A guide to business health insurance underwriting

The underwriting process enables insurers to decide what private health insurance cover they can provide to your business and how much your premiums will cost. The process will vary depending on the type of underwriting you have and the approach your chosen insurer takes.

Underwriting helps insurers assess the likelihood that someone covered under the policy will make a claim. They'll consider factors such as your workforce's average age, your location, and the type of work you do, among others. If you already have health insurance and are renewing your policy, they'll likely use your claims history to decide what risk level to set. The higher the risk that an employee will claim, the higher your premium will be. They may also impose coverage limits in some circumstances.

The way that underwriting operates can impact your business in several ways. It can directly affect the premium you pay, which has both financial and tax implications. Different types of medical underwriting affect how quickly your insurer processes claims, with some offering greater clarity about the conditions and treatments the policy covers. Some underwriting types involve more paperwork for your admin team, affecting staffing levels and costs. A lengthy claims process or significant policy exclusions can also lengthen sickness absences, with a knock-on effect on employee morale.

How underwriting affects premiums

The underwriting of your policy can affect your premiums. During underwriting, insurers will consider the information available to them to determine the level of risk. More information typically provides greater certainty and a more accurate assessment, which can often mean lower premiums.

With moratorium underwriting, they don't have any medical information upfront, although they will have details of your claims history on renewal. With full medical underwriting, employees complete a medical questionnaire, which gives your insurer more information to help them assess risk. Medical history disregarded underwriting will cover pre-existing conditions and carries the highest risk, meaning it costs the most.

All health insurance policies have standard exclusions, meaning they don't cover specific treatments and conditions regardless of an employee's medical history. These typically include emergency treatment, intensive care and chronic conditions that require long-term monitoring and management.

Medical underwriting also involves identifying and excluding pre-existing medical conditions that an employee had before joining the policy. Insurers typically define a pre-existing medical condition as anything an employee sought advice or treatment for within the five years before joining the policy. They usually apply a moratorium period, meaning that insurers can remove the exclusion if an employee remains symptom-free.

How does a moratorium period work?

The moratorium period for pre-existing medical conditions is usually 2 years, starting on the date an employee joins your group health insurance plan. For example, say an employee had physiotherapy for knee pain 12 months before they joined the policy. They wouldn't be able to claim any further treatment for the affected knee during the first two years of coverage. If they remained symptom-free for two years, insurers could remove the exclusion. However, if they needed further treatment, such as physiotherapy or surgery, the exclusion would stay in place.

Business health insurance policies typically offer three main types of medical underwriting. These are moratorium underwriting, full medical underwriting, and medical history disregarded underwriting. Availability can vary depending on your business size and the number of employees.

Here's what each type means and how they operate.

Moratorium underwriting

If you choose moratorium underwriting, a moratorium period will apply to your policy. As we've mentioned, most health insurance plans have a moratorium period of about 2 years. During that time, your health insurance won't cover any pre-existing medical conditions. The main difference between this and other types of underwriting lies in how insurers identify exclusions and how this affects the claims process.

What information will your employees need to provide?

With this type of underwriting, your employees won't need to provide any details of their medical history when they first join the policy. They'll have less paperwork to complete, and you can add them to the policy quickly and easily without having to chase them to complete their medical questionnaire. Most health insurance providers have an online portal where you can add new employees' information as they join.

How the claims process works

While moratorium underwriting can reduce the administrative time and paperwork involved when a new employee joins the policy, it can lengthen the claims process. Your insurer won't have any advance information about an employee's medical history, so they must consider every claim for medical treatment on a case-by-case basis. The process varies between insurance companies. Some may contact the employee to ask questions, while others will contact their GP for information. If an employee's GP charges a fee to complete a form or write a letter, your employee will likely need to pay this themselves. The time each claim takes may also vary depending on the time each doctor takes to respond. This is frustrating for your employee, but it can also mean they spend more time away from work waiting for treatment, without knowing whether their claim will be approved.

Benefits of moratorium underwriting

Underwriting on a moratorium basis is ideal if your employees have straightforward medical histories without pre-existing conditions. Your HR team can add new employees to your group health insurance policy as part of the onboarding process, and your employees won't have to complete any additional paperwork to access their employee benefits. It's one less thing for recruits to do, and your admin staff won't have to spend time chasing medical questionnaires. It could mean substantial time savings, especially if you have a large workforce.

Disadvantages of moratorium underwriting

There are two main disadvantages to this type of underwriting. Firstly, the claims process can be much slower, depending on how long it takes insurers to gather and process information. One of the main benefits of private health insurance is that it lets your employees access medical treatment quickly, so you run the risk of losing this advantage. As your insurers don't have the necessary information to confirm exclusions for pre-existing conditions in advance, an employee could wait for a decision, only to have their claim refused. They'll then have to start back at square one and wait for NHS treatment. Valuable time could have been lost spending time on an NHS waiting list, especially in cases where early diagnosis and treatment significantly improve outcomes.

Moratorium policies can also be more expensive than full medical underwriting when you first buy private health insurance, as your insurers don't have accurate information to help them assess the risk that your employees will claim.

Full medical underwriting (FMU)

Full medical underwriting also applies a moratorium period to pre-existing conditions in the same way as other types of medical underwriting. However, the differences in how this type of underwriting operates mean that the information-gathering and claims processes are very different.

What information will your employees need to provide?

