Switching from ESI to Group Health Insurance: Key Benefits and Process

At a time when the well-being of staff is of the highest priority, the majority of organisations are reviewing the efficiency of traditional ESI health insurance schemes and shifting towards making the switch to more comprehensive group health insurance policies. While the Employees' State Insurance (ESI) scheme has been a fundamental source of social security in India over the last several decades, its limitations have faced stronger than ever before criticism, with rising private healthcare costs and evolving employee expectations. Employers are therefore now turning increasingly towards group health insurance as a more proactive and beneficial alternative better tailored to the needs of the contemporary workforce.

This blog discusses why employees and employers are switching, the key differences between ESI cover and group insurance, and how to switch between the two systems successfully without compromising on the quality of healthcare protection.

Understanding the Limitations of ESI Health Insurance

The ESI scheme was launched to give medical and financial support to workers whose monthly wages are not more than ₹21,000 (₹25,000 in the case of handicapped workers). The employee and the employer share the contributions equally, and the scheme funds such expenses as hospitalisation, outpatient treatment, maternity benefits, and disability benefits. In reality, the actual worth of ESI protection is below anticipated because of several practical considerations.

ESI network government hospitals tend to get overburdened, leading to long queues and limited specialist facilities. Second, availability of ESI dispensaries is uneven in different locations, and the majority of the workers lack decent access to timely healthcare. These limitations deter firms that are willing to retain the best talent, especially when health benefits constitute an increasing share of the employee value proposition.

Why to Consider Group Health Insurance?

Private insurance providers provide group health insurance plans that are better fit to cater to the evolving healthcare needs of employees. They offer better hospital networks, cashless services, faster claim settlement, and individualised coverage. The reasons below are the reasons why more and more employers are dropping the ESI scheme and opting for group insurance plans:

Full Coverage

As opposed to overall ESI coverage, which is restricted to sites and services, group health insurance schemes cover more. They generally include pre- and post-hospitalisation, daycare procedures, maternity and child cover, and even mental health consultations, something not included in overall ESI schemes.

Customisation for Employees' Needs

Group medical insurance plans may be customised based on the employee group, company, or risk group. For example, companies engaged in high-stress business activities may have wellness benefits, preventive health check-ups, or outpatient coverage, which would offer a more personalised experience of healthcare.

Access to Private Hospitals

One of the most compelling reasons for dropping the ESI health insurance scheme is access to private healthcare centers. Group insurance policies typically comprise access to a large number of private hospitals, which enables employees to be treated in a timely and convenient manner.

Quicker Claim Settlements

The private insurers offer improved claim settlement, including cashless hospitalisation and online claim tracking. This eliminates the red tape of ESI claim-making, significantly improving the employee experience.

More Choice for Employers

The employers benefit by adding or subtracting certain elements of coverage, determining the amount of insured limits, and even covering the employees' relatives. All such flexibility is near impossibility with the inflexible structure of an ESI policy.

Also read : Coverage Under the ESI Scheme and Eligibility Criteria

The Process of Transition: From ESI to Group Health Insurance

Switching from group insurance to ESI isn't a policy change, it's a structural change in the administration of employee health. Here's how to do it step by step:

Establish Eligibility and Workforce Need

Not everyone in the workforce will be in the mandatory ESI pay range. Begin by separating your workforce into ESI-qualifying and non-qualifying groups. In the case of workers no longer having a requirement to stay in ESI (e.g., once salaries are realigned), the switch might be easy.

Tell the Change Effectively

Transparency is the way forward while withdrawing ESI cover. Hold meetings, issue formal notices, and educate on the comparative merits of group insurance. The workers must know why their medical cover is being increased, and not reduced.

Select an Appropriate Insurance Company

They make the right choice in terms of the insurer as well. Assess insurers on the size of their hospital networks, claim settlement percentages, online assistance, and personalisation levels. Most firms choose insurers that are employee-focused and have seamless digital claim settlement.

Exit from ESI plan

For the exempted workers from the mandatory wage limit, the employer can make a request to withdraw from ESI registration. Clear all arrears and pay the last ESI contribution in advance. Document preparation for audit and compliance.

Implement the New Group Policy

After the group insurance plan is chosen and the same is approved, gather required documents from the employees and arrange for e-cards, welcome kits, and policy documents with the insurer. Organise awareness sessions such that employees are best informed about how to use their new benefits.

Cost vs. Value: Justifying the Transition

At first glance, ESI would seem to be the cheaper alternative on lower premium costs. Yet the long-term benefit of a good group health policy is well worth temporary sacrifices. Reduced absenteeism, happy employees, and improved health all feed through to improved organisational performance. In fact, most HR executives view health insurance not simply as an incentive, but as a major talent attraction and retention device.

Also read : Coverage Under the ESI Scheme and Eligibility Criteria

A Modern Solution for a Modern Workforce

When businesses evolve, so must the benefits they offer. Shifting from ESI health insurance to a well-crafted group health policy is a step in the right direction. The ESI system, although rudimentary, simply cannot hold a candle to the flexibility and responsiveness of private group insurance policies, especially for employers who desire to create a more attractive workplace.

In today's worker health-oriented culture, workers are looking for access to fast, high-quality, and convenient healthcare offerings.The transition to group insurance satisfies these requirements and also allows the employer to provide more value in terms of customisation and additional benefits. We at Niva Bupa have been propelling such changes by providing flexible and comprehensive corporate plans, which are the natural choice for firms enhancing worker welfare infrastructure.

FAQ’s

1. Can employers drop ESI and offer group medical coverage?

Employees can be exempted from the ESI scheme by the employer for certain employees if they fall out of the ESI eligibility criteria, like crossing the ₹21,000 salary cap every month. For the remaining employees who are still eligible according to ESI standards, the scheme is compulsory. For exempted employees, the employer can substitute ESI coverage with a group health insurance policy of a broader nature.

2. What is the most important difference between ESI coverage and group health insurance?

ESI coverage is a statutorily provided benefit for low-income workers, mostly providing access to government health facilities. Group health insurance, on the other hand, is a private policy that provides wider benefits, such as access to private hospitals, choice of protection, faster settlement, and higher wellness features.

3. Will group health insurance replace employee medical benefits adversely? 

Not at all. Overall, group health insurance enhances the standard of health care services that employees receive. With cashless hospitalisation, wider networks of hospitals, and family cover as a choice, it is generally far superior to an average ESI policy. 

4. What happens to prior ESI contributions when an employee changes to group health coverage? 

Prior ESI contributions are retained with the Employees' State Insurance Corporation and may still be used for certain long-term benefits, i.e., maternity or disability (depending on contribution history and eligibility). All new claims, however, must go through the group insurance company once the transition is implemented.