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The pros and cons of business health insurance for your employees

Updated 10 September 2020

3min read

Nick Green
Financial Journalist

Employee medical cover

One of the many employee benefits a business owner can offer to attract and retain the best people is health insurance. Traditionally, it’s larger companies that have been able to offer these group schemes. But if you run a small business, you too could reap the rewards by adding a healthcare policy to your employee benefits programme.

What is business health insurance?

Business health insurance is much like an individual health insurance policy. It pays for a large portion of the cost of various private medical treatments and care, but it’s taken out by employers to cover employees. When an employee is diagnosed with an illness, they can pay a small excess while the insurer pays for the cost of treatment.

Your business will have one policy to cover everyone and you can choose who you offer it to, as long as this decision isn’t made on discriminatory grounds. By spreading the risk across a group, the cost of premiums is generally lower than that of individual polices.

Why should I offer health insurance to my employees?

Having a health insurance policy for your employees can deliver significant long-term benefits to both your business and your employees.

For your employees, the benefits include:

  • Access to high standards of healthcare for a wide range of illnesses and conditions, including mental health and musculoskeletal conditions
  • Shorter waiting times for treatment and generally more accessible hours
  • More personalised care, based on their preferences
  • Sometimes the policy will cover their family members, too
  • Often, a 24-hour GP or nurse practitioner phoneline

As a business, you could benefit from a group health insurance policy for these reasons:

  • Your staff aren’t subject to NHS waiting lists, helping employees get better and return to work more quickly
  • Employees can speak to a doctor outside working hours
  • Better healthcare could help improve wellbeing among your team, boosting productivity
  • You can attract and retain the best people by offering this benefit as part of the overall remuneration package

How much does a business health insurance policy cost?

Prices for group health insurance policies tend to start around £250 per employee per year but they can reach £1,000. A number of aspects will affect the cost of premiums, including:

  • Group size – Generally, the higher the number of people covered, the lower the price per employee. For small businesses, the cost will generally be higher, but there are specialist policies for those with fewer than 250 employees.
     
  • Average age – It is cheaper to cover younger employees. Because this is a group policy, the premiums will be based on the average age of those covered.
     
  • What’s covered – You can choose from various levels of cover. The more comprehensive the cover, the more expensive it will be. Additions include things like outpatient cover, dental care, psychiatric care, physiotherapy and allowing second opinion appointments.
     
  • Occupation – The type of work your employees do will affect how at risk they are of getting ill or injured. If they are more likely to claim, the cost will be higher.
     
  • Where you’re based – Getting treatment in certain locations like Central London can be more expensive, and this will affect the price of your policy.
     
  • The excess – Employees will usually pay an excess for treatment. The lower the excess, the higher the premiums.

Business health insurance is a benefit in kind, so you will also need to factor in the costs of National Insurance contributions. Your employees also have to pay income tax on them.

How many employees do you need to qualify for group health insurance?

You usually need at least two employees to take out a group health insurance policy, and you’ll probably need specialist small business health insurance if you have less than 250 employees.

If you run a limited company and you’re the director, you can take out business health insurance for yourself, but it will be a taxable benefit-in-kind.

Is small business health insurance cheaper than individual?

Even small businesses may find that taking out corporate health insurance is cheaper than individual policies. Spreading the risk between as little as two people can help bring down the cost of premiums. Plus, group policies tend to be less flexible and personalised, which can make them cheaper.

Contractor insurance is available for those who work on a freelance basis, but these are specialist policies. You’ll need to work out whether it’s more cost-effective to get an individual policy if you want health insurance.

Where can I get a business health insurance policy?

You can search online for a business health insurance policy, with schemes on offer with well-known providers such as Bupa, AXA, Aviva, Vitality and more. Lots of businesses choose to go through a broker or financial adviser to access more specialist policies and to take the legwork out of finding the most suitable and valuable cover.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.