If your group health insurance has full medical underwriting, your employees must provide details of their medical history, usually by completing a questionnaire. The information your insurer asks for will include their general health, any medical advice they sought and specific illnesses with treatment dates. As we've mentioned, most insurers exclude pre-existing conditions that occurred within 5 years before they joined the policy, making the treatment date information essential. Some insurers also ask about any relevant family history.

When your policy is due for renewal, your staff may also need to provide information on any treatment they received that their private health insurance didn't cover. That could be NHS treatment or private care that they funded themselves. The information helps your insurer decide whether to remove an exclusion or leave it in place.

How the claims process works

Full medical underwriting can speed up and simplify the claims process. Your insurer already has the information it needs to confirm the exclusions that apply to your group health insurance, meaning it can approve claims quickly without needing to investigate an employee's medical history upon receipt of each claim. It also gives each employee certainty about what the policy covers from the outset. If your health insurance has unlimited coverage, your employee can access treatment quickly. Otherwise, your insurer must check whether any financial limits apply to confirm whether they can meet the full cost of the treatment.

Alternatively, if an employee knows in advance that their health insurance won't cover their treatment, they can seek NHS care or decide whether to self-fund private treatment.

Benefits of FMU

FMU makes claims more straightforward, gives your employees certainty about what's covered, and speeds up claims decisions. Your staff can start treatment quickly, which is one of the main benefits of private health insurance.

It can also save your business money on your group health insurance premiums, as your insurer can assess your claims risk more easily.

Disadvantages of FMU

FMU can involve more paperwork and administration time for the HR staff responsible for managing your health insurance scheme. New starters must complete a medical questionnaire before they can join, along with all other paperwork required for a new job. Chasing them for a response takes additional administrative time and delays adding new starters to the policy, meaning they aren't receiving their full employee benefits. As we've mentioned, insurers will also ask for updated information when renewing your health insurance, resulting in more work for your HR staff.

It can sometimes be challenging to have exclusions based on pre-existing medical conditions removed at the end of the moratorium period.

Medical history disregarded underwriting (MHD)

Medical history disregarded underwriting is only available on business health insurance policies. Most insurers only offer medical history disregarded underwriting to companies with at least 20 employees, meaning you may not qualify if you're looking for small business health insurance.

As the name suggests, medical history disregarded underwriting means your health insurance company won't apply any exclusions for employees' pre-existing conditions. Other policy exclusions still apply. Private medical insurance policies have standard exclusions for chronic conditions, cosmetic surgery, and emergency treatment, among others. Always check the small print before choosing your policy.

What information will your employees need to provide?

With medical history disregarded underwriting, your employees won't need to provide any medical history when they join the policy. This allows your HR staff to add them to the scheme straight away and saves them time by eliminating the need to chase up outstanding information.

How the claims process works

Medical history disregarded underwriting is similar to full medical history underwriting in that it speeds up the claims process. Upon receiving a claim, your insurer must check whether the policy covers the treatment and whether any financial limits apply. Still, they don't need to investigate whether there are any medical history exclusions.

An employee can claim, get a quick decision and receive treatment promptly.

Benefits of MHD underwriting

As we've discussed, MHD underwriting eliminates the need for extensive medical history checks, reducing paperwork and administration time for your staff. It also speeds up the claims process and gives your staff greater certainty. While there will still be standard exclusions, these are set out in the policy terms and conditions, meaning employees can check their coverage before claiming.

Private health insurance helps reduce absenteeism, and MHD can further improve this. For example, say an employee is away from work because of a recurrence of a pre-existing condition. In that case, your business health insurance won't cover their treatment if you have moratorium or full medical underwriting, meaning they must wait for NHS care. With MHD underwriting, employees can access treatment as long as the policy covers it, meaning less time away from work. It also means they can keep their medical history confidential as they won't have to explain why they need more time off work while waiting for NHS treatment.

Disadvantages of MHD underwriting

The main disadvantage of MHD underwriting is the cost. Your policy covers pre-existing health conditions, which means there's a much greater risk that staff will make claims. Overall treatment costs will likely be higher, so your premiums will be higher too.

The increased premium may be worth the investment if it reduces the costs associated with absenteeism or poor workplace well-being. Speaking with your financial advisers, accountants, and a specialist insurance broker can help you consider your options.

If you want to change your health insurance provider to save money or get better customer service, the underwriting process can be complex. The conventional medical underwriting process means you risk introducing new exclusions or losing the moratorium period your employees have already earned.

However, if you'd prefer to avoid this, you'll need CMORI or CPME underwriting.

Continued Moratorium underwriting (CMORI)

CMORI underwriting lets your employees keep the moratorium period they've already earned with your previous insurer. Say an employee had received physiotherapy on their shoulder before joining the policy, but they haven't had symptoms for a year. With CMORI underwriting, the exclusion will still apply, but they'll only have to stay symptom-free for another year before your insurer removes the exclusion, rather than for another two years.

Continued Personal Medical Exclusions (CPME)

If you have full medical underwriting with your previous insurer, you can ask your new insurer for CPME underwriting. It lets you keep the exclusions from your old policy without adding new ones. For example, say you have an employee who's receiving cancer treatment using their health insurance. If you switch to a new insurer with CPME, their private treatment can continue. Without it, a new exclusion would apply, requiring them to pause their treatment while they switch to NHS care.

A broker can help you understand your underwriting options and find the right private health insurance for your employees. We provide a personal service that's tailored to you. Get in touch with us for a comparison quote.