Key Takeaways

• Group health insurance is mandatory for companies covered under ESIC, specifically for employees earning up to Rs 21,000 per month, now governed by the Code on Social Security 2020, effective November 21, 2025.
• The April 2020 MHA order that made group health cover compulsory for offices reopening post-COVID was revoked on March 23, 2022. It no longer has legal force.
• For employees earning above the ESIC wage threshold, group health insurance is not legally mandated, but it has become the standard expectation across India’s organised sector.
• The minimum employee count to start a group health insurance policy in India is typically 7 employees, though some insurers accept groups as small as 5.
• Companies in Bangalore working with a broker like Edify can design GMC policies that complement ESIC for mixed-salary workforces, covering both requirements in one structured program.

As a business owner in India, if you get this question posed to you by either the HR manager or any financial officer in your company, you should know that this issue goes beyond the obvious.

In 2020, there were some important changes that occurred which were followed by even greater changes in 2022, and yet another major shift took place once the Code on Social Security was enacted in November 2025. This is why the straightforward answer is that everything depends on your company’s size, employees’ salaries, and your industry.

The Legal Framework: Where Mandatory Begins and Ends

The issue of whether there must be a compulsory group health insurance plan offered by companies in India can be seen from two different perspectives, that is, mandatory health insurance through ESIC, and discretionary plans beyond ESIC.

ESIC Under the Code on Social Security 2020

ESIC (Employees’ State Insurance Corporation) provided coverage of health insurance for lower-salary workers since 1948. The ESI Act 1948 is now repealed. Code on Social Security 2020 came into effect on 21st November 2025, which consolidated nine different social security legislations, such as ESI, EPF, gratuity, and maternity benefits in one law.

According to this Code, the ESIC scheme must compulsorily cover all employees who earn up to Rs 21,000 per month (Rs 25,000 for disabled persons). Some major differences are:

• ESIC now applies nationally, removing earlier restrictions to specific notified areas
• The 10-employee minimum threshold is removed for hazardous occupations, even a single worker in such roles requires coverage
• Establishments with fewer than 10 employees can voluntarily opt into ESIC with an employer-employee agreement
• A new 50% wage rule standardises how the Rs 21,000 threshold gets calculated across different salary structures

Companies that fall within ESIC’s scope must register, contribute, and comply. Non-compliance invites penalties.

What Happened to the COVID-Era Mandate?

On April 15, 2020, the Ministry of Home Affairs issued an order under the Disaster Management Act requiring companies reopening post-lockdown to provide group health insurance to their employees. That mandate created real urgency. Many companies bought their first GMC policies in response to it.

That order was revoked on March 23, 2022, when the National Disaster Management Authority withdrew DM Act provisions for COVID containment. The MHA order has no legal force today.

A parallel IRDAI circular from April 16, 2020, directing insurers to make group health products available to employers has not been formally withdrawn. The market has continued treating group cover as a baseline expectation, and most legal and HR advisors recommend it on those grounds.

Is Corporate Health Insurance Mandatory? Here Is the Practical Answer

For companies in India’s organised sector, the honest picture looks like this. Below are the scenarios that determine your obligation:

• ESIC applies to your company, and eligible employees earn below Rs 21,000/month: Group health insurance through ESIC is mandatory. You must register and contribute.
• Your employees earn above the ESIC threshold: No statutory group health insurance mandate applies. Coverage is discretionary.
• You operate in manufacturing, logistics, construction, or hazardous industries: State labour laws or contract requirements may impose additional accident or health coverage obligations, separate from ESIC.
• You are a startup, tech company, or professional services firm: Group health insurance is not legally required but is the de facto expectation. Candidates at every seniority level now treat it as a baseline benefit, not a differentiator.

What Is the Minimum Number of Employees for Group Health Insurance?

Most IRDAI-registered insurers in India set the minimum group size at 7 employees for a group health policy. Some insurers accept groups of 5 employees. There is no regulatory minimum set by IRDAI for the lower limit; each insurer defines it in its product structure.

