Group health insurance in India: a guide for employers

What group health insurance (GMC) covers, how the premium is built, what a CD balance is, how claims work, and what happens when an employee leaves.

Updated 1 August 2026 · 9 min read · Reviewed by K Abhay Kamath, IRDAI-certified Specified Person

In short

Group health insurance — often called GMC, for Group Mediclaim — is a single policy an employer buys to cover hospitalisation for its employees, and optionally their spouse, children and parents. Unlike a retail policy it is underwritten on the group as a whole rather than on each person, which is why it usually covers pre-existing conditions from day one and requires no medical tests. Most Indian insurers ask for a minimum of around seven employees.

What group health insurance is

A group health policy is one contract between the insurer and the employer. The employer is the policyholder; employees are the insured members. Each member gets a sum insured — the ceiling on what the policy will pay in a year — and a health card they can use at a hospital in the insurer's network.

Cover typically runs to in-patient hospitalisation of 24 hours or more, listed day-care procedures that need less than a full day, and expenses for a defined window before and after admission. Beyond that, almost everything is negotiable at the point the policy is designed, which is the part most first-time buyers underestimate.

How it differs from a retail policy

The differences are not cosmetic. They change what gets paid and when.

	Group policy	Retail policy
Underwriting	On the group, as a whole	On the individual, with medical tests above certain ages
Pre-existing conditions	Commonly covered from day one, by negotiation	Waiting period applies
Who chooses the terms	The employer	You
Who pays	The employer, wholly or partly	You
Portability of the cover	Ends when you leave the job	Follows you
Sum insured	Usually uniform, or banded by grade	Whatever you buy
Cost per person	Lower, because risk is pooled	Higher, because risk is individual

The last row is why group cover is the most cost-effective benefit most companies buy — and the fifth row is why employees should still hold something of their own. Both things are true at once.

Who is covered: family definitions

Insurers describe the covered family with a shorthand. The number after the 1 is how many dependants are included alongside the employee.

1+0: Employee only.
1+1: Employee and spouse, or employee and one child.
1+3: Employee, spouse and two children. The most common definition in India.
1+5: Adds two parents, or two parents-in-law — usually one set, not both.
1+6: Employee, spouse, two children and two parents. The most expensive step.

Each step up the ladder adds cost, and the parental step adds the most, because parents are typically the oldest people in the pool and claim the most. Where the budget will not stretch to 1+6, a common structure is to cover 1+3 at company cost and offer parental cover as a voluntary plan that employees fund through payroll — they still get group pricing and no medical tests, and the company's cost does not move.

What decides the premium

Group premiums are quoted, not listed, and no honest intermediary will give you a number before seeing your census. These are the variables that actually move it:

Average age: The single largest factor. A workforce averaging 42 prices very differently from one averaging 28.
Family definition: Every dependant added is another life in the pool.
Sum insured: Higher cover costs more, though rarely in a straight line.
Prior claim ratio: If your previous year paid out more than it took in, expect a loading.
Industry risk class: A manufacturing floor and a software office are not the same risk.
Location mix: Treatment costs differ by city, and insurers zone their pricing accordingly.
Policy features: Removing a room-rent cap, or adding maternity or a corporate buffer, each has a price.

Two levers are worth understanding before you negotiate. A room-rent limit caps what the insurer pays for the room, and where a member exceeds it many insurers apply a proportionate deduction to the associated treatment charges too — so the claim settles for materially less than the bill. A co-payment makes the member bear a fixed share of every claim. Both reduce the premium. Both are felt by the employee at the worst possible moment.

The CD balance, and why it stalls cover

Most group policies run on a CD account — a cash deposit you hold with the insurer. When someone joins mid-year, the pro-rata premium is debited from it. When someone leaves, a refund is credited back. It exists so that headcount can move without raising a separate payment and approval every time.

The operational failure mode is simple and common: the balance runs low, an addition cannot be processed, and a new joiner believes they are covered when they are not. Nobody notices until there is a claim.

Reconcile the CD statement against your own joiner and leaver records monthly, not annually.
Agree a floor with the insurer and top up before you hit it, not after.
Check that deletions are actually being credited — this is where reconciliations usually break.
Ask for the statement in a format you can reconcile, not a PDF you have to retype.

How a claim actually works

There are two routes, and the one your employee ends up on depends mostly on which hospital they reach.

Cashless applies at a hospital in the insurer's network. For a planned admission the hospital sends a pre-authorisation request a few days ahead; for an emergency, it goes in after admission, within the window the policy specifies. The insurer or its TPA approves an amount, and the member pays only what the policy does not cover — non-medical consumables, anything above a sub-limit, and any co-payment.

Reimbursement applies everywhere else. The member pays the hospital and claims the money back afterwards with the discharge summary, the itemised bill, investigation reports and the claim form. It works at any hospital, but the member funds the treatment first.

1Intimate the insurer or TPA as early as the policy requires — this is the deadline most often missed.
2Use a network hospital if there is a genuine choice; cashless removes the cash-flow problem entirely.
3Keep every original document until the claim is settled and the money has landed.
4If a cashless request is declined, that is not the end — the claim can usually still be filed for reimbursement.
5If a settled claim looks short, ask for the deduction breakdown in writing before disputing it.

Joiners, leavers and endorsements

Every change to the covered population is an endorsement — a formal amendment to the policy. Additions are charged pro-rata for the remaining policy period; deletions are refunded on the same basis.

