Six years after the pandemic changed everything, here's what most HR leaders are still trying to figure out: Is providing health insurance to employees actually mandatory in India, or has it become something else entirely, an unwritten rule that no company can afford to ignore?
The short answer: Yes, it's mandatory.
In April 2020, the Indian government made it compulsory for all employers to provide medical insurance for employees. But the legal mandate is just the starting point. At Loop, we work with 1,250+ companies covering 10 lakh+ lives, and we've seen that the real question isn't about compliance anymore. It's about whether your benefits are actually working for your people.
This guide covers everything you need to know about employee health insurance in India heading into 2026 - from legal requirements to choosing the right plan.
Employee Health Insurance Laws in India: The IRDAI Mandate Explained
In April 2020, the Insurance Regulatory and Development Authority of India (IRDAI) issued circular No. 40-3/2020-DM-I(A) as part of the Standard Operating Procedure for resuming workplace operations post-lockdown. The directive was clear: all commercial and industrial establishments must provide medical insurance for their workers.
One thing about mandates during crisis periods: they create precedents that stick.
While the 2020 directive was technically tied to pandemic reopening guidelines, its spirit has become embedded in how Indian businesses operate. Here's how the current framework works:
- Organizations with 10+ employees are expected to offer group health insurance coverage.
- Employees earning up to ₹21,000/month fall under the ESI Act, with contributions from both employer and employee.
- Employees earning above ₹21,000/month typically receive coverage through Group Mediclaim (GMC) policies, fully funded by the employer.
The bigger picture matters more than legal fine print: by 2026, offering comprehensive health insurance isn't just about compliance. According to iHire's 2024 Talent Retention Report, 68% of employees prioritize health insurance as a key retention benefit—making it the top-ranked benefit for keeping workers.
Employee healthcare handbook
A quick and easy-to-read guide for implementing employee benefits that work for you and your organization
What Employers Are Required to Provide
If you're setting up or reviewing your company's health insurance, here's what you need to know:
Minimum coverage: Most insurers require at least 7 employees for a group policy. Coverage should extend to hospitalization expenses for employees and, ideally, their families (spouse, children, and in some cases, parents).
Coverage amounts: Industry standards have shifted significantly. According to Policybazaar's 2025 health insurance report, the average sum insured has risen 31% to ₹19 lakh, with policies below ₹10 lakh declining 29% year-on-year. Given medical inflation of approximately 14% annually per IRDAI reports, we recommend ₹10-15 lakh coverage for tier-1 city employees with families.
Basic GMC typically covers:
- Hospitalization expenses (room, ICU, surgery)
- Pre and post-hospitalization costs
- Ambulance charges
- Daycare procedures
But hospitalization coverage alone doesn't reflect how healthcare actually works in 2026. Most health interactions don't involve hospital stays—doctor consultations, diagnostic tests, pharmacy purchases, mental health sessions, preventive screenings. These everyday healthcare needs often fall outside traditional GMC policies.
This is where additional health benefits become the differentiator between a policy that exists on paper and coverage employees actually use.
Health Benefits Beyond Hospitalization: OPD, Maternity, and Wellness
When organizations research group health insurance, the instinct is often to compare premiums and find the best-priced plan. That's a reasonable starting point, but it misses something important.
What "additional benefits" look like in practice:
OPD coverage. Doctor consultations, prescribed lab tests, and pharmacy expenses without requiring hospitalization. This is where employees interact with healthcare most frequently. At Loop, our plans include up to ₹8,200 annual OPD coverage that can be used even without exhausting the main policy.
Maternity benefits. Coverage for delivery, pre and post-natal care, and newborn expenses. With childbirth costs in metro cities ranging from ₹50,000 to ₹3 lakh depending on the hospital and delivery type, this isn't optional—it's essential. Group policies cover maternity from day one, unlike retail policies with 2-4 year waiting periods.
Mental health support. Therapy sessions, psychiatric consultations, and counseling services. The WHO India mental health report indicates 59% of employees report work stress as a significant concern. Traditional policies often excluded or severely limited mental health coverage, that's changing.
Wellness programs. Annual health checkups, vaccination drives, fitness incentives, and preventive screenings that catch problems before they become expensive hospitalizations. We partner with 20+ wellness brands including Apollo, Cult.fit, and Tata 1mg to offer discounts and programs.
Chronic disease management. Support for employees managing diabetes, hypertension, thyroid conditions, and other long-term health needs. These require ongoing care rather than acute treatment.
The organizations seeing the highest benefits utilization and employee satisfaction are the ones treating additional benefits not as add-ons, but as essential components of their health strategy.
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IRDAI 2025 Health Insurance Guidelines: Key Changes for Employers
The regulatory landscape continues to evolve. The IRDAI's 2025 health insurance guidelines brought several employee-friendly updates worth noting:
- Faster access to coverage: The waiting period for pre-existing conditions dropped from 48 months to 36 months maximum. For employees managing chronic conditions like diabetes or hypertension, that's a full year of faster financial protection.
