TL;DR
In today's competitive UK job market, attracting and retaining top talent requires more than just a competitive salary. At WeCovr, with our experience in arranging over 900,000 policies of various kinds, we see firsthand how forward-thinking companies use employee benefits to stand out. One of the most valued benefits you can offer is employer private medical insurance (PMI).
Key takeaways
- Pre-existing Conditions: Any medical condition an employee had symptoms of, or received treatment for, in the years leading up to the policy start date (typically the last five years) will not be covered initially. Some underwriting types can address this, which we'll cover later.
- Chronic Conditions: Long-term conditions that cannot be cured but can be managed, such as diabetes, asthma, arthritis, and high blood pressure, are not covered by PMI. The day-to-day management of these conditions remains with the NHS. However, a new, acute flare-up of a chronic condition may sometimes be covered to restore the patient to their previous state of health.
- Attract & Retain Top Talent: In a candidate-driven market, a strong benefits package is a powerful differentiator. PMI is consistently ranked as one of the most desirable employee perks.
- Reduce Sickness Absence: According to the latest ONS data, an estimated 185.6 million working days were lost because of sickness or injury in 2022. By providing fast access to treatment, PMI can significantly shorten an employee's recovery time, reducing absenteeism and its impact on your bottom line.
- Boost Productivity & Morale: An employee worried about their health or a long wait for treatment is unlikely to be fully productive. Knowing they have access to swift medical care reduces stress and shows you care, fostering loyalty and a positive workplace culture.
In today's competitive UK job market, attracting and retaining top talent requires more than just a competitive salary. At WeCovr, with our experience in arranging over 900,000 policies of various kinds, we see firsthand how forward-thinking companies use employee benefits to stand out. One of the most valued benefits you can offer is employer private medical insurance (PMI).
This comprehensive guide explains everything UK companies need to know about setting up a group health insurance scheme, from how it works and what it costs, to the significant tax implications and benefits for both your business and your team.
How employer private health insurance works and whether its worth offering staff
Employer private health insurance, often called a 'group health insurance scheme' or 'company PMI', is a policy paid for by a business to give its employees access to private medical care. Its primary purpose is to help staff bypass long NHS waiting lists for eligible, acute conditions, allowing them to receive prompt diagnosis and treatment.
For many UK businesses, offering PMI is a strategic decision. It's not just a perk; it's an investment in your most valuable asset: your people. By ensuring your team can get back on their feet quickly after an illness or injury, you protect your business's productivity and demonstrate a genuine commitment to employee wellbeing.
What is Employer Private Health Insurance?
At its core, employer private health insurance is a contract between your company and an insurance provider. Your company pays a monthly or annual premium for each employee covered by the scheme. In return, the insurer agrees to pay for the private medical treatment of acute conditions that arise after the policy begins.
An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery. Examples include joint replacements, cataract surgery, or treatment for hernias.
The Critical Distinction: What PMI Does Not Cover
It is vital to understand that standard UK private medical insurance is designed for new, treatable conditions. It is not designed to replace the NHS.
Two key areas are almost always excluded from standard policies:
- Pre-existing Conditions: Any medical condition an employee had symptoms of, or received treatment for, in the years leading up to the policy start date (typically the last five years) will not be covered initially. Some underwriting types can address this, which we'll cover later.
- Chronic Conditions: Long-term conditions that cannot be cured but can be managed, such as diabetes, asthma, arthritis, and high blood pressure, are not covered by PMI. The day-to-day management of these conditions remains with the NHS. However, a new, acute flare-up of a chronic condition may sometimes be covered to restore the patient to their previous state of health.
Understanding these exclusions is the single most important step in managing employee expectations and ensuring the benefit is valued correctly.
The Core Benefits: Why Offer PMI to Your Staff?
The decision to invest in a company health scheme brings tangible advantages for both the employer and the employee. In a climate of record NHS waiting times, these benefits have never been more pronounced.
Benefits for Your Company
- Attract & Retain Top Talent: In a candidate-driven market, a strong benefits package is a powerful differentiator. PMI is consistently ranked as one of the most desirable employee perks.
- Reduce Sickness Absence: According to the latest ONS data, an estimated 185.6 million working days were lost because of sickness or injury in 2022. By providing fast access to treatment, PMI can significantly shorten an employee's recovery time, reducing absenteeism and its impact on your bottom line.
- Boost Productivity & Morale: An employee worried about their health or a long wait for treatment is unlikely to be fully productive. Knowing they have access to swift medical care reduces stress and shows you care, fostering loyalty and a positive workplace culture.
- A Duty of Care: Providing health insurance demonstrates a proactive approach to employee wellbeing and your responsibilities as an employer.
Benefits for Your Employees
- Bypass NHS Waiting Lists: With NHS waiting lists in England exceeding 7.5 million, the primary benefit is speed. PMI allows employees to get diagnosed and treated in weeks, not months or years.
