. They will have to pay the premium for specifically chosen add-ons that cater to only their requirements and are not a part of the original company-sanctioned policy.

Is it inexpensive to receive employer-offered health insurance?

As in most cases, the premium to insure the employees is paid by the employer, the health insurance policy is considered as a company-offered benefit. This means the employees do not have to pay for it. Therefore, it is inexpensive, and often free of cost, to receive employer-offered health insurance.

View Infographic: Factors for Group Health Insurance Plans Premium Calculation


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