Business health insurance for UK employers

Business health insurance, also called company health insurance, corporate PMI, or group private medical insurance, is a policy that pays for your employees to receive private medical treatment. Instead of waiting for an NHS appointment, your team can access private hospitals, consultants, and diagnostic tests much faster.

The policy is taken out by your company and covers the employees you choose to include. Many businesses also extend cover to employees' partners and children, either paid for by the company or as an optional benefit employees pay for themselves.

What business health insurance typically covers

• Private hospital treatment and surgery
• Consultations with specialists and consultants
• Diagnostic tests including MRI, CT, and PET scans
• Cancer treatment and advanced therapies
• Mental health support and therapy
• Physiotherapy and other rehabilitation
• 24/7 GP helplines and virtual consultations

What business health insurance typically doesn't cover

• Pre-existing medical conditions, meaning those you had before the policy started
• Chronic conditions requiring ongoing management, like diabetes or asthma
• Cosmetic surgery
• Pregnancy and childbirth, unless complications arise
• Routine dental and optical care, unless added as extras
• Experimental treatments not yet proven effective

The key distinction is that private medical insurance covers acute conditions, health problems that respond to treatment and lead to recovery. The NHS remains the right choice for managing long-term chronic conditions.

NHS data shows the number of people waiting for consultant-led elective treatment has climbed to over 7.4 million, with the median wait for treatment now sitting at around 12.9 weeks, up significantly from the pre-pandemic figure of 7.7 weeks.

For businesses, these delays translate into extended staff absences, reduced productivity, and frustrated employees. A team member waiting months for a knee operation or a diagnostic scan isn't performing at their best.

• Reduced absence costs: when employees can access private treatment quickly, they're back to full health sooner. A hip replacement that might take months through the NHS can often be arranged within weeks privately.
• Improved recruitment and retention: business health insurance consistently ranks as one of the most valued employee benefits. In a competitive job market, offering private healthcare can help attract talent and keep your best people.
• Better employee wellbeing: beyond the practical benefits, offering health cover signals that you genuinely care about your team, which can build loyalty and improve workplace morale.
• Access to care the NHS can't always provide: some advanced cancer drugs and treatments aren't routinely available through the NHS due to cost constraints. Private insurance often covers these.
• Mental health support: many policies now include comprehensive mental health cover, giving employees access to therapists and counselling without NHS waiting lists.

One of the most common questions business owners ask is what they'll actually pay. The honest answer is that it varies significantly based on several factors, but here's what you can typically expect.

These figures are averages. Your actual costs will depend on:

• Age of employees: premiums increase with age because older employees are statistically more likely to need treatment. A workforce with an average age of 30 will cost less to insure than one averaging 50.
• Location: healthcare costs vary by region. London and the South East typically attract higher premiums than other areas.
• Level of cover: adding outpatient cover, mental health support, dental, and optical all increase costs. The more comprehensive the policy, the higher the premium.
• Excess amount: choosing a higher excess, the amount employees pay towards each claim, reduces premiums. Some policies offer excesses up to £500 or more.
• Hospital list: policies with access to top London hospitals and nationwide facilities cost more than those limited to regional providers.
• Claims history: if your company has made many claims, renewal premiums may increase. Insurers assess the claims, or loss ratio, of your scheme when pricing renewals.

Understanding the tax implications of business health insurance is essential for budgeting accurately. The rules are straightforward once you understand them.

For the employer

• Corporation tax relief: the premiums you pay for employee health insurance are usually an allowable business expense, meaning you can deduct them from your taxable profits.
• Class 1A National Insurance: as the employer, you must pay Class 1A National Insurance on the value of the benefit you provide. The current rate is 15%, so if you pay £1,000 a year for an employee's health insurance, you'll owe £150 in employer's National Insurance.
• P11D reporting: you must report the benefit on form P11D for each employee receiving health insurance, submitted to HMRC by 6 July following the tax year end. From April 2027, most benefits will need to be reported through your payroll system (RTI) rather than P11D forms.

For employees

• Benefit in kind: when your company pays for an employee's private health insurance, HMRC treats it as a taxable benefit in kind, and the employee pays income tax on the value of the premium.
• How it works in practice: HMRC adjusts the employee's tax code to collect the additional tax through their regular salary.
• No employee National Insurance: employees don't pay National Insurance on the benefit, only income tax.

Despite the tax, most employees still come out ahead. If they bought equivalent cover personally, they'd pay the full premium from their net, after-tax income, and the premium would likely be higher than the group rate negotiated by their employer.

Business health insurance isn't one-size-fits-all. You'll need to decide what level of cover makes sense for your company. Here's how the main options work.

Inpatient and day-patient cover

This is the core of any business health insurance policy, and all policies include it as standard. Inpatient treatment means any care requiring an overnight hospital stay, including surgery, extended tests requiring monitoring, and post-operative recovery. Day-patient treatment covers procedures where an employee is admitted to a hospital bed but goes home the same day.

With inpatient-only cover, employees can access private hospitals for surgery and overnight stays, but they'd use the NHS for diagnostic tests, scans, and consultations that don't require admission.

