Why is Health Insurance for Employees in India Mandatory?

The Indian government has made health insurance for employees in India mandatory after the COVID-19 pandemic. IRDAI has already issued a circular regarding group insurance for employees when the workplace operations resume after post lockdown. The instructions in the circular were clear that all industrial and commercial organizations have to provide medical health insurance for their employees. Almost 68% of the employees consider health insurance for employees in India a primary retention advantage.

Requirements for health insurance for employees in India

If you are reviewing or setting up the health insurance plan of your company, you should consider the following.

• Minimum coverage

For a group insurance for employees, the insurance companies need at least 7 workers. The coverage should include expenditures for the hospitalization of employees and their family members, such as parents, children, or spouses.

• Coverage amount

The average amount of sum insured has increased from 31% to 19 lakh INR, and that below 10% declining to 29% year on year. Every year, there is a medical inflation of 14% according to the IRDAI reports. So, as per the reports, the company should offer a coverage of 10 to 15 lakh INR health insurance for the employees living in the tier 1 city with their families. Generally, group insurance for employees covers the expenditures for room, surgery and ICU of the hospital, all the costs related to pre and post-hospitalization and daycare and ambulance charges.

But now in 2026, the charges for hospitalization coverage are not alone enough. Many health complications do not need hospital stays but need diagnostic tests, sessions for mental health, doctor consultations, medicine purchase and preventive screenings. In these scenarios, your health insurance for employees in India should offer the required coverage beyond the conventional policies. Additional benefits of the health insurance include:

• OPD Coverage

In this segment, you will get coverage for lab tests that the doctor has prescribed and medicine expenses with no need for hospitalization. In many healthcare policies, you can get OPD coverage to use without finishing the main health insurance for employees in India.

• Support for Mental Health

It includes counseling services, therapy sessions and psychiatric consultations. More than 60% employees suffer from stress due to work-related pressure and have become one of the primary concerns in today’s world. The need for mental health coverage is included, and that is a huge change in the health policy world.

• Management of chronic diseases

This segment covers employee support for managing hypertension, diabetes, thyroid conditions and many long-term health conditions. In these scenarios, the patient needs ongoing care in place of any acute diagnosis or treatment.

• Maternity advantages

Another segment to look for in the health insurance for employees in India is the coverage for postnatal care, expenditures for newborn and maternity delivery. The child birth expenses vary from 1,00,000 to 1,50,000 INR in a city, that too without any complications. However, the expenses vary according to the delivery type and hospital reputation. Group health insurance covers maternity expenditures from the first day.

• Wellness programs

It includes vaccination drives, preventive screenings, health checkups annually, and fitness incentives. All these programs assist in catching the primary problem before getting admission to an expensive hospital.

Most companies are going for the health insurance policies that have all the above additional benefits along with the main policy perks.

FAQ

What are the current conditions for companies to be eligible for employee health insurance?

The organization with more than 10 employees has to provide health insurance benefits. If the employee will be under the ESI Act if he/she is earning within 21000 INR every month with contributions from both employee and employer. Employees who earn above 21000 INR each month will receive group insurance for employees, which the company will completely fund.

Closing words

Employers who have resumed their operations of a full fledged in an office environment have to provide health insurance to all their employees. If you have more than 10 employees, then you can go for group health insurance for employees in India. Sometimes the insurance also offers benefits like counseling services, mental health, fertility advantages, wellness stipends, leave and support for eldercare, support for family planning and many more.