TL;DR
As one of the UK's most experienced private health insurance brokers, having helped arrange cover for over 900,000 people through various policies, WeCovr understands the significant value of a well-structured employee benefits package. This guide delivers expert, practical advice on company private medical insurance for UK businesses. A practical guide to employee private medical insurance for UK employers In today's competitive job market, attracting and retaining top talent requires more than just a competitive salary.
Key takeaways
- Diagnostics: Consultations with specialists, MRI/CT/PET scans, and other diagnostic tests to quickly determine the cause of a health issue.
- Treatment: In-patient and day-patient treatment in a private hospital, including surgery, hospital accommodation, and nursing care.
- Out-patient Care: Specialist consultations, therapies (like physiotherapy), and diagnostic tests that do not require a hospital admission.
- Cancer Care: Comprehensive cover for chemotherapy, radiotherapy, and surgical procedures is a cornerstone of most PMI policies.
- Mental Health Support: Access to counsellors, therapists, and psychiatrists, which is an increasingly vital component of modern schemes.
As one of the UK's most experienced private health insurance brokers, having helped arrange cover for over 900,000 people through various policies, WeCovr understands the significant value of a well-structured employee benefits package. This guide delivers expert, practical advice on company private medical insurance for UK businesses.
A practical guide to employee private medical insurance for UK employers
In today's competitive job market, attracting and retaining top talent requires more than just a competitive salary. A comprehensive benefits package that prioritises employee health and wellbeing is now a critical differentiator. Group Private Medical Insurance (PMI) stands out as one of the most valued employee benefits, offering tangible advantages for both your team and your business.
This guide provides UK employers with a clear, exhaustive roadmap to understanding, choosing, and implementing a company health insurance scheme that delivers real value.
What is Employee Private Medical Insurance (PMI)?
Employee private medical insurance, also known as a group or company health insurance scheme, is a single policy purchased by an employer to provide private healthcare access for its workforce. Instead of individuals buying their own cover, the company arranges the policy, often securing more favourable terms and broader cover than is typically available to individuals.
The core purpose of PMI is to cover the costs of diagnosis and treatment for acute conditions. An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery.
Key Fact: Standard UK private medical insurance is designed for new, short-term, curable conditions that arise after you take out the policy.
What it typically covers:
- Diagnostics: Consultations with specialists, MRI/CT/PET scans, and other diagnostic tests to quickly determine the cause of a health issue.
- Treatment: In-patient and day-patient treatment in a private hospital, including surgery, hospital accommodation, and nursing care.
- Out-patient Care: Specialist consultations, therapies (like physiotherapy), and diagnostic tests that do not require a hospital admission.
- Cancer Care: Comprehensive cover for chemotherapy, radiotherapy, and surgical procedures is a cornerstone of most PMI policies.
- Mental Health Support: Access to counsellors, therapists, and psychiatrists, which is an increasingly vital component of modern schemes.
What it almost always excludes:
- Chronic Conditions: Long-term illnesses that cannot be cured, only managed (e.g., diabetes, asthma, hypertension).
- Pre-existing Conditions: Any medical condition you had symptoms of, or received treatment for, before the policy started (unless you have 'Medical History Disregarded' underwriting).
- Emergencies: Emergency treatment is provided by the NHS. PMI is for planned, non-emergency care.
- Routine Pregnancy & Childbirth: Normal maternity care is not covered, though complications may be.
- Cosmetic Surgery: Procedures that are not medically necessary.
- Self-inflicted Injuries: Including those from dangerous sports or substance abuse.
Why Should Your Company Offer Private Medical Insurance?
Offering PMI is a strategic investment in your most valuable asset: your people. The return on this investment is measured in productivity, loyalty, and a healthier, more resilient workforce.
1. Attract and Retain Top Talent In a candidate-driven market, a strong benefits package can be the deciding factor. PMI is consistently ranked as one of the most desirable employee benefits, signalling that you are an employer who genuinely cares.
2. Reduce Sickness Absence and Boost Productivity The reality of the UK healthcare landscape includes significant waiting times. According to the latest NHS England data, the waiting list for consultant-led elective care stands at several million. This can mean employees are off work, or working at reduced capacity, for months.
PMI bypasses these queues, enabling employees to get a diagnosis and start treatment in days or weeks, not months. This dramatically reduces the length of sickness-related absences and gets your team members back to full health and productivity faster.
3. Enhance Employee Morale and Loyalty Providing health insurance demonstrates a tangible commitment to employee wellbeing. Knowing they have access to fast, high-quality medical care gives employees and their families peace of mind, fostering a positive and loyal company culture.
