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What is Employee Contribution in Group Health Insurance?

Roocha KanadeNov 24, 2025

When you join a company, one of the most valued perks you receive is group health insurance. It provides medical coverage for you (and sometimes your family) at little or no personal cost. But in many organisations today, the cost of health insurance is not entirely covered by the employer - a part of it comes from the employee’s side. This is known as employee contribution.

In this blog, we’ll talk about what employee contribution means, and everything there is to know about it.

Contents

Employee Contribution in Health Insurance
Why Do Companies Have Employee Contributions?
How Employee Contribution Works
Advantages of Employee Contribution
Disadvantages of Employee Contribution
Conclusion
Frequently Asked Questions

Employee Contribution in Health Insurance

Employee contribution in group health insurance is the portion of the insurance premium that an employee pays towards their health coverage under the company’s group plan.

Usually, employers negotiate a master policy with an insurance provider that covers all employees under a single umbrella. The total premium for this policy is shared between the employer and the employees in different ways depending on company policy.

For example:

If the annual premium per employee is ₹15,000, the employer might cover ₹12,000, while the employee contributes ₹3,000. This ₹3,000 becomes the employee’s contribution.

This contribution is deducted directly from the employee’s monthly salary, which means you don't have to make separate payments for it, this makes the process convenient and hassle-free.

Why Do Companies Have Employee Contributions?

Here are some reasons

1. Rising healthcare expenses
Medical inflation has made health insurance premiums more expensive each year. Sharing costs helps companies maintain sustainable benefits programs without overburdening budgets.

2. Enhanced coverage flexibility
Some employees want to include dependents like parents or go for higher coverage. Asking for an employee contribution ensures that those who choose more coverage share in the added cost.

3. Employee accountability
When employees contribute financially, they tend to value the coverage more and are more likely to understand their benefits.

4. Fairness and sustainability
Cost-sharing helps create a balanced system where the organisation can continue offering quality healthcare benefits in the long run.

How Employee Contribution Works

The contribution structure can vary by organisation, but it usually follows one of these models:

Paid fully by your employer: The company covers 100% of the premium for employees. Dependents’ coverage may be optional at the employee’s cost.
Partially employee-paid: The employer covers a base percentage (for example 80%), and the employee pays the rest.
Dependent opt-in: The company covers only the employee, while dependents such as spouses, children, or parents can be added by paying extra.

The contribution amount depends on factors such as:

Sum insured: Higher coverage leads to higher premiums.
Number of dependents added: More family members mean more contributions.
Age and health profile: Insurers decide the premium based on the group’s overall age and health risk.
Company policy: Some employers offer different plan levels or let employees upgrade their coverage by paying a little extra.

Advantages of Employee Contribution

While paying from your salary might not sound appealing at first, employee contributions come with several advantages:

Access to comprehensive coverage: You can include your family members at a much lower cost than buying separate retail policies.
Lower premiums: Group insurance premiums are a lot cheaper compared to individual plans because of pooled risk.
Tax benefits: Contributions made toward health insurance can qualify for tax deductions under Section 80D of the Income Tax Act.
Cashless hospitalisation: You get access to a network of hospitals for cashless treatment, saving you from paying out of your own pocket for expenses during medical emergencies.
100% paperless: You don’t have to worry about payments or paperwork as the premium is automatically deducted from your salary, and your employer takes care of all the claim-related coordination.

Disadvantages of Employee Contribution

Even though it has many benefits, there are also some limitations when it comes to this contribution amount.

Limited control: Since the policy is owned by the employer, you have little say in choosing coverage features or the insurance provider.
Ends with employment: The coverage usually ends when you leave the company or change jobs, unless there’s a portability option.
Restricted sum insured: The coverage amount might not be sufficient for large families or high medical costs.
Variable terms: Companies can change or discontinue their group policy based on budgets or business priorities.

Conclusion

At the end of the day, employee contribution is your small share in keeping your health insurance active and affordable. It gives you access to medical protection for yourself and your family without the hassle of managing a separate policy. Knowing how it works can help you get the most out of your company’s health plan and stay prepared for life’s unexpected medical expenses.

Frequently Asked Questions

Below are some of the frequently asked questions on Employee Contribution in Group Health Insurance

How does this benefit me?

Even though you’re paying a small amount, you get access to comprehensive coverage, cashless hospitalisation, and lower premiums compared to buying an individual plan on your own.

Is it possible for me to choose how much I want to contribute?

No, the contribution amount is set by your employer.

Is it compulsory to pay this contribution?

In most cases, the employee’s own coverage is mandatory, but adding dependents is optional. You can usually decide whether to include family members (and pay the additional contribution) or not.

Does this contribution give me any tax benefits?

Yes. Premiums you pay for health insurance, including your contribution under a group plan, can be claimed as a deduction under Section 80D of the Income Tax Act, subject to specified limits.

How is this amount calculated?

It depends on things like the company’s policy, the total premium amount, number of dependents covered, the chosen sum insured, etc.

What happens if I leave the company?

Your coverage under the group policy ends. Some insurers, however, allow you to port or convert the group policy into an individual plan by paying the full premium yourself.