How much does group health insurance cost per employee?
That’s probably the first question on an HR professional’s mind when deciding whether to include group health insurance or employee wellness plans in the company budget for the year.
Let’s put this into perspective with a real-life scenario: Imagine an employee who, just weeks after joining a new company, faces a serious medical issue. He’s stressed, unsure of how to handle the costs, and worried about what comes next. Then, he finds out that his new employer’s health insurance plan covers a wide range of medical expenses including hospitalization and ambulance fees.
Suddenly, the burden lifts. Because the company’s health plan has no waiting period for major procedures, he gets the care he needs right away. Not only does this help him recover faster, but it also builds a strong sense of loyalty toward his employer.
This example shows just how valuable group health insurance can be not just for employee well-being, but for strengthening the employer-employee relationship as well.
As HR professionals in India, it is becoming increasingly important to manage employee benefits efficiently, especially given the rising costs of group health insurance. In 2025, corporate health insurance premiums have seen an 6% higher than 2024, and the median sum insured has risen significantly from Rs 3 lakhs to Rs 5 lakhs. Therefore, effective budget planning is essential. This comprehensive guide will explore various strategies to balance the provision of competitive benefits while maintaining financial prudence.
Understanding the need for group health insurance
Group health insurance is not just a corporate benefit; it is also a vital tool for attracting and retaining talent. In a competitive market where skilled employees have many choices, providing a comprehensive insurance plan can differentiate a company. These benefits enhance job satisfaction and contribute to a supportive workplace culture, which is essential for long-term employee retention.
Tailored budgeting for diverse needs
Budgeting for group health insurance isn't one-size-fits-all. Different organizations have different capabilities and needs, which calls for a customized approach:
- Generous budget: At ₹40,000 per employee per year (approximately ₹3,500 per month), this plan suits organizations that aim to provide comprehensive coverage, including various wellness programs and extensive medical procedures.
- Ideal budget: Priced at ₹10,000 per employee per year (around ₹833 per month), this is a balanced option for most companies, offering good coverage while managing costs effectively.
- Frugal budget: With a budget of ₹3,000 per employee per year (₹250 per month), this option is geared towards startups and small businesses that need to cover basic health needs without financial strain.
Trying to start group health coverage on a budget? Download our guide to get insights from insurance experts
Factors influencing your insurance budget
Deciding on the right insurance budget involves considering several key factors:
Group size: The size of your employee group significantly affects premium rates. Larger groups tend to receive more favorable rates due to economies of scale and lower risk per capita.
Employee demographics: Younger employee groups generally attract lower premiums due to their lower risk of health issues. However, a diverse age group might require a more nuanced insurance plan to cover varying health needs adequately.
Industry risks: Certain industries face higher health risks due to the nature of their work. For example, industries like construction or mining may incur higher premiums due to the increased likelihood of injuries.
Add-on benefits: Consider whether to include additional benefits such as dental, vision, and preventive health check-ups. While these can increase the premium, they also promote better overall health and can reduce long-term medical costs.
Co-pay options: Implementing a co-pay system can help mitigate the company's costs by requiring employees to share a portion of the healthcare expenses. This strategy can lead to significant savings in premium costs while still providing substantial health coverage.
Strategic decision-making for optimal coverage
Selecting the appropriate group health insurance involves more than just understanding the financial aspects; it's about aligning the company's strategic goals with employee well-being:
- Employee feedback: Engage with your employees to understand their health coverage needs and preferences. This feedback can be instrumental in shaping a plan that truly benefits them.
- Long-term benefits: Healthier employees tend to be more productive and take fewer sick leaves. Investing in comprehensive health insurance can thus contribute to a more efficient and motivated workforce.
- Financial health of the company: It’s vital to consider your company’s financial stability when choosing a health insurance plan. Opting for a plan that is financially sustainable over the long term is crucial for maintaining continuous coverage.
How to calculate your group health insurance budget in 2026?
Planning your group health insurance (GHI) budget in 2026 starts with understanding a few core components that directly influence the cost of group health insurance per employee in India. Breaking it down step by step helps HR teams and founders estimate expenses accurately and avoid last-minute surprises during renewals.
1. Number of employees to be covered
The first step in group health insurance premium calculation is identifying how many employees will be covered under the policy. Most insurers in India require a minimum of 7 employees to start a group health insurance plan.
A higher employee count usually results in a lower premium per employee, thanks to risk pooling making GHI cost-effective for growing startups and SMEs.
2. Decide the sum Insured per employee
The sum insured is the maximum amount an insurer will cover per employee in a policy year. In 2026, most companies in India are opting for a ₹5 lakh group health insurance cover, up from the earlier ₹3 lakh benchmark.
A higher sum insured increases the group medical insurance cost, but significantly improves employee satisfaction and claim usability.
3. Estimate the average premium per employee
Once the sum insured is finalised, calculate the average group health insurance cost per employee. For 2026, indicative pricing in India looks like:
- ₹5 lakh sum insured → ₹7,000 to ₹10,000 per employee per year
- Pricing varies based on age demographics, industry risk, and claims history
This figure forms the backbone of your employee health insurance budget.
4. Add costs for optional add-ons
Many companies now enhance their corporate health insurance plans with add-ons to meet evolving workforce needs. While these increase premiums, they also improve plan utilisation.
Popular add-ons include:
- OPD cover (doctor visits, diagnostics, medicines)
- Parent or in-law coverage
- Mental health & counselling benefits
5. Keep a corporate buffer for renewal inflation
Medical inflation and claim trends mean group health insurance premiums rarely stay flat. For 2026 budgeting, HR teams should allocate a 10–15% buffer to account for renewal hikes. This ensures your group health insurance budget remains sustainable year-on-year without forcing benefit rollbacks.
Example: Group health insurance budget calculation
Let’s look at a realistic GHI cost calculation for a startup in India:
- Number of employees: 50
- Sum insured per employee: ₹5 lakh
- Average premium per employee: ₹9,000 per year
Total annual GHI cost:
50 × ₹9,000 = ₹4,50,000 per year
Adding a 10% renewal buffer brings the total group health insurance budget to approximately ₹4.95 lakhs annually.
Effectively managing your budget for group health insurance is crucial for maintaining a healthy and satisfied workforce. By carefully considering the factors that influence premium costs and aligning them with your employees' needs, you can ensure that your health insurance offerings are both beneficial and financially viable. This strategic approach not only supports your employees' well-being but also enhances your company’s reputation as a caring and responsible employer. Through thoughtful planning and ongoing engagement with employee needs, HR professionals can develop health insurance policies that align with both organizational goals and employee health, creating a resilient and productive workforce prepared to face future challenges.
Use Pazcare’s group health insurance premium calculator to get an instant estimate based on your team size, coverage needs, and add-ons.
Calculate your GHI budget now
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