4. Access to Advanced Treatments and Wellness Perks Many PMI policies provide access to the latest licensed drugs and treatments, some of which may not yet be available on the NHS due to funding decisions. Furthermore, modern insurers bundle valuable wellness services into their plans, such as:
- Virtual GP services (24/7 access)
- Mental health support lines
- Gym discounts and fitness tracking rewards
- Nutritional advice and wellness apps (WeCovr clients, for example, get complimentary access to the CalorieHero AI calorie tracking app).
| Benefit for Employer | Benefit for Employee |
|---|---|
| Reduced sickness absence | Faster access to specialists & treatment |
| Increased productivity | Peace of mind and reduced health anxiety |
| Stronger employee retention | Access to a wider range of treatments |
| Enhanced employer reputation | Valuable wellness & mental health support |
| Tax-deductible business expense | A highly valued part of their compensation |
How Does Group Private Medical Insurance Work?
Setting up and running a group scheme is a straightforward process, especially when guided by a specialist broker.
The Employee Journey:
- GP Referral: An employee feels unwell and visits their NHS GP as usual.
- Open Referral: The GP determines a specialist consultation is needed and provides an open referral letter.
- Claim Authorisation: The employee calls the insurer's claims line. The insurer checks the policy terms and authorises the consultation.
- Treatment: The insurer helps the employee book an appointment with a recognised specialist. If treatment is needed, the insurer provides a pre-authorisation code, and the hospital bills the insurer directly.
The employee's primary interaction is with the insurer's claims team, minimising administrative burden for the employer.
Types of Company Schemes:
- Fully Insured Scheme: The most common type. The employer pays 100% of the premium for all included employees. This is treated as a Benefit in Kind for tax purposes.
- Voluntary Scheme: The employer facilitates access to a group scheme, but employees opt-in and pay the premium themselves from their salary. They benefit from corporate rates which are typically cheaper than individual policies.
- Flexible Benefits Scheme: The company gives employees a 'flex pot' or benefits allowance. Employees can then choose to allocate some or all of this allowance to 'purchase' PMI, alongside other options like dental cover or increased pension contributions.
Key Decisions for Employers: Tailoring Your Company Scheme
A "one-size-fits-all" approach does not work for PMI. The policy must be tailored to your budget, company culture, and employee demographics. An expert broker like WeCovr can guide you through these critical choices.
1. Underwriting Options
Underwriting is how an insurer assesses risk and decides what to cover. For group schemes, there are several options, each with significant implications.
| Underwriting Type | How It Works | Best For | Key Consideration |
|---|---|---|---|
| Moratorium (Mori) | Simple to set up, no medical forms. Automatically excludes conditions from the last 5 years. This exclusion is lifted if the member goes 2 years without symptoms, treatment, or advice for that condition after joining. | Small groups (2-15 employees) or those wanting a quick, simple setup. | Can create uncertainty. An old condition could resurface and be excluded. |
| Full Medical Underwriting (FMU) | Each member completes a detailed health questionnaire. The insurer then sets specific, named exclusions on the policy from day one. | Groups where members are generally healthy and want clarity on what is and isn't covered from the start. | More initial administration. Can be intrusive for employees. |
| Medical History Disregarded (MHD) | The gold standard. The insurer agrees to cover all eligible medical conditions, including pre-existing ones. | Larger groups, typically 20+ employees. Essential for senior leadership teams or companies wanting the most comprehensive cover. | The most expensive option, but offers complete peace of mind. |
| Continued Personal Medical Exclusions (CPME) | Used when switching an existing scheme from one insurer to another. The new insurer agrees to honour the underwriting terms of the previous policy. | Any group looking to switch providers without losing cover for conditions that were previously covered. | Ensures seamless continuity of cover for all members. |
Broker's Tip: Medical History Disregarded (MHD) is a powerful retention tool for key staff. It removes any anxiety an employee might have about losing cover for a known health condition if they move jobs.
2. Level of Cover
Insurers typically offer tiered policies. Choosing the right level depends on your budget and what you want to prioritise.
- Basic/Entry-Level: Primarily covers in-patient and day-patient treatment. Out-patient diagnostics and consultations may be capped at a low limit (e.g., £500) or excluded entirely.
- Mid-Range/Standard: The most popular choice. Offers comprehensive in-patient cover plus a reasonable out-patient limit (e.g., £1,000 - £1,500) for consultations and tests. Often includes some therapy cover.
- Comprehensive: The premium option. Provides full cover for in-patient and out-patient treatment with no annual monetary limit. Usually includes extensive mental health, dental, and optical benefits.
3. Hospital Lists
The network of hospitals your employees can use directly impacts the premium.
- Local/Regional Lists: Restrict access to hospitals in a specific area, offering significant cost savings. Ideal for businesses with a geographically concentrated workforce.
- National Lists: Provide access to a wide range of private hospitals across the UK, excluding the most expensive central London facilities.
- Premium/London Lists: Include the high-end private hospitals in central London (e.g., The London Clinic, Cromwell Hospital), which comes with a higher premium.
4. The Policy Excess
An excess is the amount a member pays towards a claim in a given policy year. For example, with a £100 excess, the employee pays the first £100 of their claim.
