Health insurance is no longer seen merely as a financial safeguard—it has become a critical component of employee well-being, organisational strategy, and personal risk management. Many people assume that group health insurance is always cheaper than buying individual health insurance plans, but this is not universally true. In fact, there are several reasons why group policies can sometimes cost more than individual covers, especially for small or mid-sized organisations.

What is group health insurance?

Group health insurance is a policy taken by an employer or organisation to cover a defined set of individuals—usually employees and, in some cases, their dependents. The key characteristics include:

• Uniform coverage: All insured members receive similar benefits.
• No pre-policy medical tests: Unlike many individual health insurance plans, group policies typically do not require medical screening before enrolment.
• Immediate coverage for pre-existing conditions: Employees are often covered from day one, even for illnesses they already have.
• Customised benefits: Policies can be tailored with maternity benefits, OPD covers, or top-ups.

In contrast, individual plans are selected and purchased by a person for themselves or their family, often with the flexibility to choose sum insured, add-ons, and waiting periods.

Why group health insurance can be more expensive

While it’s common to hear that group policies are cheaper because of economies of scale, this isn’t always the case. Here are the most important reasons why premiums can sometimes be higher:

1. Coverage for pre-existing conditions

Individual health insurance plans usually include a waiting period (often 2–4 years) before claims can be made for pre-existing conditions. In contrast, group health insurance almost always covers such conditions from the first day of policy issuance.

This means the insurer takes on significantly higher risk, especially if the insured group includes employees with chronic illnesses such as diabetes, hypertension, or heart disease. Because the claims probability is higher, the premiums reflect this risk.

2. No medical underwriting

With individual health policies, insurers can decline coverage or increase premiums if medical tests reveal serious health issues. Group policies do not assess employees individually.

Since no pre-policy medical test is required, the insurer spreads the risk across the entire group—potentially including high-risk individuals—thus driving up the premium for everyone.

3. Maternity benefits

Many group policies automatically include maternity insurance, covering childbirth expenses and sometimes even the newborn’s health. In individual plans, maternity benefits either require a waiting period or cost extra.

Because maternity claims are almost guaranteed when a workforce includes many young families, this increases the claims ratio for insurers and pushes premiums higher.

4. Smaller groups = smaller risk pools

Large corporations can negotiate lower premiums because they have hundreds or thousands of employees. But when a small business with fewer than 50 employees buys group health insurance, the risk pool is relatively small.

If a few employees raise substantial claims, it impacts the insurer’s payout ratio disproportionately. To compensate, insurers quote higher premiums to maintain profitability and manage the uncertainty of smaller groups.

5. Broader coverage features

Group policies often include features that are either optional or unavailable in individual plans, such as:

• Outpatient consultations.
• Wellness programmes and health check-ups.
• Psychiatric or mental health support.
• Lower or zero co-payments.

All of these broaden the scope of claims and increase the likelihood of utilisation, thus leading to higher premiums compared to standard individual policies.

6. Annual renewals and no-claim incentives

Group health insurance is usually renewed annually. Insurers assess the previous year’s claims and adjust premiums accordingly. If an organisation has had several high-value claims, the renewal premium will rise.

On the other hand, individual health insurance plans often reward policyholders with no-claim bonuses, offering increased coverage at the same premium or discounted renewal rates. This feature helps keep individual premiums more stable over the long term.

Why employers still choose group health insurance

Even though group policies can be more expensive, companies still invest in them for several reasons:

• Employee satisfaction and retention: Providing health coverage is a valuable benefit that improves morale and loyalty.
• Tax advantages: Premiums paid for employee health insurance are treated as business expenses, reducing the company’s taxable income.
• Simplified administration: Employers can manage a single master policy instead of dealing with multiple individual policies.
• Attracting talent: A robust group policy makes an organisation more attractive to potential hires.

Should individuals rely solely on group insurance?

It is risky to rely exclusively on employer-provided group health insurance. When you switch jobs, retire, or if the employer decides to reduce coverage, you could be left uninsured. Individual plans remain in force regardless of employment status, and early enrolment locks in health coverage before pre-existing diseases develop.

As a best practice, consider buying an individual health insurance plan alongside any group cover provided by your employer. This dual approach ensures continuity and enhanced protection.

Conclusion

While group health insurance often appears to be a more affordable and comprehensive solution, it is not always cheaper than individual health insurance plans. Factors like guaranteed coverage of pre-existing conditions, lack of underwriting, mandatory maternity benefits, and smaller group sizes can drive up the cost.

However, group policies remain a strategic investment for organisations focused on employee well-being, talent retention, and corporate goodwill. For employees, understanding the limitations and potential costs of group insurance is critical. Pairing it with an individual plan ensures you and your family remain protected in any circumstance.