TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands the nuances of private medical insurance in the UK. This guide explores whether a group or individual PMI approach is best for your business, helping you make an informed decision for your team's health and wellbeing.
Key takeaways
- Reduces Sickness Absence: Faster diagnosis and treatment mean employees can return to work sooner. The Office for National Statistics (ONS) estimated that 185.6 million working days were lost due to sickness or injury in 2022, the highest level in a decade. PMI is a direct strategy to mitigate this cost.
- Attracts and Retains Talent: In a competitive job market, a quality health insurance plan is a highly sought-after employee benefit. It signals that you are an employer who genuinely cares for your team's wellbeing.
- Boosts Morale and Productivity: Employees who feel valued and have peace of mind about their health are typically more engaged, loyal, and productive.
- Supports Employee Wellbeing: Modern PMI often includes a suite of wellness tools, from mental health support to 24/7 digital GP access, promoting a proactive approach to health.
- For the Business: The premiums you pay for a group PMI scheme are considered an allowable business expense. This means you can deduct the cost from your pre-tax profits, reducing your Corporation Tax bill.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands the nuances of private medical insurance in the UK. This guide explores whether a group or individual PMI approach is best for your business, helping you make an informed decision for your team's health and wellbeing.
WeCovr compares corporate PMI schemes with private cover
Deciding how to support your employees' health is one of the most significant choices a business owner can make. It impacts morale, productivity, and your ability to attract top talent. The two main pathways are offering a comprehensive group Private Medical Insurance (PMI) scheme or providing a cash allowance for employees to purchase their own individual cover.
Both options have distinct advantages and suit different business models. This comprehensive guide will break down the features, costs, and practical considerations of each, empowering you to choose the right strategy for your organisation.
A Critical Note on UK Private Medical Insurance
Before we delve deeper, it's vital to understand a fundamental principle of the UK PMI market. Standard private health insurance is designed to cover acute conditions – diseases, illnesses, or injuries that are likely to respond quickly to treatment and return you to your previous state of health.
PMI does not typically cover:
- Pre-existing conditions: Any medical condition you had before your policy began.
- Chronic conditions: Conditions that are long-lasting and require ongoing management, such as diabetes, asthma, or high blood pressure.
While some group schemes can offer ways to cover pre-existing conditions (which we'll explore below), the rule for acute, post-policy conditions is the bedrock of how PMI works in the UK.
What is Private Medical Insurance and Why Do UK Businesses Bother?
Private Medical Insurance, often called private health cover, is an insurance policy that pays for the costs of private healthcare treatment for new, acute medical conditions. For a monthly or annual premium, policyholders gain access to private hospitals, specialists, and treatments, often much faster than would be possible through the NHS.
In the context of a challenging healthcare landscape, where NHS England reported a waiting list of 7.54 million treatments in April 2024, the appeal of PMI is clear. For businesses, the benefits extend far beyond simply "skipping the queue."
Key drivers for businesses offering PMI:
- Reduces Sickness Absence: Faster diagnosis and treatment mean employees can return to work sooner. The Office for National Statistics (ONS) estimated that 185.6 million working days were lost due to sickness or injury in 2022, the highest level in a decade. PMI is a direct strategy to mitigate this cost.
- Attracts and Retains Talent: In a competitive job market, a quality health insurance plan is a highly sought-after employee benefit. It signals that you are an employer who genuinely cares for your team's wellbeing.
- Boosts Morale and Productivity: Employees who feel valued and have peace of mind about their health are typically more engaged, loyal, and productive.
- Supports Employee Wellbeing: Modern PMI often includes a suite of wellness tools, from mental health support to 24/7 digital GP access, promoting a proactive approach to health.
A Deep Dive into Group Private Medical Insurance
Group Private Medical Insurance (also known as a company or corporate PMI scheme) is a single policy purchased by a business to cover a group of its employees. It is the most common way for UK businesses to provide health benefits.
The company chooses the level of cover, and all eligible employees are invited to join the scheme. This collective approach creates economies of scale and unlocks unique benefits not available to individuals.
Key Features of Group PMI Schemes
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A Single Master Policy: The business holds one overarching policy, which dramatically simplifies administration. Rather than dealing with dozens of individual policies, the company manages a single scheme, a single renewal date, and a single point of contact—especially when using an expert broker like WeCovr.
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Cost-Effectiveness: Insuring a group spreads the risk for the provider. This means the average cost per person is almost always lower than it would be for an equivalent individual policy. The more members in the scheme, the greater the potential saving.
