Guide to company health insurance and how it works

Company health insurance is often seen as a perk only offered at large corporations, but more and more businesses are considering group private medical insurance (PMI) as part of their benefits package to attract and retain staff. Group medical insurance can benefit businesses of all sizes, giving staff access to treatment when they need it most – here’s how it works.

What is company health insurance?

Company health insurance policies (also known as private medical insurance or PMI) provide staff with access to private healthcare. The main advantage of PMI is that it can help employees bypass long NHS waiting lists, speeding up their treatment and recovery without the expensive fees that come with paying for treatment privately.

Is company health insurance an employee benefit?

Company health insurance often forms part of a benefits package offered to employees. It is classed as a benefit in kind (BiK), so it’s taxable, and employees will need to pay income tax on it. Depending on how much an employee gets paid, there may also be a slight increase in NI contributions.

If you’re considering offering company health insurance as part of your staff remuneration package, remember that NI contributions will be paid for by the business rather than the employee receiving the benefit.

Is PMI the same as a cash plan?

Health cash plans are not the same as private health insurance. Instead, a cash plan lets employees claim back money for routine health appointments and prescriptions– such as going to the dentist, optician, or even physiotherapist.

Read our guide to find out more, including whether health cash plans are a taxable benefit.

How does company health insurance work?

The business would pay for the cover for their employees, and if an employee is injured or unwell and needs medical attention, they can use the cover to seek private medical treatment. The private medical facility will invoice the insurer directly.

Staff can use the services provided as and when they need them. For example, if your policy offers 24/7 GP access, your employees should be able to arrange a same-day appointment (usually by telephone or video call). However, it’s worth noting that private medical insurance will not cover emergency treatment, so employees will still need to use the NHS in this eventuality. There may also be other exclusions depending on the insurer and the level of cover taken out.

Do all staff need to have the same level of cover?

Most policies can be tailored so that different groups of staff have different levels of cover. If you decide to do this, you’ll need to ensure that all employees in the same role receive the same benefits.

What does company health insurance cover?

What’s included will depend on the level of cover you agree with the insurer, but policies can provide:

• Access to GP advice 24/7

• Choice of hospitals for treatment

• Dental or opticians appointments

• Regular health checks

• Mental health support and stress-management

• Diagnostics such as consultant appointments and scans

• Treatment for acute conditions, including surgery

What is an acute condition?

Acute conditions are classified as injuries or illnesses with a clear set of symptoms and should get better with the right treatment, for example, broken bones, hernias, or appendicitis.

Longer-term illnesses are known as chronic conditions, for example, asthma, high blood pressure or heart disease. Private health insurance doesn’t usually cover chronic conditions, but there may be some exceptions depending on what’s agreed with the insurer.

Does company health insurance cover pre-existing health conditions?

In most cases, PMI won’t cover any pre-existing health conditions, but again, this would depend on what’s been agreed with the provider.

Employees would usually be expected to declare whether or not they’d had treatment for any illness or condition within the last five years. This would be listed as an exclusion within their policy if they have.

Does company health insurance cover cancer?

Policies can provide cancer care, including diagnosis and treatment, but this will depend on the plan agreed with the insurer.

How to choose business health insurance?

Company health insurance policies are generally very flexible, and businesses will be able to specify what’s included. When looking for PMI, think about:

• The features staff might want included, for example, would they be more interested in cover for common issues or for rarer but often more expensive to treat illnesses?

• Whether or not the plan should include cancer care. This can increase the cost of cover but would be viewed as an important benefit, helping attract and retain staff.

• How will the policy be offered? For example, will different groups of staff receive different packages?

• Whether you want staff to have the option of adding family members to the policy, and if so, how will this be managed?

Is there a minimum number of employees I need?

In most cases, you’ll need at least two employees to qualify for company health insurance. Broadly speaking, organisations with a handful of staff on the scheme will be offered a small business health insurance plan, while larger companies with at least 250 employees on the scheme will qualify for corporate group health insurance.

How much does company health insurance cost?

The cost comes down to the policy agreed with the provider and will depend on:

The postcode of the business

One of the ways insurers determine how likely it is that your employees will make a claim is based on the location of the business. This can work advantageously if the registered business address is in a low-crime area, such as Norfolk, with staff living or working in ‘riskier’ areas, such as London, as the insurer will rate the risk based on the ‘less-risky’ registered office address.

The average age of your employees

A younger workforce typically means lower premiums as there are potentially fewer health risks.

The features included within the policy

The level of cover you choose will have a big impact on the cost. The more features included, the higher premiums are likely to be.

The size of your business

The more employees you want to enrol in the scheme, the more it will cost. However, you’ll need to think about how the cost to the business could be offset by greater staff retention and a healthy workforce.

What sector you work in

Some jobs carry inherently more risk from an insurance point of view. For example, working with heavy machinery or in construction could mean more claims, increasing the cost.

The level of excess

Some policies come with an excess, usually paid by the employee when they make a claim. The higher the excess, the lower the premium and vice versa. Be mindful that while setting an excess can keep premiums down, if it’s high, it could stop employees from claiming, which would defeat the purpose of having the policy in the first place.

How can businesses use company health insurance to their benefit?

Figures released by the Health and Safety Executive (HSE) revealed 17 million working days were lost due to work-related stress alone in 2021-2022. Nearly half a million workers also suffered from work-related musculoskeletal conditions. Not only does this impact individual businesses, but it also costs the country billions of pounds.

For business owners, company health insurance can alleviate some of that impact. Firms can benefit from fewer sick days and better motivated and productive staff.

Organisations can also use company health insurance as an incentive. Research shows job hunters are concerned about the rising cost of living, and employee benefits can help attract new candidates and improve staff retention.

Is company health insurance worth it?

Company health insurance can be a way to improve overall morale and can also give you:

• a happier work culture where employees feel valued;

• a more productive workforce, as staff receive treatment quicker;

• peace of mind, knowing that help is there if needed;

• access to a wide range of treatments for little cost to the employee;

• convenience for both employer and employee, particularly for GP access, consultations, and referrals.

How do businesses arrange company health insurance?

Choosing the right company health insurance for your business can be difficult and confusing. To get the right level of group cover, it’s worth speaking to a broker or consultant who can discuss your options in relation to your specific business.