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Mumbai: Despite employing over 110 million people across India, micro, small and medium enterprises (MSMEs) continue to fall short in providing basic health protection to their workforce. New data from the National Institute for Micro, Small and Medium Enterprises (NI-MSME) shows that fewer than one in 10 MSMEs offer group health insurance to employees, a figure that underscores a significant gap in workplace benefits across the sector.
The findings are particularly concerning given the scale of the MSME ecosystem, which comprises more than 63 million enterprises nationwide. While group health insurance is often the first and only form of coverage for salaried workers, most MSME employees remain uninsured, especially those in informal or unregistered businesses. This leaves millions vulnerable to medical emergencies without financial support from their employer.
The adoption of group health insurance is highest in urban, Tier 1 service sectors such as information technology and financial services. In contrast, industries with higher physical risk – including manufacturing, construction and retail – show markedly lower coverage rates. Micro and small enterprises are the least likely to offer any form of employee insurance, according to the NI-MSME data.
Several factors contribute to this low uptake. Cost remains a primary concern, with many small business owners assuming that group insurance is prohibitively expensive or only viable for larger firms. There is also a widespread lack of awareness about affordable, customisable plans now available in the market.
Digitisation plays a role too, MSMEs that operate offline are less likely to engage with digital insurance platforms that simplify enrolment and claims. Crucially, there is no regulatory mandate requiring MSMEs to provide group health insurance, unlike schemes such as the Employees’ State Insurance Corporation (ESIC) or Provident Fund.
However, the landscape is beginning to shift. Insurers and fintech companies have introduced bite-sized group health plans tailored for small teams, with premiums starting as low as ₹100 to ₹150 per employee per month. These plans often include features such as zero paperwork, instant onboarding, and optional add-ons like outpatient cover or teleconsultation services. The Insurance Regulatory and Development Authority of India (IRDAI) has also encouraged insurers to design simplified group products specifically for micro and small businesses.
Some state governments are exploring incentives to boost adoption, including GST waivers and partial premium contributions. These efforts aim to make health insurance more accessible and relevant for MSMEs, aligning with broader national goals around universal health coverage and financial inclusion.
The implications for workers are significant. Without employer-sponsored insurance, many MSME employees face delays in seeking treatment due to cost concerns. Group plans typically offer advantages such as no medical checks, maternity cover, mental health support and lower premiums compared to individual policies – benefits that are often out of reach for those without formal employment benefits.
According to industry estimates, only eight to 10 million MSME employees are currently covered by group health plans. This represents a small fraction of the total workforce, and highlights the urgency of expanding coverage across the sector. With roughly 90 per cent of MSMEs operating informally and outside the purview of labour regulations, the challenge is not only financial but structural.
As India continues to push for inclusive growth, the MSME sector remains a critical focus area. Addressing the health insurance gap will require coordinated efforts from policymakers, insurers and industry bodies. For employers, the availability of flexible, low-cost plans presents an opportunity to enhance workplace security. For employees, initiating conversations around coverage could be the first step toward better protection.
The data paints a clear picture that health insurance is no longer a corporate luxury but a workplace necessity. Bridging the coverage gap in MSMEs is not just a matter of policy, but of equity and resilience.
(Write to us at editorial@bombaychamber.com)