- Stronger claim security: The moratorium period, the timeframe after which insurers can't reject claims based on non-disclosure, was reduced from eight years to five. After five continuous policy years, your coverage becomes nearly guaranteed (barring proven fraud).
- No more age discrimination: Insurers can no longer set upper age limits for new policies. Your 62-year-old star performer can now get covered just as easily as a fresh graduate.
- Quicker processing: Cashless pre-authorization requests must now be approved within one hour. Final discharge authorization? Three hours from receiving the final hospital bill. No more watching employees stress at hospital counters.
- Expanded treatment options: AYUSH treatments (Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homeopathy) now receive full coverage up to the sum insured. Not a token add-on, but real coverage for how many Indians actually prefer to heal.
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Super Top-Up Insurance: Boosting Coverage at Lower Cost
If your base GMC coverage feels insufficient—and for many families, ₹5 lakh isn't enough given rising medical costs—Super Top-up insurance provides additional coverage at significantly lower premiums than retail alternatives.
How it works: Super Top-up activates after your primary group policy is exhausted. If your company offers ₹5 lakh coverage and you face a ₹8 lakh medical expense, the Super Top-up kicks in for the remaining ₹3 lakh.
Why it's worth considering:
- Premiums are 40-50% lower than comparable retail options (₹5,000-10,000 annually for ₹10 lakh coverage for a family of four)
- Zero waiting period for pre-existing conditions
- No restrictions on critical illnesses—works as a replica of your GMC policy
- Includes OPD coverage (up to ₹8,200/year) for consultations and lab tests
- Coverage continues even after changing jobs, provided your new employer offers equal or higher base coverage
Also read: Is ₹5 Lakh Health Coverage Enough in 2026? Super Top-Up Insurance Explained
Flexible Employee Benefits in India: What Workers Want in 2026
This is where things get interesting for forward-thinking HR teams.
The conversation has shifted from "do we provide insurance?" to "are our benefits actually personalized to what our people need?"
According to a 2025 workforce survey, 78% of Indian employees want flexibility in choosing their benefits. Yet only 34% of companies offer cafeteria-style or personalized benefit programs. That's a massive gap, and it's costing companies talent.
Think about what this means in practice. A 28-year-old single employee in Bangalore has completely different needs from a 42-year-old working parent in Pune caring for aging parents. One-size-fits-all benefits packages leave both feeling underserved.
What employees are actually asking for in 2026
Eldercare support. According to MOSPI's Elderly in India 2021 report, about 70% of India's elderly depend on family for day-to-day upkeep, and the 60+ population is projected to reach 194 million by 2031. This creates a growing cohort of "sandwich generation" caregivers juggling children and aging parents simultaneously.
Fertility benefits. With marriage and parenthood being delayed, IVF coverage and fertility support have moved from "nice to have" to expected. ICMR data shows fertility treatment demand has grown 20% annually since 2020.
Mental health access. The WHO India mental health report indicates 59% of employees report work stress as a significant concern. Counseling services, therapy access, and mental wellness programs matter.
Wellness stipends. Gen Z employees particularly value gym memberships, meditation apps, and preventive health programs over traditional perks.
Cafeteria-style choice. The ability to allocate a benefits budget toward what actually matters to them, whether that's enhanced health coverage, learning allowances, or family support.
This is exactly why insurtech platforms have reshaped corporate health insurance. Employee health benefits platforms like Loop offer flexible benefits (Flex) that let employees personalize their coverage based on life stage and actual needs. When employees can choose benefits that match their circumstances, utilization goes up and so does perceived value.
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Why Companies Are Switching to Insurtech for Group Health Insurance
India is now the second-largest insurtech market in Asia-Pacific. According to IMARC Group's India Health Insurance Market Report, the market is projected to hit USD 11.90 billion by 2033, growing at nearly 30% annually.
What's driving this? Simple: traditional insurance models weren't built for how modern workplaces actually function.
What digital-first corporate health insurance looks like:
- AI-powered coverage assessment. No more guessing what your workforce needs. Data tells the story.
- Mobile-first access. Employees can view e-cards, find cashless hospitals, file claims, and book doctor consultations from their phones. No paperwork, no phone trees.
- Integrated wellness. Annual checkups, fitness programs, mental health support, and preventive care built into the platform. Not bolted on as afterthoughts.
- Simplified administration. HR teams get dashboards for endorsements, live claim tracking, and downloadable reports. Less time on admin, more time on strategy.
- Prevention focus. The real shift is from reactive healthcare (treating illness) to proactive health management (preventing it). Loop's approach, for instance, positions them as a "health assurance company," not just insurance processing.