- Impact on Premium: A higher excess reduces the overall policy premium for the employer.
- Implementation: You can choose an excess of £0, £100, £250, or more. Setting a mandatory excess of £100-£250 is a common way to manage costs without significantly impacting the benefit's value.
Understanding the Costs and Tax Implications
The cost of a group PMI scheme is influenced by several factors:
- Average age of employees: Older workforces have higher premiums.
- Company size: Larger groups often achieve better per-head rates.
- Industry: Higher-risk occupations may attract higher premiums.
- Location: Premiums are often higher in London and the South East.
- Chosen Cover: The level of cover, hospital list, and excess are the biggest levers on price.
Tax Treatment: A Critical Detail for Employers
Understanding the tax rules is essential for budgeting and payroll.
- For the Employer: The premiums you pay for a group PMI scheme are considered an allowable business expense. This means you can deduct the full cost from your pre-tax profits, reducing your Corporation Tax bill.
- For the Employee: Company-paid health insurance is a 'Benefit in Kind' (BIK). This means it has a cash value that is treated as part of the employee's income for tax purposes. The employee must pay income tax on the value of the premium.
- Employer National Insurance: The employer must also pay Class 1A National Insurance Contributions (NICs) on the value of the benefit provided to each employee. The current rate is 13.8%.
Practical Example: Let's say your company pays an annual PMI premium of £800 for an employee who is a higher-rate taxpayer (40%).
-
Employer Cost:
- Premium: £800
- Class 1A NICs (£800 x 13.8%): £110.40
- Total cost to employer: £910.40
- This entire amount is a tax-deductible expense.
-
Employee Cost:
- The £800 premium is added to their taxable income.
- Income Tax due (£800 x 40%): £320
- This is typically collected via a change in their tax code.
The employer is responsible for reporting this benefit to HMRC on a P11D form for each employee.
The Role of a Specialist Health Insurance Broker
The UK PMI market is complex, with numerous providers, policies, and options. Partnering with an independent, FCA-regulated broker like WeCovr is the most effective way to navigate this landscape.
Why use a broker?
- Whole-of-Market Access: We compare policies from all leading UK insurers, including Bupa, AXA Health, Aviva, Vitality, and WPA, ensuring you get the best terms and price.
- Expert, Unbiased Advice: We take the time to understand your business and recommend a scheme that truly fits your needs and budget, explaining the pros and cons of each option.
- Time and Hassle Savings: We handle the entire market review, negotiation, and application process for you, freeing up your time.
- Annual Review and Support: At renewal, we re-broke the market to ensure your scheme remains competitive. We also provide ongoing support for any administrative or claims queries.
- No Direct Cost: Brokers are paid a commission by the insurer you choose. Our expert advice and support come at no additional cost to your business.
Furthermore, WeCovr clients often benefit from additional perks, such as discounts on other business or personal insurance policies when they take out a group PMI or life insurance scheme.
Common Mistakes Employers Make When Buying Group PMI
Drawing on our experience, here are some common pitfalls to avoid:
1. Focusing Only on the Cheapest Price The Mistake: Choosing the policy with the lowest headline premium without scrutinising the cover levels. This often leads to policies with very low out-patient limits or restrictive hospital lists, causing employee frustration at the point of claim. Broker's Tip: Define your "must-have" benefits first (e.g., a £1,500 out-patient limit, good mental health cover). Then, ask your broker to find the most cost-effective policy that meets these requirements.
2. Misunderstanding the Underwriting The Mistake: Defaulting to Moratorium underwriting for a senior team with known medical histories. This can lead to key individuals finding their conditions are not covered when they need treatment. Broker's Tip: For groups over 20, always push for a Medical History Disregarded (MHD) quote. For smaller groups, discuss the pros and cons of FMU vs. Moratorium with your broker to match the option to your team's profile.
3. Failing to Communicate the Benefit The Mistake: Launching the scheme with a single email and expecting employees to understand its value. If employees don't know how to use the policy or what it covers, its value as a benefit is lost. Broker's Tip: Work with your broker and insurer to create a clear communications plan. This should include welcome packs, intranet pages, and even short presentations explaining the benefits and the claims process.
4. Auto-Renewing Without a Market Review The Mistake: Simply accepting the insurer's renewal quote each year. Premiums often increase above medical inflation, and the market is constantly evolving with new products and pricing. Broker's Tip: Mandate an independent market review by your broker at least 8 weeks before your renewal date. This gives you leverage to negotiate with your current insurer or the option to switch to a better-value provider seamlessly.
Ready to Offer Your Team the Best in Health Benefits?
Implementing a company private medical insurance scheme is one of the most powerful investments you can make in your workforce. It protects your employees' health, safeguards your business against productivity loss, and positions you as a top-tier employer.
Navigating the options can be complex, but you don't have to do it alone. The expert team at WeCovr is here to provide free, impartial advice and a comprehensive market comparison tailored to your business.