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Powerful Underwriting Options: This is the most significant advantage of group PMI. Underwriting is how an insurer assesses risk and decides what it will and won't cover.
| Underwriting Type | How It Works | Best For |
|---|---|---|
| Medical History Disregarded (MHD) | The gold standard. The insurer agrees to cover all eligible acute conditions, regardless of a member's prior medical history. No medical questionnaires are needed. | Larger groups (typically 20+ employees). It's the most inclusive and attractive option for attracting senior talent. |
| Full Medical Underwriting (FMU) | Each employee completes a detailed health questionnaire. The insurer then lists specific conditions that will be excluded from their cover. | Smaller groups where cost control is the top priority and clarity on exclusions from day one is preferred. |
| Moratorium Underwriting | A simplified approach. Pre-existing conditions from the past 5 years are automatically excluded for a set period (usually 2 years). If the employee remains free of symptoms, treatment, or advice for that condition during the 2-year period, it may become eligible for cover. | A very common option for small business schemes (2-19 employees) as it's quick to set up and requires no forms. |
- Inclusivity and Team Cohesion: Providing the same core benefit to all employees fosters a sense of fairness and community. It shows that everyone's health is valued equally by the organisation.
The Alternative: An Allowance for Individual PMI
An alternative to a group scheme is to offer employees a fixed cash sum as part of their salary, specifically intended for them to purchase their own individual health insurance policy. This is sometimes called a "health stipend" or "PMI allowance."
With this model, the responsibility shifts from the company to the employee. The business provides the funds, and the employee researches, chooses, and manages their own private health cover.
Key Features of Individual PMI Policies
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Complete Personalisation: The employee has total control. They can choose the insurer, the level of cover (e.g., diagnostics only, full treatment), the excess they are willing to pay, and the specific list of hospitals they want access to.
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Strict Underwriting: Individual policies are almost always sold on a Full Medical Underwriting (FMU) or Moratorium basis. Medical History Disregarded (MHD) underwriting is not available. This means pre-existing conditions will be a key consideration and will likely be excluded.
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Full Portability: The policy belongs to the employee, not the company. If they leave their job, they can continue the policy seamlessly, provided they keep paying the premiums. This offers excellent continuity of cover.
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Higher Cost: Lacking the risk-spreading benefit of a group, individual policies are assessed on the specific risk of that one person (and their family, if included). This typically results in a higher premium for a comparable level of cover.
Head-to-Head: Group PMI Scheme vs. Individual Policy Allowance
So, which is right for your business? The answer depends on your company size, goals, budget, and administrative capacity. Let's compare them directly.
| Feature | Group PMI Scheme | Individual PMI (via Cash Allowance) |
|---|---|---|
| Cost Per Person | ✅ Lower. Risk is spread across the group, leading to more favourable premiums. | ❌ Higher. Risk is assessed individually, resulting in more expensive cover. |
| Administration for Business | ✅ Simpler. One master policy, one renewal date, one point of contact. | ❌ More Complex. Requires managing payroll allowances; no oversight on whether employees actually buy cover. |
| Cover for Pre-existing Conditions | ✅ Often possible. Medical History Disregarded (MHD) underwriting on larger schemes covers past conditions. | ❌ Almost never. Pre-existing conditions are typically excluded via FMU or Moratorium underwriting. |
| Flexibility for Employee | ❌ Less flexible. Cover level is standardised for all employees (or within tiers). | ✅ Fully flexible. Employee chooses their own insurer, cover level, excess, and hospital list. |
| Employee Experience | ✅ Effortless. Simple to join, often with no medical questions to answer (on MHD/Moratorium schemes). | ❌ High-effort. Employee must research the market, compare quotes, and manage their own policy. |
| Portability | ❌ Ends with employment. Cover ceases when the employee leaves, though they may have an option to continue on a personal basis at a higher cost. | ✅ Fully portable. The policy is owned by the employee and is unaffected by a change in employer. |
| Tax Implications | A taxable benefit-in-kind for the employee. Business can claim the premium as an expense. | The allowance is treated as salary, subject to Income Tax and National Insurance for both parties. |
Real-Life Scenarios: Which Model Works Best?
Scenario 1: The Fast-Growing Tech Start-Up (25 Employees)
- Goal: Attract the best developers in a fiercely competitive market. They need a standout benefits package that is also easy to manage.
- Best Choice: A Group PMI Scheme with Medical History Disregarded (MHD) underwriting.
- Why? The MHD underwriting is a huge selling point. A new senior hire with a history of back problems knows they will be covered for any new flare-ups. The administrative simplicity allows the small HR team to focus on growth, and the scheme builds a strong, unified company culture.
Scenario 2: The Small Consultancy Firm (5 Employees)
- Goal: Provide a meaningful health benefit without the administrative burden of a full group scheme. The team is young and healthy.
- Best Choice: A Group PMI Scheme with Moratorium underwriting.
- Why? It's incredibly simple to set up, with no medical forms. The cost per head will be significantly lower than five individual policies. It provides a solid foundation of cover and shows the partners are invested in their small team's wellbeing. WeCovr can help compare the market to find the most cost-effective small business scheme.
Scenario 3: The Highly Distributed Business (50 Remote Workers)
- Goal: Offer a flexible health benefit that accommodates employees with very different needs and priorities across the UK.
- Best Choice: A Cash Allowance for Individual PMI.