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Frequently Asked Questions
Is group health insurance legally mandatory for all employers in India?
Yes, following the IRDAI's April 2020 directive, employers resuming operations were required to provide medical insurance for workers. While enforcement varies, organizations with more than 10 employees are expected to offer group insurance coverage. The ESI Act covers employees earning up to ₹21,000 monthly; those above this threshold typically receive coverage through Group Mediclaim policies.
What's the minimum number of employees required for group health insurance?
Most insurers require a minimum of 7 employees for group medical insurance coverage. Some providers may have different requirements based on plan type and coverage levels.
What coverage amount should companies provide?
Industry standards have evolved significantly. According to Policybazaar's 2025 health insurance report, the average sum insured has risen 31% to ₹19 lakh, with policies below ₹10 lakh declining 29% year-on-year as buyers shift toward higher coverage. Given medical inflation of approximately 14% annually per IRDAI reports, experts increasingly recommend ₹10-15 lakh coverage for tier-1 city employees with families.
How have IRDAI regulations changed in 2025?
Key 2025 IRDAI updates include:
- Reduced pre-existing condition waiting periods (from 48 to 36 months maximum)
- Shortened moratorium period (from 8 to 5 years)
- Removal of age restrictions for new policies
- Mandatory 1-hour cashless pre-authorization approvals
- Comprehensive AYUSH treatment coverage
What's the difference between ESI and Group Health Insurance?
ESI (Employee State Insurance) covers employees earning up to ₹21,000 monthly, with both employer and employee contributions. Group Health Insurance (GMC) covers employees above this wage threshold and is typically fully employer-funded. GMC policies generally offer broader hospital networks and higher coverage limits.
Can employees continue coverage after leaving a company?
This depends on the policy type. Super Top-up insurance offers portability. Employees can continue coverage if their new employer provides equal or higher base coverage. Standard group policies typically end when employment ends, though some insurers offer conversion to retail policies per IRDAI portability guidelines.
Also read: Super Top-ups Explained
What flexible benefits should companies consider offering?
High-impact flexible benefits include: enhanced health coverage options, mental health and counseling services, eldercare support and leave, fertility benefits and family planning support, wellness stipends and fitness programs, and cafeteria-style benefit selection.
Loop's HealthFlex enables companies to offer personalized benefits that employees can tailor to their life stage and needs.
How can small businesses compete with larger companies on benefits?
Small businesses can offer competitive benefits through insurtech platforms that provide enterprise-level coverage at accessible pricing. Focus on flexibility. Remote work support, learning allowances, and personalized benefits often resonate more with employees than traditional perks. Monthly healthcare subscription models also help manage cash flow while providing comprehensive coverage.
What should HR teams look for in an insurtech partner?
Key evaluation criteria include: claims settlement ratio and processing speed, platform usability for both HR and employees, breadth of network hospitals, integration of wellness and preventive care, flexibility in plan design, quality of customer support, and data/analytics capabilities for benefits optimization.
How does medical inflation affect coverage adequacy?
Medical inflation in India consistently runs at 14% annually per IRDAI data, far exceeding general inflation. A procedure costing ₹1 lakh today will likely cost ₹1.5 lakh in three years. This makes it critical to review and adjust coverage levels regularly, and consider Super Top-up or enhanced coverage options to maintain adequate protection.
Is Super Top-up worth it if my company already provides insurance?
For most employees, yes. Standard GMC coverage (typically ₹5 lakh) may not be sufficient given rising medical costs. Super Top-up premiums are 40-50% lower than retail alternatives, there's zero waiting period for pre-existing conditions, and OPD coverage (₹8,200/year) provides value even without hospitalization. For a family of 3-5 members, the base ₹3-5 lakh coverage may be inadequate for major medical events.
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How to Choose the Right Corporate Health Insurance Plan
If you're evaluating or upgrading your corporate health insurance strategy, these are the factors that actually matter:
- Assess your current state. What coverage do you offer? What gaps do employees experience? What's your claims experience telling you about unmet needs?
- Consider the full picture. Insurance is just one piece. Wellness programs, mental health support, preventive care. These aren't add-ons anymore. They're core to whether your benefits actually work.
- Evaluate platform capabilities. Can employees easily access their benefits? Can HR track and manage policies without drowning in spreadsheets? The platform experience matters.
- Think personalization. Flexible benefits aren't a luxury. They're increasingly what employees expect. If your current setup is rigid, that's a retention risk.
- Partner strategically. The right benefits partner doesn't just process claims. They help you understand workforce health patterns, optimize coverage, and actually engage employees with their benefits.
Loop simplifies this entire journey. From selecting the right plans based on demographics and health goals, to providing 24/7 medical support, to running wellness programs that actually engage employees. It's healthcare that works like it should.
Interested in exploring what comprehensive employee health benefits could look like for your organization? Learn more about Loop's approach.
