How Does Business Health Insurance Work in the UK?

One of the benefits most valued by employees is private health insurance. A company health insurance scheme can help you attract and retain staff at all levels of your organisation.

In this article, we take a look at how company health insurance works in the UK and the benefits for your employees and your business.

What is Business Health Insurance?

Business health insurance provides employees with fast access to private healthcare. It’s also known as private medical insurance (PMI) or company health insurance.

It covers a wide range of treatments. Such as seeing a private GP, physiotherapist or mental health professional. Plus, quick diagnosis and treatment, cancer care, stays in private hospitals, and access to specialist drugs.

Vitality also provides a personal health fund (PHF). This fund helps pay for everyday healthcare bills that aren’t usually covered by private medical insurance. Such as dental check-ups, health screening and NHS prescriptions for chronic conditions.

How does Business Health Insurance Work in the UK?

Private health insurance is usually provided as part of an employee benefits package. Employers pay the premium, the cost of which can be deducted from their taxable income.

The plan is set up as a single policy. Providers generally offer a core plan, which you can tailor with optional extras. These include:

• Outpatient cover
• Therapies cover
• An employee assistance programme
• Optical, dental and hearing cover
• Travel insurance.

This means you can tailor the cover to suit the needs of your workforce. For example, you can provide a more comprehensive level of cover for senior managers and key staff.

You can also choose which hospitals and consultants your employees can access when they need treatment.

To manage the cost of providing cover, you can introduce an excess. This means your employees will need to pay a set amount towards their treatment. It can help to reduce the overall premiums.

There are also different types of underwriting you can apply to the plan. The main options are:

• Full medical underwriting
• Moratorium underwriting
• Continued personal medical exclusions underwriting and
• Medical history disregard underwriting.

 As premiums are tax deductible as a business, the insurance is classed as a benefit in kind. This means employees pay income tax at their usual rate relative to the cost of the insurance premiums.

So, if the benefit costs £500 per year and the employee’s tax rate is 20%, they’ll pay £100 additional income tax per year to have this benefit. Many employees feel this is an acceptable amount to pay for access to private medical care.

Is Company Health Insurance Worth It?

There are many good reasons to provide company health insurance.

Improved recruitment and retention

Giving employees access to private medical care shows that you care about their wellbeing. Companies that provide company health insurance are often considered employers of choice. And it can help with recruitment and retention.

Improved workplace efficiency

Private health insurance can help manage staff short-term absence. It gives employees access to non-urgent treatments at a time that’s convenient for both employee and employer. Plus, seeing a medical specialist quickly means that health issues can be treated before they become serious.

If an employee needs hospital treatment they won't need to wait long. Meaning they could be back to work more quickly following their recovery. In 2023 the average UK employee lost nearly 50 days of productive time due to absenteeism and presenteeism¹. The saving in lost productivity for your business can offset the cost of providing the benefit.

Improved staff morale and motivation

63% of employees want their employer to do more to support their health¹. With company health insurance, employees can see a practitioner quickly and conveniently. If cover is extended to family members, this can add another level of reassurance. Employees with Vitality Health Insurance are 13% less likely to report low job satisfaction¹.

What Are the Benefits of Health Insurance Through Your Company?

Company health insurance isn’t only for larger organisations. Plans can be set up for sole traders and upwards. But as a small business, you may be wondering if it’s better to take out a company plan or a personal plan. So, it’s good to know that company health insurance has some specific benefits for businesses:

• Premiums are generally lower when compared to a personal plan as the risk is spread across all the members in the plan.
• Access to an Employee Assistance Programme is often included in business plans but not in personal plans.
• Vitality offer a cashback incentive if employees engage with the workplace wellness programmes.
• Premiums are tax deductible, whereas they’re not for a personal plan.

How Do Claims Work?

When an employee has a medical issue, they’ll usually contact the insurance company directly for advice. Each insurer will have their own claims process. But generally, treatment is accessed through the insurance company rather than via their employer. This keeps their personal medical records private and confidential.

Many policies offer access to a 24/7 GP service which is often the first step in getting treatment. The GP can then recommend a course of treatment or refer the employee to a consultant for further investigation. At each stage, the employee should check that the next step of their treatment is covered by the insurance. When they have approval, they can book it in straightaway.

Some insurers allow employees to self-refer for physiotherapy and mental health services. This can speed up access to treatment as there’s no need to speak to a GP first.

