As the country is recovering in stages from the COVID lockdown, a directive dated 15th April 2020 by the Ministry of Home Affairs (MHA) has made news. This directive has mandated that all offices, workplaces, factories or other establishments that resume functioning post the coronavirus lockdown are required to provide medical insurance to their returning employees. This covers permanent, temporary and even contracted workers working in these establishments.
Over the years there have seen various government-backed schemes and policies to cover the health costs of employees and workers (eg. ESIC), but this is perhaps the first time that a directive with such broad impact has been issued. Let us take a closer look at the reason for this step, what it means for employers and employees, what benefits it provides across the board, and importantly what it could mean in terms of costs for a typical firm.
Why has this step been taken?
Clearly the MHA directive aims at providing for proper treatment costs to potential COVID sufferers in the workforce, without placing a burden on their family finances. While it does entail costs for the employer who is required to buy the insurance cover, it is a far-reaching step that could help to cover the long term financial and social costs of medical treatment for an entire stratum of society.
For the employer, while there is an initial burden of the cost of the policy, there is also the potential benefit of improved worker productivity. This would occur due to timely and hopefully complete treatment for workers afflicted by COVID-19 or other illnesses. It is important to understand that this insurance covers the cost of any type of treatment, not just for COVID-19. Also the Insurance Regulator (IRDAI) has issued an advisory asking insurers to price the product in a way that employers are encouraged to maintain this policy over multiple years. Hence the immediate (and thereafter annual) insurance cost for the employer or firm could be offset by the medium and long-term benefits for them, through better employee health and productivity, and even through improved employee retention.
What are the typical features of a Workers Mandatory Health Insurance?
The typical Workers Health Insurance as launched by several insurers in April itself is a group policy and offers benefits comparable to a typical group medical health insurance policy. Such a product usually covers inpatient hospitalization cost to treat both illness and injury, including the medication and surgery costs, room or ward rental (including ICU charges), doctors’ and surgeons’ fees, cost of prosthetic limbs or devices, pre and post-hospitalization charges, maternity costs and so on. These benefits can vary with the insurer, the insurance plan chosen, the level of the sum assured and of course the premium per person.
How does this product compare with ESIC?
The Employees State Insurance (ESI) offered by the ESI Corporation (ESIC) covers medical treatment only for the permanent employees (workers) earning below a certain limit (presently Rs 21,000 per month) who are working in units that are governed by the ESIC Act. Their treatment can be done only in the ESIC hospitals or clinics which are available only in certain states of the country and not across all geographies. Temporary or contract workers are excluded from this cover. Effectively the ESIC offers coverage to about 3-3.5 crore workers, i.e. only 6-7 per cent of the total estimated workforce of over 47 crore in the country.
On the other hand, Workers Mandatory Health Insurance can cover not just permanent workers, but also contracted workers, temporary workers and even management trainees. The salary of the worker is not a qualifier. Nor is the geography a limiter as in the case of ESIC. Hence the coverage of different types of workers is more complete. Treatment in both government and private hospitals of choice is covered. Hence this directive may cover a much wider set of workers.
Which insurers offer this policy?
The Insurance Regulatory and Development Authority of India (IRDAI) has asked general and standalone health insurers to offer comprehensive workers health insurance policies to individuals or groups in order to enable organizations or employers to comply with the Government of India directives. From our research, many insurers were already offering the product within April itself.
What are the typical costs of this policy?
The typical costs for a Workmen Mandatory Health Insurance for a group vary by insurer, but they can start from as low as around Rs 800 per person, excluding taxes. This amount can provide coverage for a sum assured of Rs 50,000 per annum. Of course, as you add coverage benefits or increase the sum assured, the premium will increase.
Does this figure of about Rs 800 per person look daunting? Consider that for a MSME with 10 employees this amounts to a premium of only about Rs 8000 (plus taxes) for a year’s cover for them. However, if your premium is higher, and you need help with paying this amount, a good insurance broker can negotiate a staggered payment schedule with the insurer to ease your burden.