How Can Group Health Insurance Help Your MSME Save Tax?

One of the Accounting Big Fours, KPMG, recently performed a study on over 200 MSMEs from 15 industrial and service sectors to examine employment health insurance. The study results proved that healthcare coverage in terms of group health insurance is nearly only 31% among the Micro, Small & Medium Enterprises (MSMEs). In contrast, the figure is estimated to be 85% for large corporations.

With the frequently changing events around the world like the COVID-19 pandemic, it has become fundamental to take care of one’s health and protect oneself from such risks. Therefore, it has become essential for all organisations, especially MSMEs, to offer group health plans to their employees.

What are MSMEs?

  • Micro, Small, and Medium Enterprises (MSME) are the organisations whose investment in plant and machinery ranges from INR 0 to INR 10 Crore; depending on the investment amount, they are classified as either a micro, small, or medium enterprise.
  • MSMEs play a significant role in the Indian economy, they are responsible for almost 37% of India’s GDP, and employ over 11 Crore people all over the country.
  • This makes it highly essential for them to recognise the significance of their employee retention. One way to do so is by offering their employees a group health plan.

What is Group Health Insurance?

  • A group health plan is medical insurance that allows businesses to provide health insurance benefits to their employees. It plans to incorporate a group of people who are usually company employees.
  • Since the insurer’s risk is dispersed throughout a group of policyholders, group health members typically get insurance cover at highly affordable rates.
  • Plum Insurance has a GHI-Plum Lite, a unique and comprehensive group health plan that enables startups and emerging businesses to care for their employees’ health insurance requirements.
  • We offer a plan for every type of employee group, starting from a group of 5. We also administer your dashboard for managing your group’s medical benefits.

Features of an Ideal Group Health Plan

Following are the key features which you see are there in a group health plan that you purchase for your employees:

  • Wide Coverage: You must ensure that the group health plan offers wide coverage to your employees, including the treatment for COVID-19. This is essential, especially nowadays, when most of the companies are resuming work from the office.
  • No Room Rent: There are various group health insurance plans which do not provide any coverage for the room rent charges incurred during hospitalisation. However, there are also group health covers which provide coverage for the room rent. So, do check for the room rent coverage at the time of buying a group health plan.
  • Coverage for Pre-Existing Diseases: Pre-existing diseases (PED) refer to a medical condition or disease that an employee might be suffering from before being getting coverage under a group health plan. Many group plans provide coverage for PEDs after 2 years, but Plum Insurance covers all PEDs also from day 1! So choose wisely.
  • No Waiting Period: In health insurance, waiting period refers to a time frame during which the insured cannot make a claim. Choose group plans with shorter or no waiting periods.
  • Maternity & New-born Expenses Coverage: Choose a group health plan that provides coverage for maternity and newborn baby expenses. This will help you retain your female employees by conveying that the company stands with them during their important life stages.

5 Questions to Ask When Choosing Group Health Insurance for Businesses

Benefits of Group Health Plan For Employers

If you are a business or a startup owner, a group health plan will offer you the following benefits-

  1. High Employee Motivation: Group health plan is a great way to convey the message to your employees that they are valued by the company. An offering encourages employees to remain highly motivated to work hard in both adverse and normal conditions.
  2. Low Attrition Rates: When your employees feel valued and motivated, they would feel they belong to the company and would not wish to change their job. This will thus help you maintain low employee turnover rates.
  3. High Efficiency: A happy environment propers efficiency. When the employees feel that they are not only a part of the company, but also a part of the larger group that cares for them, they will work more efficiently. This will, in turn, help boost your business.
  4. Tax Benefits: Besides providing operational benefits, a group health cover also provides several tax benefits, which we have discussed in detail below.

Tax Benefits Available With Group Health Plans

  • Any amount paid by an employer for the benefit of their employees is treated as “profit in lieu of salary” under the Income Tax Act. This means that the amount paid towards group health plan premiums is shown as a business expense.
  • Thus, this expense is shown in the company’s profit and loss account, which is deducted from the company’s profit amount as a 100% tax-deductible amount. So, you get a lower taxable profit and thus a lower tax liability.

Take Away

To promote employee welfare, the Insurance Regulatory and Development Authority of India (IRDAI) has made it compulsory for all businesses, including MSMEs, to provide group health insurance to their employees. To ensure that the businesses also do not suffer any loss in terms of premium payment, the government has made all such premium payments 100% tax-deductible. So, it is a win-win situation for both parties.