Group Health Insurance — Structure, Eligibility & IRDAI Framework

One master policy

Group health insurance is a single master policy issued to a group, most often an employer, covering its members and, where the policy provides, their dependants. The employer is the master policyholder. Employees and their eligible dependants are the insured members.

The contract is between the insurer and the employer, but the cover is used by the members. That split explains much of what follows: the employer negotiates and holds the policy, while each member needs to be told what it contains.

Who pays, and how the premium is treated

In a non-contributory plan the employer pays the whole premium. In a contributory plan the employer and the employees share it. Which arrangement applies is part of the scheme the employer sets up with the insurer.

The premium an employer pays is a cost of running the business, so the employer generally treats it as business expenditure. Section 126 of the Income-tax Act, 2025 (section 80D of the old 1961 Act) is a different provision: it gives an individual a deduction for health insurance premiums that the individual pays, and only under the old tax regime. Group premiums carry GST at 18%; the nil rate that applies from 22 September 2025 is for individual policies.

The framework today

The current rules are the IRDAI (Insurance Products) Regulations, 2024 and the Master Circular on Health Insurance Business of 29 May 2024, which replaced earlier circulars. The IRDAI (Health Insurance) Regulations, 2016 were repealed from 1 April 2024, so material that cites them is out of date.

Within this framework, eligibility, the size of group an insurer will accept, the sum insured and how members are added or removed are settled by the insurer's underwriting and the master policy. No IRDAI minimum group size has been identified, so no minimum number of members is quoted here; the insurer's underwriting and the master policy decide.

What every member must be given

Every member of a group policy must be given a Customer Information Sheet. It is a short summary of the cover, the exclusions, the waiting periods, the limits and the steps for making a claim. The master policy itself is held by the employer. Members usually also receive a certificate or e-card, whose name varies from insurer to insurer.

The Master Circular expects the insurer to obtain the details of group members early. Collecting that data is the insurer's task, carried out with the employer. If the details of a member were not collected and that member makes a claim, the claim cannot be denied for that reason.

Conversion

A conversion option lets a member who leaves the group move to an individual policy, usually with the same insurer. It is a feature of the scheme: whether it is offered, the time allowed and the terms are set by the master policy and the insurer. On migration within the same insurer, credits such as waiting periods already served carry over.

Rules at a glance

Key points

• A group health policy is one master policy; the employer is the master policyholder and employees and eligible dependants are insured members.
• In a non-contributory plan the employer pays the whole premium; in a contributory plan it is shared.
• The employer generally treats the premium as business expenditure; section 126 is for premiums an individual pays.
• Eligibility, group size and how members are added or removed are settled by the insurer and the master policy.
• Every member must be given a Customer Information Sheet.
• A claim cannot be denied merely because the insurer had not collected the member's details.

Common misunderstandings

• The employee is not the policyholder: the employer holds the master policy, and employees and dependants are insured members.
• A minimum group size is not to be assumed from regulation: no IRDAI minimum has been identified, and the insurer's underwriting and the master policy decide.
• The nil GST rate does not apply to group policies: it covers individual policies, and group premiums carry 18%.
• Conversion is not an automatic right with a fixed deadline: whether it is offered, and the time allowed, are set by the master policy and the insurer.

Questions people ask