- Choice and Control: Employees often have a choice of leading specialists and a nationwide network of high-quality private hospitals.
- Comfort and Privacy: Treatment is typically in a private, en-suite room, offering a more comfortable and restful environment for recovery.
- Access to Specialist Treatments: Some policies provide access to new drugs or treatments not yet available on the NHS due to funding decisions.
- Peace of Mind: Perhaps the most significant benefit is the reduction in anxiety for the employee and their family, knowing that care is available when it's needed most.
How Does a Company Health Insurance Scheme Work in Practice?
The process is designed to be straightforward. Let's walk through a typical employee journey:
- Develops Symptoms: An employee, let's call her Sarah, develops persistent knee pain.
- Visits GP: Sarah visits her NHS GP, who suspects a torn meniscus and recommends an MRI scan and a consultation with an orthopaedic specialist. The GP provides an 'open referral' letter.
- Contacts the Insurer: Sarah calls her company's PMI provider's claims line. She provides her policy number and details of her GP's referral.
- Claim Authorisation: The insurer checks her cover and confirms that the condition is eligible. They approve the consultation and MRI scan, providing an authorisation code. They may also provide a list of approved specialists and hospitals in her area.
- Receives Treatment: Sarah books her appointment with the specialist at a local private hospital. The scan confirms the diagnosis, and surgery is scheduled for two weeks later.
- Direct Settlement: Sarah undergoes the surgery. The hospital and specialist send their invoices directly to the insurance company. Sarah only pays if she has a policy 'excess'.
- Recovery: Sarah recovers quickly and is back at work far sooner than if she had waited for the same procedure on the NHS.
The key is that the insurer manages the financial side directly with the healthcare provider, leaving the employee to focus on their health.
Key Factors That Determine the Cost of a Group PMI Policy
The premium for a company health insurance scheme is not a one-size-fits-all figure. Insurers calculate the price based on a range of risk factors. Understanding these can help you tailor a policy to your budget.
| Cost Factor | How it Affects the Premium | Broker Insight |
|---|---|---|
| Average Age | Higher average age = higher premium. Older employees are statistically more likely to claim. | Many insurers use age bands. The premium can jump significantly when the average age crosses a new threshold (e.g., 40, 50). |
| Number of Employees | The more employees on the scheme, the lower the per-head cost tends to be, as the risk is spread. | Larger groups (20+) can often access more favourable underwriting terms, like Medical History Disregarded. |
| Industry/Location | Manual labour or high-risk jobs can increase premiums. Policies in Central London are more expensive due to higher hospital costs. | An office-based business in Manchester will pay less than a construction firm of the same size based in London. |
| Level of Cover | This is the biggest driver of cost. Adding benefits like out-patient cover, mental health, or dental/optical will increase the price. | Start with core cover (in-patient and day-patient) and then add options based on budget. A good broker like WeCovr can model these costs for you. |
| Policy Excess | The amount an employee pays towards their first claim each year. A higher excess (£250, £500) will lower the overall premium. | Introducing a small compulsory excess is one of the most effective ways to manage costs without significantly reducing the benefit. |
| Hospital List | Insurers offer tiered hospital lists. A comprehensive list including prime London hospitals is the most expensive. | Choosing a more restricted list that still provides excellent nationwide coverage can deliver significant savings. |
| Underwriting | The method used to assess pre-existing conditions. 'Medical History Disregarded' is the most expensive but most comprehensive. | We'll explore this next, as it's a critical decision point, especially for smaller businesses. |
Understanding Underwriting: The Engine of Your Policy
Underwriting is how an insurer decides how to treat pre-existing medical conditions. For group schemes, there are several options, and the right choice depends on your company's size and goals.
| Underwriting Type | How it Works | Best For |
|---|---|---|
| Moratorium (Mori) | No medical questions upfront. Any condition a member had in the 5 years before joining is excluded. This exclusion is lifted if they go 2 full years on the policy without symptoms, treatment, or advice for that condition. | Small businesses (2-15 employees) wanting a quick and simple setup. It's the most common type for SMEs. |
| Full Medical Underwriting (FMU) | Each employee completes a full health questionnaire. The insurer then applies specific, named exclusions to their cover based on their medical history. | Companies wanting absolute clarity on what is and isn't covered from day one. Can sometimes be cheaper if the workforce is very healthy. |
| Medical History Disregarded (MHD) | The 'gold standard'. The insurer agrees to cover eligible pre-existing conditions, subject to the policy terms. No medical information is needed from staff. | Larger companies (usually 15/20+ employees). It's a major selling point as it provides the most comprehensive cover. |
| Continued Personal Medical Exclusions (CPME) | Used when switching a scheme from one insurer to another. It ensures employees carry over the same exclusions they had on their old policy, preventing loss of cover. | Any business looking to switch its PMI provider to get a better deal or improved service. |
An expert broker like WeCovr can be invaluable here. We help you understand which underwriting option offers the best value for your specific team and negotiate with insurers to secure the most favourable terms, especially for accessing MHD underwriting.