- Why? This model gives ultimate flexibility. A young employee in a low-cost area might prioritise a basic policy and pocket the difference. An older employee in London with a family might top up the allowance to buy comprehensive cover. The downside is the less favourable tax treatment and lack of cover for pre-existing conditions.
More Than Just Treatment: The Modern Wellness Ecosystem
Today's private medical insurance is about far more than just paying for operations. The best PMI providers now include a rich ecosystem of wellness benefits designed to keep your employees healthy and out of hospital in the first place.
These added-value services are often included as standard with group schemes and are a major part of their appeal.
Common Value-Added Services in UK PMI
- 24/7 Digital GP: Instant access to a GP via phone or video call, often with same-day appointments. This is invaluable for busy employees and reduces time off work for minor ailments.
- Mental Health Support: This is now a cornerstone of PMI. It can include access to telephone counselling, referrals to therapists or psychiatrists, and subscriptions to mindfulness apps like Headspace. With workplace stress and burnout being major concerns, this support is critical.
- Physiotherapy and Musculoskeletal (MSK) Support: Many policies offer a set number of physiotherapy sessions without needing a GP referral, helping to quickly resolve back, neck, and joint pain—a leading cause of sickness absence.
- Wellness Programmes and Discounts: This can include discounts on gym memberships, fitness trackers, and online health assessments to encourage a proactive approach to health.
WeCovr Client Benefit: As part of our commitment to holistic wellbeing, WeCovr provides clients who purchase PMI or Life Insurance with complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app. We also offer discounts on other insurance policies, helping your team build comprehensive financial and physical resilience.
Understanding the Costs and Tax Rules for Business Health Insurance
The financial side of business health insurance can seem complex, but the rules are quite clear. How you structure your offering has direct tax implications for both the business and your employees.
How Group PMI is Taxed
- For the Business: The premiums you pay for a group PMI scheme are considered an allowable business expense. This means you can deduct the cost from your pre-tax profits, reducing your Corporation Tax bill.
- For the Employee: The health insurance is treated as a 'benefit-in-kind'. This means the value of the premium is added to their income for tax purposes, and they will pay income tax on it. This is usually handled via an adjustment to their tax code. The employee does not pay National Insurance on the benefit.
- Employer's National Insurance: The business must pay Class 1A National Insurance Contributions (currently 13.8%) on the total value of the premiums paid. This is reported to HMRC annually using a P11D form.
How a Cash Allowance for Individual PMI is Taxed
This model is much simpler from a tax perspective because the allowance is treated exactly like a normal salary payment.
- For the Business: The allowance is part of your payroll costs and is an allowable business expense. You will also pay Employer's Class 1 National Insurance (13.8%) on the amount.
- For the Employee: The cash allowance is added to their gross pay. They will pay standard Income Tax and Employee's National Insurance contributions on it through PAYE.
This difference in National Insurance treatment is a key reason why, from a pure tax-efficiency standpoint, a group scheme can sometimes be more advantageous than a cash allowance, despite the P11D administration.
How to Choose the Right Path: Partnering with a PMI Broker
Navigating the private medical insurance UK market alone can be overwhelming. The terminology is complex, the providers are numerous, and the policy details are intricate. This is where an independent, expert broker like WeCovr provides immense value.
Partnering with us means you get:
- Expert, Unbiased Advice: As an FCA-authorised broker, our duty is to you, our client. We listen to your business goals, budget, and team demographics to recommend the right approach—be it a group scheme or guidance on a cash allowance model.
- Whole-of-Market Comparison: We have access to policies and rates from all the UK's leading health insurers, including Aviva, Bupa, AXA Health, and Vitality. We do the shopping around so you don't have to.
- Clarity and Simplicity: We translate the jargon and present your options in a clear, easy-to-understand format. We'll explain the difference between moratorium and MHD in plain English, ensuring you make a confident decision.
- Hassle-Free Implementation: Once you've chosen a policy, we handle the application and setup process, saving you valuable administrative time. We remain on hand to support you with renewals, claims queries, and adding new staff to your scheme.
Best of all, our service comes at no extra cost to you. We are paid a commission by the insurer you choose, so you get expert guidance without adding to your bottom line.
Can I cover pre-existing conditions with business health insurance?
How many employees do I need for a group PMI scheme?
Is dental and optical cover included in private medical insurance?
What happens to an employee's health cover if they leave the company?
Ready to build a healthier, more resilient team? The right health insurance strategy is a cornerstone of a modern, caring business.
Contact the WeCovr team today for a free, no-obligation chat about your business needs. We'll compare the market and provide expert, tailored advice to help you find the perfect solution.
Sources
- NHS England: Waiting times and referral-to-treatment statistics.
- Office for National Statistics (ONS): Health, mortality, and workforce data.
- NICE: Clinical guidance and technology appraisals.
- Care Quality Commission (CQC): Provider quality and inspection reports.
- UK Health Security Agency (UKHSA): Public health surveillance reports.
- Association of British Insurers (ABI): Health and protection market publications.
