Is Health Insurance Mandatory for Employees in India

Whether a company in India must provide health insurance to its employees is a question that has changed materially in the last two years. The answer in 2026 has three layers: ESIC under the new Code on Social Security, the residual position from the COVID-era directives, and the de facto market expectation.

The Short Answer

Health cover is mandatory in two specific situations:

• For employees earning up to ₹21,000 per month (₹25,000 for persons with disabilities), through the ESIC scheme. ESIC is now governed by the Code on Social Security, 2020, which came into force on November 21, 2025. The earlier ESI Act, 1948 stands repealed, with ESIC continuing as the administering body.
• For specific establishments still operating under residual COVID-era IRDAI guidance. The April 2020 IRDAI circular directing insurers to offer group health policies is still on the IRDAI website. The underlying MHA order under the Disaster Management Act was revoked on March 23, 2022.

Outside these, group health insurance for employees earning above the ESIC threshold is not legally mandatory but is now the standard expectation at most organised-sector employers.

The ESIC Position Under the Code on Social Security, 2020

The Code on Social Security, 2020 was notified and brought into force on November 21, 2025. It consolidates nine social security laws, including ESI, EPF, gratuity, and maternity benefits. Key changes that affect health cover for employees include:

• Wage threshold unchanged. ESIC coverage continues to apply to employees earning up to ₹21,000 per month (₹25,000 for PwD).
• Geographic expansion. ESIC coverage now extends across India, removing the earlier restriction to notified areas.
• Voluntary coverage. Establishments with fewer than 10 employees can voluntarily opt into ESIC if both employer and employees agree.
• Hazardous occupations. The 10-employee minimum is removed for hazardous occupations; even a single worker engaged in such work must be covered.
• New wage definition. The Code introduces a 50% rule, requiring at least 50% of total remuneration to be classified as wages, which affects how the ₹21,000 threshold is computed.

Companies covered by ESIC under the Code must comply with contribution and registration requirements. Failure attracts penalties.

What Happened to the April 2020 MHA Mandate

The April 15, 2020 Ministry of Home Affairs order, issued under the Disaster Management Act, originally required employers resuming office work after COVID lockdowns to provide medical insurance to their employees. That MHA order was withdrawn on March 23, 2022, when the National Disaster Management Authority decided to revoke DM Act provisions for COVID containment. The order is therefore no longer a binding legal mandate.

However, the parallel IRDAI circular issued on April 16, 2020 (IRDAI/HLT/CIR/MISC/093/04/2020), which directed insurers to make comprehensive group health products available to employers, has not been formally withdrawn. The market has continued to treat group health cover as a baseline expectation at organised-sector workplaces, and most legal advisors recommend it as a matter of good practice and ESG compliance.

Where It Becomes Voluntary

For employees earning above the ESIC threshold and at companies not falling under the mandatory ESIC framework, group health insurance is a discretionary benefit. It has become the de facto standard at most organised-sector employers because:

• It's a primary tool for talent attraction and retention
• Employees increasingly view it as basic, not bonus
• Premiums are tax-deductible for the employer under Section 37(1) of the Income Tax Act
• The cost per employee is low relative to perceived value, particularly compared to retail health insurance

Gig and Platform Workers Under the New Code

The Code on Social Security, 2020 introduces a distinct framework for gig and platform workers under Sections 113 and 114. Aggregators are required to contribute to a social security fund, with health and other benefits to be administered through schemes notified by the Central Government. Implementation is in a calibration phase as state-specific rules are finalised. This is separate from group health insurance for full-time staff.

How Plum Helps Employers Stay Compliant and Competitive

Plum offers group health insurance plans designed for Indian companies starting at seven employees. Plans complement ESIC for workforces with mixed wage profiles and provide cover above the ₹21,000 threshold. Pre-existing conditions are covered from Day 1, with a wide network of cashless hospitals across India.

Frequently Asked Questions

Is ESIC the same as group health insurance?

No. ESIC is a statutory scheme administered by the government for employees earning up to ₹21,000 per month, now governed by the Code on Social Security, 2020. Group health insurance is a private policy purchased by an employer from an IRDAI-regulated insurer.

Can a company offer both ESIC and group health insurance?

Yes. Many do — ESIC for eligible employees and group cover for the rest, or top-up cover that complements ESIC for employees who fall under the wage threshold.

Is the post-COVID MHA order still in force?

No. The MHA order issued on April 15, 2020 was rescinded on March 23, 2022, when the NDMA revoked DM Act provisions for COVID containment. The parallel IRDAI circular directing insurers to make group health products available has not been formally withdrawn, and the market continues to treat group cover as a standard practice.

What changed for employers when the Code on Social Security came into force?

ESIC is now administered under the Code, with the ESI Act, 1948 repealed. The wage threshold of ₹21,000 is unchanged, but ESIC coverage now applies nationwide and the wage definition has been standardised under the Code's 50% rule. Voluntary ESIC enrolment is also permitted for sub-10-employee establishments.