What's Typically Covered by Company PMI (and What's Not)?
While every policy is different, most are built around a core set of benefits, with optional extras you can add to enhance the cover.
| Included in Most Policies (Core Cover) | Often Excluded or Optional Extras |
|---|---|
| ✅ In-patient & Day-patient Treatment (hospital stays) | ❌ Pre-existing & Chronic Conditions |
| ✅ Specialist Consultation Fees | ❌ Routine Pregnancy & Childbirth |
| ✅ Hospital Accommodation & Nursing Care | ❌ Cosmetic Surgery |
| ✅ Cancer Cover (often extensive and a key benefit) | ❌ A&E / Emergency Services |
| ✅ Diagnostic Tests (MRI, CT, PET scans) | ❌ Management of Alcohol/Drug Abuse |
| ✅ Surgical Procedures | ❌ Unproven or Experimental Treatment |
| ✅ Optional Add-ons: | ❌ Optional Add-ons (unless selected): |
| ➕ Out-patient Cover (consults/tests not needing a hospital bed) | ➖ Dental & Optical Cover |
| ➕ Mental Health Cover (psychiatric & therapeutic support) | ➖ Therapies (Physio, Osteo, Chiro) |
| ➕ Alternative Therapies |
Communicating this clearly to staff is essential. The policy is there for acute, unexpected issues, while the NHS remains the port of call for emergencies, GP services, and long-term condition management.
The Tax Implications of Employer Health Insurance
The tax treatment of company health insurance is a crucial factor in your financial planning. It's viewed favourably for the business but creates a tax liability for the employee.
For the Employer
The premiums your company pays for the group health scheme are generally considered an allowable business expense. This means you can deduct the full cost from your pre-tax profits, reducing your overall Corporation Tax bill.
For the Employee
Private medical insurance is treated as a 'benefit-in-kind'. This is a non-cash benefit that has a monetary value.
- The value of the benefit is the cost of the premium paid by the employer for that specific employee.
- Your company must report this on a P11D form to HMRC each year.
- The employee then pays income tax on the value of that premium, usually through an adjustment to their tax code.
Example:
- An employee, David, is a basic rate (20%) taxpayer.
- The annual premium for his health cover is £800.
- David will pay 20% of £800 in tax, which is £160 per year (or about £13.33 per month).
- For a higher rate (40%) taxpayer, the cost would be £320 per year.
Even with this tax liability, the vast majority of employees find that the value and peace of mind offered by the insurance far outweigh the personal tax cost.
Enhancing Your Benefits with WeCovr's Added Value
When you arrange your company's health insurance through a dedicated broker like WeCovr, you not only get expert advice and market comparison but also access to additional perks that enrich your employee wellbeing programme.
- Complimentary Access to CalorieHero: All employees covered under a scheme arranged by us get free access to our AI-powered calorie and nutrition tracking app, CalorieHero. This is a great tool to support proactive health and wellness initiatives in your workplace.
- Discounts on Other Insurance: As a WeCovr client, your business and employees can benefit from preferential rates on other types of essential cover, such as life insurance, income protection, and critical illness cover, creating a more holistic safety net.
We believe in adding tangible value beyond just finding the right policy. These benefits help embed a culture of health and financial resilience within your organisation.
Is employer health insurance a taxable benefit in the UK?
How many employees do I need for a group health insurance policy?
Can we cover employees' family members on the policy?
Does company PMI cover mental health conditions?
Is Employer Private Health Insurance Worth It? The Verdict
For a modern UK business focused on growth, stability, and its people, the answer is a resounding yes.
The investment in a company health insurance scheme pays dividends in recruitment, retention, and reduced absenteeism. It sends a powerful message that you value your employees' health and wellbeing, fostering a loyal and resilient workforce. In an era where the NHS is under unprecedented pressure, providing a route to fast, effective private medical care is one of the most meaningful and impactful benefits you can offer.
The key to a successful scheme is getting the right advice. The market is complex, with numerous providers, cover levels, and underwriting options. Partnering with an expert, independent broker is the most effective way to navigate these choices.
At WeCovr, we specialise in helping UK businesses of all sizes find the perfect health insurance solution. We take the time to understand your company's budget, culture, and objectives. We then scour the market on your behalf, comparing policies from leading providers like Aviva, AXA, Bupa, and Vitality to present you with clear, jargon-free options.
Our service is free, our advice is impartial, and our goal is simple: to help you protect your team and your business.
Ready to explore the best health insurance options for your company?
Contact WeCovr today for a free, no-obligation market review and quote. Let's build a healthier, more productive future for your business, together.