For Bangalore startups with 7-20 employees, Edify structures group plans that work from day one of hiring, with flexible endorsement processes as headcount grows. You do not need to wait until you cross an arbitrary size threshold to offer meaningful coverage to your team.

Beyond Compliance: Why Bangalore Companies Are Buying Group Health Insurance

The legal mandate tells you the floor. The market tells you something different. Here are the real reasons Bangalore companies, startups, mid-stage scaleups, and enterprises alike are buying group health insurance regardless of whether the law requires it:

• Talent acquisition and retention: Candidates from Bangalore’s tech, consulting, and startup ecosystem consistently list health insurance as a non-negotiable benefit. Offering it is table stakes; not offering it is a visible gap.
• Tax advantage for the company: Group health insurance premiums paid by the employer are deductible as a business expense under Section 37(1) of the Income Tax Act 1961. The coverage delivers real value to employees while reducing the company’s taxable income.
• Employee productivity: Employees without health coverage deal with medical costs out of pocket. That financial stress shows up in distraction, absenteeism, and turnover. A group plan removes that variable.
• Pre-existing condition coverage from day one: Unlike individual retail policies with waiting periods of up to 4 years, most group plans cover pre-existing conditions from day one of policy commencement. That is a real benefit employees notice and value.
• Parental and family inclusion: Group plans allow companies to extend coverage to spouses, children, and parents, in some structures, which individual policies cannot replicate at a similar cost.

ESIC vs Group Health Insurance: What Is the Difference?

Many HR departments deal with both of these at once, and the difference is significant for administrative purposes as well as compliance. Some important differences between the two include:

• ESIC is a statutory plan which is run by the government. In this, the employer contributes 3.25% of wages, while the worker contributes 0.75%. The worker gets coverage for health, maternity, disability, and other issues through ESIC hospitals and dispensaries run by the government. Coverage applies to employees earning up to Rs 21,000 per month.
• Group health insurance is a private policy purchased by the employer from an IRDAI-regulated insurer. The employer pays a premium to provide coverage at private hospitals, including cashless access at network hospitals across India. It covers employees regardless of salary level and can be customised with riders, sum insured choices, and family inclusion.

Conclusion

Group health insurance is legally mandatory for employers whose workforce falls under ESIC, and the Code on Social Security 2020 has extended that mandate nationally with tighter definitions. For everyone else, the law does not compel it, but the talent market, employee expectations, and tax benefits make a strong practical case. 

Bangalore companies building teams of 7 or more typically find that the cost per employee per year is manageable, and the signal it sends to the team pays back in ways that do not show up on a premium invoice. Edify works with companies across Bangalore to design group health programs that meet compliance requirements and go further where it matters.

Ready to set up group health insurance for your company? Contact Edify today. Our team will assess your requirements and help you find the right plan.

FAQs:

Q1. Is group health insurance mandatory for all companies in India in 2026? 

Group health insurance through ESIC is mandatory for employees earning up to Rs 21,000 per month under the Code on Social Security 2020. For employees above this threshold, private group health insurance is not legally required but is the standard across India’s organised sector.

Q2. Is corporate health insurance mandatory after the COVID MHA order? 

No, the MHA order from April 2020 was revoked on March 23, 2022. It no longer applies. The parallel IRDAI circular directing insurers to offer group health products to employers has not been withdrawn, but it does not impose a legal obligation on companies.

Q3. What is the minimum number of employees needed for group health insurance? 

Most insurers require a minimum of 7 employees for a group health policy. Some accept groups from 5. There is no IRDAI-set regulatory minimum; each insurer defines the floor in their product terms.

Q4. How many employees do I need for a group policy to start in Bangalore? 

You can start a group health policy with as few as 7 employees in most cases. Edify works with Bangalore startups from early-stage hiring to help them set up a compliant and competitive group plan from the beginning.

Q5. What is the difference between ESIC and a private group health insurance plan? 

ESIC is a government-administered statutory scheme for employees earning up to Rs 21,000 per month. A private group health policy is purchased from an IRDAI-regulated insurer, offering coverage at private hospital networks with customisable benefits for any salary level.