"Beyond the Basics: Decoding Medical Insurance Expectations in India" for foreign Employers

When onboarding new clients for EOR services, there’s always a conversation about salary structures. Inevitably, when we reach the line item for medical insurance, clients often pause. “What exactly does this medical insurance cover?” they ask. This question arises for various reasons—some clients are unfamiliar with the expectations in India, while others want to ensure they provide their employees with adequate coverage. And, of course, there’s always the consideration of avoiding any potential liabilities.

Medical insurance is a standard benefit in Indian salary packages, but it’s not viewed the same way here as it is in Western countries. In the West, employees expect a range of health-related benefits, from basic health insurance to dental and vision coverage, prescription drugs, and mental health services. It’s a comprehensive package. However, in India, things are different.

I explain to clients that in India, what we offer is typically a “mediclaim” type of insurance, which focuses on hospitalization and maternity. At this point, many clients feel like something is missing. They wonder why the coverage seems limited compared to what they’re used to offering their employees. I assure them it’s not that we’re cutting corners—it’s simply that the needs and expectations in India differ.

Most companies in India offer health insurance as part of the overall salary package, rather than as an additional perk. This often surprises clients, but it’s a system that has evolved because employees here tend to value cash in hand over extensive insurance packages. The healthcare system in India plays a big role in this mindset. Unlike the West, Indians don’t visit doctors or hospitals frequently. Many rely on home remedies or over-the-counter medication. For general ailments, they go to their family doctor, who is easily accessible without a long wait or high fees. So, the urgency for comprehensive health insurance just isn’t there.

For instance, mental health services are becoming more relevant now, but historically, mental health issues in India have carried a stigma. People who need support are often labeled as weak or “mad.” In joint families, the support system for mental health has always come from within the family itself—emotional help from relatives, spiritual guidance, or community support. However, this is changing as nuclear families and urbanization increase, but it’s still a relatively new concern in the workplace.

I remember one client who was particularly concerned about liability. He asked, “What if we don’t provide enough coverage and an employee needs serious care? Won’t that come back to the company?” I explained that, while there are mandatory government schemes for employees earning below a certain threshold, for white-collar employees who earn much more than the minimum wage, there are no strict laws around what employers must provide in terms of health insurance. The coverage we offer typically includes hospitalization, room charges, doctor fees, and medication during the hospital stay. It also covers maternity, with a fixed amount allotted for pregnancy-related expenses.

Interestingly, as per our company’s records, only about 1 or 2% of employees ever make use of this insurance for accidents or hospitalization. The reality is that most Indian employees prefer to have a smaller insurance package and more take-home salary. However, some younger employees do expect to add their families to the plan, including spouses or aging parents, which is becoming more common.

In these discussions, it’s important for clients to understand the cultural nuances. What works in one country doesn’t necessarily translate directly into another. Medical insurance in India reflects the country’s unique healthcare system, social structures, and priorities. While it may not mirror the comprehensive packages in the West, it’s designed to meet the specific needs of Indian employees.