What is the difference between a health cash plan and private medical insurance?
The main differences between company health insurance and cash plans are in their coverage and how they pay for your medical treatment. Health insurance covers treatment for acute conditions, so your employees can contact the insurance provider to arrange for consultations, surgery or physiotherapy, subject to the coverage offered by your group health insurance policy. A health cash plan pays cash back on treatments your employee arranges and pays for themselves. It will typically cover routine health treatments such as eye tests or dental treatment.
As an employer, you can choose to pay the premiums yourself and provide coverage to all of your employees or offer health cover as a voluntary benefit that employees fund themselves, whether you opt for health insurance or a cash plan.
How does a cash plan work?
Health cash plans pay cashback to your employees for a range of treatments. Some of these are routine health treatments such as eye tests or dental check-ups. They can also fund the cost of dental treatment, prescription glasses and contact lenses. Cash plans also typically cover a set number of NHS prescriptions each year.
A cash plan can also provide cashback for therapies including physiotherapy, osteopathy, chiropractic treatment or chiropody. Your employees can also claim for hospital stays. Some cash plans also offer additional cover, including access to counselling, telephone helplines or online health support.
Cash plan payments
With a cash plan, your employees arrange and pay for their treatments and then claim back the cost by providing a copy of the invoice and receipt to the insurer. They'll then receive a percentage of the total cost, subject to the policy limits you agree to when you take out the plan.
Coverage and exclusions: Group health insurance vs health cash plan
The differences between private medical insurance and health cash plans mean that the coverage each one offers is very different. Depending on the policy options you choose, health insurance can cover the costs of surgery, diagnostic tests, consultant appointments and accommodation in private hospitals. It can also provide access to private GP appointments and mental health support.
Health cash plans don't cover the costs of surgery, mental health treatment or cancer care, although you can claim cashback if you spend a night in the hospital. Instead, health cash plans focus on providing cashback for routine healthcare costs such as dental appointments and eye tests.
All health insurance policies include a list of exclusions. These vary between providers but typically exclude cosmetic surgery, treatment for addiction and private medical care for straightforward pregnancy and childbirth. By contrast, cash plans can pay out for a hospital stay that a standard health insurance policy may not cover.
Whilst some group health insurance policies cover pre-existing medical conditions, most don't. Any condition that has required medical advice or treatment in the five years before an employee joined the policy won't be covered for the first two years. However, a health cash plan typically doesn't exclude pre-existing conditions. This is generally because they don't need to; your employees will need optical and dental checks regardless of their medical history. However, it can also enable them to claim the cost of physiotherapy treatment or an overnight hospital stay for conditions their private health insurance wouldn't cover.
What are the advantages and disadvantages of business health insurance?
A company health insurance policy gives your employees access to high-quality private healthcare without spending time on an NHS waiting list. Depending on the policy you choose, they can be seen by a consultant and booked for surgery in a matter of weeks. Business policies can also provide you and your employees with various support services and benefits. It's a highly valued benefit that can help you attract the best staff.
The main disadvantage from a company perspective is that comprehensive coverage can be costly. There may be other drawbacks depending on the type of underwriting you choose.
What are the advantages and disadvantages of health cash plans?
A health cash plan allows you to provide your employees with health coverage at a low cost. As a result, your monthly premium per employee is significantly lower than it would be with a comprehensive policy. Whilst a cash plan doesn't offer all the benefits of health insurance, it can encourage your employees to look after their health by covering their routine expenses.
The main disadvantage of a cash plan is that your employees must arrange treatment themselves. This may be straightforward if they're already registered with a dentist or optician or know a good physiotherapist. With private health insurance, your insurer can provide details of suitable treatment providers.
Which is best: a health cash plan or private health insurance?
The right choice for your business depends on your circumstances. If you have a limited budget, a cash plan offers low-cost coverage. It's also easy to administer as your employees can join the scheme and make a claim without needing to provide any medical information.
A comprehensive health policy is a better choice if you want to provide your employees with a full range of treatment options. This can make it a more desirable company benefit as it gives your employees peace of mind knowing they can access private treatment quickly, should they need it. They can also benefit from virtual GP appointments that fit around their work and other commitments.
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Frequently asked questions
How do health cash plans work?
A cash plan allows your employees to claim cashback for their routine medical expenses. Policy coverage varies, but your plan can enable them to claim their dental care costs, check-ups with an optician, physiotherapy treatment and overnight stays in an NHS hospital. They'll need to arrange and pay for their treatment, and they'll then be able to claim back a percentage of the cost by providing a copy of their invoice and receipt to the insurer.
Is there a difference in who pays the premium between company medical insurance and a cash plan?
No. As an employer, you can choose to pay the premiums yourself regardless of whether you opt for an insurance policy or a health cash plan. You can also apply admission criteria, for example, a minimum service period, to any employee joining the scheme.
You can also offer either plan as a voluntary benefit so your employees can choose whether to join and pay the premiums themselves.
Is a health cash plan a taxable benefit?
Yes. Health cash plans and insurance policies are both regarded as a 'benefit in kind' by HMRC. As an employer, you'll need to pay employer's National Insurance contributions, and your employees will also have to pay tax on the benefit. This is calculated on the total annual cost of the premium.
If an employee pays for their insurance out of their salary after tax, there won't be any additional tax to pay.