The two moments that need a written process are the ones where people fall through:

A new joiner is not covered because they were named in a spreadsheet — they are covered when the endorsement is processed and the CD balance carried it. Build the insurance step into onboarding, with a confirmation back.
A leaver loses cover on their last working day. If they have any intention of keeping health cover, they need to know about portability before they leave, not after — the window is tight and the waiting-period credit they have built up is worth real money.

Renewal, and the number that drives it

Renewal pricing is driven by your claim ratio — the total claims paid against the total premium collected, sometimes called the burn rate. If the policy paid out more than it took in, the insurer will look to recover that, either through a higher premium or by tightening the terms.

This is where most employers are on the back foot, because they start the conversation three weeks before expiry with no data of their own.

1Start at T-90, not T-14. A rushed renewal is a renewal on the insurer’s terms.
2Ask for your claims data early: paid, outstanding, and by category. You are entitled to it.
3Understand what drove the ratio before you accept a design change to fix it.
4Model the alternatives — a co-pay, a room-rent cap, a lower sum insured — and price what each saves against what it costs your people.
5If you move insurer, negotiate continuity explicitly: the day-one pre-existing waiver and any waiting-period credit do not carry across automatically.

That last point is the one that quietly hurts employees. A cheaper policy that resets everyone's waiting periods is not a cheaper policy — the cost has just moved from the company to the person who gets ill in month two.

Getting started

A first group policy usually takes days rather than weeks, and the timeline is driven almost entirely by how quickly you can produce clean data.

1Assemble the census: name, date of birth, gender, and the same for each dependant you intend to cover.
2Decide the family definition and the sum insured — these two choices set most of the price.
3Get quotes on identical terms, so you are comparing price rather than comparing coverage gaps.
4Read the wording for room-rent limits, co-payment, sub-limits and the pre-existing waiver before you bind.
5Fund the CD account, confirm the policy is issued, and get e-cards out to employees with the network hospital list.

Finzip is an IRDAI-registered Corporate Agent (Composite), CA0985, which means we can place your cover with a panel of insurers and administer it afterwards. You can see what we arrange for employers, or read how the same decisions look from an individual's side of the table.

Frequently Asked Questions

What is the minimum number of employees for a group health policy in India?

Most insurers set the threshold at around seven employees, though it varies by insurer and some will consider smaller groups case by case. Below that size, individual or family floater policies are usually the practical route. The threshold counts employees on the payroll rather than contractors, and insurers will ask for a census file to confirm it.

How much does group health insurance cost per employee?

There is no list price. Group premiums are underwritten against your specific employee census, so two companies of the same headcount can be quoted very differently. The main variables are the average age of the covered population, the family definition you choose, the sum insured, your prior claim ratio, your industry risk class and the location mix of your workforce.

Does group health insurance cover pre-existing diseases from day one?

Group policies commonly waive the pre-existing disease waiting period from day one, which is one of the main differences from a retail health policy. The waiver is negotiated as part of the policy terms rather than guaranteed by regulation, so it should be confirmed in the policy wording before the policy is bound — not assumed.

Can employees add their parents to a corporate health plan?

It depends on the family definition the company buys. A 1+5 or 1+6 definition typically includes parents or parents-in-law. Where parents are not included by default, many employers offer a voluntary parental plan that the employee funds through payroll deduction, which keeps the cost off the company while still giving employees access to group pricing.

What is a CD balance in group insurance?

A CD, or cash deposit, balance is a running account you maintain with the insurer. Premium for mid-term additions is debited from it and refunds for deletions are credited back, so employees can be added without raising a separate payment each time. If the balance runs dry, additions can be held up — which means a new joiner may not be covered — so it needs monitoring alongside headcount.

What happens to an employee’s cover when they resign?

Cover normally ends on the last working day or on the date specified in the policy, and the employee is removed by endorsement. The employee can apply to port to a personal health policy, carrying forward credit for waiting periods already served, but the application generally has to be made around the exit date and the new insurer retains the right to underwrite it.

Is group health insurance mandatory in India?

Group health insurance itself is not a statutory requirement for most employers. Other employee benefits are: the Employees’ State Insurance scheme applies above defined headcount and wage thresholds, EDLI applies to establishments covered by the EPF Act, and the Employee’s Compensation Act creates a liability for workplace injury. Group health is bought because employees expect it and because it covers what those schemes do not.

Are group insurance premiums tax-deductible for the company?

Premiums paid by a company for employee health cover are generally treated as a business expense allowable under Section 37(1) of the Income Tax Act, being expenditure incurred wholly and exclusively for the purposes of the business. Treatment of GST input credit and of premium paid for employees’ parents differs and is worth confirming with your auditor for your specific facts.

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Reviewed by

K Abhay Kamath

IRDAI-certified Specified Person

Certificate SP0985787341, issued by the Insurance Regulatory and Development Authority of India, valid to 13 November 2027. Authorised to solicit insurance business for Finzip Private Limited, Corporate Agent (Composite) CA0985.

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Finzip Private Limited is registered with IRDAI as a Corporate Agent (Composite), Regn. No. CA0985, and with AMFI as a Mutual Fund Distributor, ARN-189270. Insurance is the subject matter of solicitation. This article explains how a product category works in general; the terms that apply to you are those in the document issued by your insurer or the scheme information document of your fund.