Post lockdown employers must mandatorily provide medical insurance to employees

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The government has made it mandatory for all employers which resume functioning as the lockdown gets over, to provide medical insurance to their employees.

Roopam Asthana, CEO and Director, Liberty General Insurance said that earlier it was not mandatory for all employers to provide health insurance cover to their employees. “However, some employers were buying ‘Group Health Insurance’ from insurance companies to cover their employees.”

A corporate group health insurance policy generally covers hospitalization expenses of employees as well as defined family members including parents or parents-in-law up to a prescribed limit.

A recent Insurance Regulatory and Development Authority of India (IRDAI) circular states: “Reference is invited to Order No. 40-3/2020-DM-I (A) dated 15th April 2020 issued as part of the Consolidated Revised Guidelines by Ministry of Home Affairs (MHA), GOI. As per the said order, inter alia; the following are stipulated:

All industrial and commercial establishments, workplaces, offices etc. shall put in place arrangements for the implementation of Standard Operating Procedure (SOP) before starting their functioning. As per clause no. 5 of Annexure – II of the said SOP for social distancing for offices, workplace, factories and establishments, medical insurance for the workers to be made mandatory, as per the circular.

In the circular, the regulator has advised insurers to offer comprehensive health insurance policies to individuals or groups to enable the above mentioned organisations to comply with the government’s directions. The regulator has also advised the insurers to devise these comprehensive health insurance products with simple wordings and conditions and at an affordable cost for the stated organisations.

Dr. S. Prakash, MD at Star Health and Allied Insurance, said that any health insurance cover (comprehensive health insurance or group insurance policy) is a great gesture by a company towards its employees. According to Prakash, after the MHA order, all companies should strive towards providing health insurance cover to their employees. “The companies can provide group health insurance covers to their employees as they are not very expensive and can be purchased with ease by large and small-scale companies,” he said.

What if you are covered under Employee State Insurance (ESI)?
As per labour law, medical insurance is available under the Employee State Insurance (ESI) Act, 1948 to those organised sector employees whose monthly wage is Rs 21,000 (Gross) or less.

Pooja Ramchandani, Partner, Shardul Amarchand Mangaldas and Co. said that under the ESI Act, the employer and employee contribute to the Employee State Insurance Corporation (ESIC). An employee has to avail ESI benefits from the ESIC. The Shops and Establishments Act of the States of AP and Telangana refers to an insurance-cum-savings scheme under which the state government may by notification extend a group medical insurance scheme. Other than the aforesaid there is no separate medical insurance mandated under the law. “Hence, a group insurance cover is not a statutory obligation like ESI and is typically taken for those not covered under ESI,” she said.

A person insured under the ESIC Act is entitled to various benefits such as sickness benefit, maternity benefit (where applicable), disablement benefit, medical benefit etc. A medical benefit is insurance cover for out-patient treatment and attending physician in a hospital, dispensary, clinic, or in-patient treatment in a hospital or a doctor’s visit to the home of the insured.

Normally employees covered under the ESI within an organization are not covered under the group health insurance policy offered by the employer. The employer generally offers a group health insurance policy to those who earn a salary of more than Rs 21,000.

Ramchandani said, “For workers employed below the pay bracket of Rs 21,000 ESI is mandatory. With this (the MHA order), not only will these employees continue to be covered under ESI, they will be mandatorily getting health insurance coverage from their employers. Thus, the medical insurance will be an additional benefit for those employees.” This means that the lower pay bracket employees will get ESI and group medical cover from employer.

Types of health policies an employer can offer
Employers have the option of taking a group health policy for their employees or can assist their employees in buying a retail health policy from insurance companies.

Asthana said, “Many large and medium-sized companies can offer group health insurance policies with defined benefits to their employees, the premium for which is paid by the employer. This annual cover is generally available to all employees without individual underwriting.” He further said, “The employer also has the option of tying up with an insurance company to offer retail health products (comprehensive health insurance policies) to its employees. In such a case, employees can choose to take these products voluntarily by paying the premium as applicable. Here each employee’s insurance policy is underwritten as per the internal rules of the insurance company.”

“In today’s scenario, there are a good number of affordable group health insurance plans in the offering which are ‘easy to buy’ and employers are advised to consider these health group plans as they not only cover hospitalization arising out of unforeseen illnesses but can also cover pre-existing illnesses and maternity from day 1 which is largely an exclusion in personal health insurance.,” Sheenu Sehgal, Vice President – General Insurance, Bajaj Capital said.

Will the mandatory medical cover be offered only till pandemic is over?
Medical insurance should be typically taken for at least one year to cater to any health issue which could commence during the lockdown but extend beyond. However, insurers can also tailor health insurance policies to suit the budgets of small enterprises for which affordability may be an issue.

The IRDAI said, “Organisations should be able to continue the Medical Insurance Policy offered by insurers not only for the present situation but for all time.”

According to experts, this means that this cover is not restricted only to the lockdown period and employers may take an insurance cover for a longer period such as a full year. Employee Group health policy is usually an annual policy which can be renewed every year by the employer.

Shailaja Lall, Partner, Shardul Amarchand Mangaldas and Co. said that as per the MHA Order, all establishments, factories, workplaces are required to put in place arrangements for implementing the SOP before starting their functioning. “Medical insurance for workers is mandatory as per the SOP. However, the Order/SOP does not clearly state that such insurance is only for the period of lockdown,” she said.

Prakash said, “A special contingency policy can be considered upon directives from the regulator. Insurers can come up with a special contingency policy for the limited period however it is advisable that employers should provide a full blanket cover instead of short-term disease-specific covers for a limited period.”

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