Once a treatment has been approved, the cost is usually paid directly to the practitioner by the insurer. In some cases, for example, dental treatment, the employee will need to pay up front and claim the cost back from the insurer.

Can Family be added to a Work Policy?

It depends on the type of policy an employer is offering, but yes, family can usually be added to a work policy. For most plans, an employee will be able to add their spouse or partner and any children. Cover doesn’t usually extend to parents or grandparents. 

Allowing employees to cover their immediate family can be very reassuring for them. And it can often be more cost effective than taking out a separate private policy for their family. 

As an employer, it means your employees’ loved ones get fast access to treatment. This can mean they need to take less time off caring for a sick relative.

How Much Does a Company Pay for Health Insurance?

When considering whether you’re going to offer this benefit it’s vital to know how much you can expect to pay for health insurance. To determine the cost, insurers look at:

• The number of employees in the scheme. Larger schemes tend to have a lower premium per employee, as the risk is spread amongst more people.
• The age demographic of your employees. Employers with a young workforce usually cost less to insure as the risk of someone falling ill rises as they age.
• Where you're located. Insurers use your head office postcode to assess the likelihood of your employees making a claim. Premiums may differ in different areas.
• The level of cover you want to offer. There are usually a range of options to suit a variety of budgets. Comprehensive cover will generally cost more.
• Claims history. If you’re moving your scheme from an existing provider, your new insurer will look at your claims history. The more claims there are, the greater the risk of taking on your business for the new provider.
• Administration. When looking at the overall cost of the scheme, bear in mind the time spent on administration. Vitality provides a specific online employer hub which simplifies changes such as adding and removing employees. Find out more about our Employer Hub.

What Happens if an Employee Leaves the Company?

When an employee leaves their job, they’re no longer eligible for cover under the company scheme. This usually happens on the day they leave employment.

However, most insurers will allow the employee to transfer to an individual scheme, so they can continue cover. Vitality provide a comprehensive personal healthcare plan from as little as £1.45 per day. Alternatively, the employee may be able to join a similar scheme with their new employer.

Key takeaways

A company private healthcare scheme is seen as a valuable benefit by employees. It can help employers attract and retain staff at all levels of their organisation.

The main benefits of implementing a company healthcare scheme are:

• Better employee health – meaning improved productivity and fewer sick days. The improved health metrics of employees with Vitality Health Insurance equate to 2.5 additional days¹ of productive time per employee each year.
• Greater employee recovery – recovery starts sooner with quick access to treatment.
• Improved staff morale – employees feel valued and have a greater sense of job satisfaction. Britain’s Healthiest Workplace 2023 found that employees with Vitality Health Insurance are 13% less likely to report low job satisfaction¹.

There are also some specific benefits to taking out company health insurance for your business.

• Premiums are cost-effective as the risk is spread across all the members in the plan.
• Many schemes provide access to an Employee Assistance Programme as part of the plan.
• Vitality offer a cashback incentive if employees engage with workplace wellness programmes.
• Premiums are tax deductible, so can be offset against profits.

Cover can be tailored to suit your employees’ needs and your budget. Providers generally offer a core plan to which you can add optional extras. So, for example, you can provide a more comprehensive level of cover for senior managers and key staff. You can also choose which hospitals and consultants your employees can access when they need treatment.

Company Health Insurance FAQs

How much does a company pay for health insurance?

The cost of cover depends on a few factors, including:

• Number of employees
• Company location
• Employee ages and family status
• Level of cover

To get an indicative quote for 1-249 employees, just use our online quote tool. 

How much tax do I pay on company health insurance in the UK?

Private health insurance is usually provided as part of an employee benefits package. Employers pay the premium, the cost of which can be deducted from their taxable income.

As premiums are tax deductible for a business, the insurance is classed as a benefit in kind. This means employees pay income tax at their usual rate relative to the cost of the insurance premiums.

So, if the benefit costs £500 per year and the employee’s tax rate is 20%, they’ll pay £100 additional income tax per year to have this benefit.

Is company health insurance worth it?

There are many benefits to providing a company health insurance plan.

• Better employee health – meaning improved productivity and fewer sick days.
• Greater employee recovery – recovery starts sooner with quick access to treatment.
• Improved staff morale – employees feel valued and have a greater sense of job satisfaction.

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¹ Source: 10 years of Britain’s Healthiest Workplace, Vitality