Outpatient cover

Outpatient cover adds private access to consultations with specialists, diagnostic tests, MRI, CT, and PET scans, therapies like physiotherapy, and follow-up appointments. You can typically choose between three levels:

• No outpatient cover: employees use the NHS for diagnostics, then private care for treatment. The cheapest option, but it can delay treatment while waiting for NHS scans.
• Capped outpatient cover: a middle-ground option limiting annual outpatient spending, typically £500-1,000 per employee per year, which covers most diagnostic needs at a reasonable premium.
• Full outpatient cover: unlimited outpatient treatment and diagnostics. The most comprehensive option, but it significantly increases premiums.

Adding some level of outpatient cover is often worthwhile. The main advantage of private healthcare is speed, and if employees still wait months for NHS scans before private treatment, much of that speed advantage is lost.

Cancer cover

Most leading UK health insurers now include comprehensive cancer cover, typically covering diagnosis and staging, surgery, chemotherapy and radiotherapy, advanced cancer drugs not available on the NHS, scalp cooling, wigs and prostheses, home chemotherapy where appropriate, and palliative care support. Cancer cover is particularly valuable because it often provides access to treatments the NHS can't fund.

Mental health cover

Mental health support has become increasingly important in business health insurance. Many policies now include consultations with psychiatrists, therapy and counselling sessions, treatment for conditions like anxiety and depression, access to mental health helplines, and online cognitive behavioural therapy. Cover levels vary: some policies offer unlimited sessions, while others cap annual treatment.

Optional extras

Beyond core cover, you can usually add dental and optical cover, extended therapies such as physiotherapy and osteopathy, travel insurance, annual health screening, and wellness programmes like gym discounts and health apps.

When you set up a business health insurance policy, the insurer needs to assess what it can cover. This process is called underwriting, and there are three main approaches: moratorium underwriting, full medical underwriting, and medical history disregarded.

Which underwriting suits your business?

• Moratorium underwriting suits smaller businesses wanting quick setup, with generally healthy employees, who are comfortable with some uncertainty about cover.
• Full medical underwriting suits businesses wanting complete clarity upfront, with time for the setup process, or employees with complex medical histories who want certainty.
• Medical history disregarded suits larger businesses wanting the simplest possible administration, and prepared to pay premium rates for it.

Every health insurance policy includes a list of hospitals and facilities where employees can receive treatment. The hospital list you choose significantly affects both the cost and quality of care.

Hospital list options

• Nationwide or extended list: access to private hospitals across the UK, including top London facilities. The most expensive option, but useful if you have employees who travel or relocate.
• Standard list: good coverage of private hospitals in most regions, potentially excluding premium London facilities. A solid middle-ground for most businesses.
• Guided or select network: the insurer directs patients to cost-effective hospitals and consultants that meet quality standards, which can reduce premiums while maintaining good care.
• Local or reduced list: limited to hospitals in your region or private rooms within NHS hospitals. The cheapest option, but it may restrict choice significantly.

What to consider

• Where do your employees live and work? A London-based business might need access to London hospitals, while a regional business might save significantly with a local list.
• Do employees travel for work? Staff who travel regularly may need nationwide access.
• How important is choice? Some employees value choosing their consultant; others just want treatment quickly and don't mind being guided.
• Hospital list is one of the biggest cost factors. A guided network can reduce premiums without necessarily compromising care quality.

The excess is the amount employees pay towards each claim before the insurance kicks in. Choosing the right excess means balancing cost savings against what your employees can afford. If you have a £100 excess and an employee needs treatment costing £5,000, they pay £100 and the insurer pays £4,900. The excess typically applies once a year, not per claim.

Some insurers offer excesses up to £5,000, essentially turning the policy into catastrophic cover for major illnesses only.

What to consider

• Can your employees afford it? A £500 excess might be manageable for well-paid staff but could deter lower-paid employees from claiming, which defeats the purpose of providing the benefit.
• Company-paid excess: some businesses offer to reimburse employees' excess payments, getting premium savings without passing costs to staff.
• Frequency of smaller claims: if employees often need treatment for minor issues, a high excess means they'll pay out of pocket frequently.

For most businesses, a moderate excess of £100-250 offers a good balance between affordability and premium savings.

Many businesses offer employees the option to add partners and children to the health insurance policy. This can work in two ways.

Company-paid family cover

You pay for employees' family members as well as the employees themselves. This is more expensive, but it positions you as a strong employer, may reduce absence when employees care for sick family members, and is a highly valued benefit that supports retention.

Employee-paid family cover

Employees pay to add family members, usually through salary deduction. Your company negotiates the group rate, but the employee bears the cost. This gives employees access to competitive group pricing at no extra cost to the company, though it does create additional P11D administration.

Family cover is typically priced as a multiple of the single employee rate, often around 2x for partners and 2.5x for full family cover.

Setting up business health insurance is straightforward once you understand the steps involved. Start by thinking about what you want to achieve, whether that's reducing absence, attracting talent, or supporting employee wellbeing, as your goals will influence the right cover level.

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The right approach to business health insurance varies depending on how many employees you have. As a sole trader, you can't buy cover in the company's name, so you'd take out a personal policy instead. If you're a limited company director, you can buy cover through your company, though the premium is treated as a benefit in kind and you'll pay personal tax on it.