Medical Insurance for Startups: Should Employers Reimburse Employee Policies with a Cap?

I had a question about medical insurance benefits for employees. Has anyone prepared a policy where employees get their own policy, and the employer reimburses it with a cap? What are the pros and cons of this approach?

Dear Avani Shroff,

The approach you describe, where employees obtain their policies and the employer reimburses up to a capped amount, can have some potential advantages as well as considerations to keep in mind.

Advantages of Employee-Selected Policies

One potential advantage of this model is that it can provide employees with more flexibility and choice in selecting a plan that best suits their individual or family's healthcare needs and preferences. This personalized approach may be appealing to a diverse workforce. Additionally, the employer cap can help control costs and budget more predictably.

Considerations for Reimbursement Caps

However, a key consideration is ensuring the reimbursement cap is set at an appropriate level to make quality coverage affordable and accessible for all employees. If the cap is too low, some staff may struggle to afford suitable policies. There could also be administrative complexity in verifying individual employee plan details and processing.

Thanks

Hi, When you suggest employees buy their own Mediclaim policy with a reimbursement option by the employer, it will be treated as an individual Mediclaim policy and not group Mediclaim insurance. Both have their pros and cons.

Group Mediclaim Insurance vs. Individual Mediclaim Policy

Under Group Mediclaim insurance, pre-existing diseases will be covered from day one, whereas if it is an individual Mediclaim policy, a waiting period will be applicable.

Pre-policy medical check-up will be required, especially for senior citizens under an individual Mediclaim policy, whereas under Group Mediclaim policy, a pre-policy medical check-up will not be required.

The premium paid under an individual Mediclaim policy will be tax-exempted under 80D, whereas no tax exemption is applicable for individuals.

No claim bonus will be applicable under an individual Mediclaim policy, whereas the same will not be applicable under Group Mediclaim policy.

When you opt for a Group Mediclaim Policy, the employer has the option to get competitive quotes from different vendors, whereas under an individual Mediclaim policy, the cost factor may be high.