How does small business health insurance work?

Small business health insurance provides health insurance to your whole team, giving them access to private medical treatment. A group health insurance policy enables your insurance company to spread the cost of your health insurance across your whole workforce.

Group health insurance is available to businesses with two or more employees, so you can offer health insurance even if you have a tiny team. Once your business health insurance is in place, your employees can claim and get private medical care or access various services.

What are the benefits of employee health insurance?

Before you invest in group health insurance, you'll need to consider how private health insurance will benefit your business. Each company is unique. However, some common factors make small business health insurance a worthwhile employee benefit.

Benefits to your business

If your business has fewer than five employees, you likely have a close-knit team where every employee plays a vital role in your business's success. Looking after your employees' well-being is essential. Here's how small business health insurance can help.

Reducing absenteeism

In a small team, employee absence can quickly disrupt day-to-day operations and productivity. Small business health insurance lets staff access private healthcare quickly to return to work or even avoid an absence altogether.

Making you an employer of choice

Private health insurance is an attractive benefit that can help your business attract new talent and retain your existing staff. It shows your commitment to looking after your team.

Mental health support

All small business health insurance provides some mental health coverage so your employees can get support with workplace stress and personal issues affecting their mental well-being. A small team where employees work closely together can provide a supportive environment but can also be stressful. Evidence suggests that 12.7% of all UK sick days result from mental health issues. Small business health insurance can help you to minimise the impact on your team.

Benefits for employees

Health insurance gives employees access to high-quality private healthcare and mental health support without spending time on an NHS waiting list.

Private healthcare can also offer patients access to treatments and medications not currently approved for NHS treatment, a choice of consultant and hospital depending on your chosen policy.

What does small business health insurance cover?

Small business health insurance includes core coverage as standard, and you can add optional extras to enhance your coverage.

Core coverage

Inpatient and day-patient treatment

All health insurance policies include inpatient treatment. Your health insurance will cover surgery and treatment costs if your employee goes into the hospital. They'll also cover accommodation in a private room. Many private hospitals offer luxurious facilities, including an ensuite bathroom and restaurant-quality meals.

Cancer treatment

Cancer will affect 1 in 2 of us, so cancer coverage is crucial to every health insurance policy. Insurance providers vary in their cancer coverage; most policies include surgery, chemotherapy and radiotherapy. Your provider may also cover additional services such as nutrition advice, reconstructive surgery and alternative therapies.

Virtual GP services

Getting an appointment with an NHS GP that fits around work and other commitments can be challenging. Employees may only seek medical advice once a problem becomes more serious.

Private health insurance provides 24/7 access to virtual and digital GP services. These services can make it easier for your team to get medical advice, private prescriptions or a referral at a convenient time.

Optional extras

Adding optional extras to your health insurance lets you tailor your coverage to your employees' needs. While they'll increase your health insurance costs, they can also provide a greater return on your investment. Here are some options you'll find with most health insurance policies.

Outpatient cover

As the name suggests, this type of coverage provides outpatient treatment such as physiotherapy, consultant appointments and diagnostic tests. NHS waiting lists for consultant appointments are at a record high, so outpatient coverage can reduce the time your employees are away from work waiting for a diagnosis before they can start treatment.

Additional treatment

Tailoring your health insurance coverage lets you spend your budget where it's most needed. You can choose lower limits on some treatments and increase the overall spending or the number of treatment sessions in other areas.

You can also add alternative therapies, such as acupuncture if you want to.

Dental and optical cover

You have a legal duty to pay for eye tests and, where necessary, glasses for employees using screens at work. Adding optical cover to your health insurance can be a cost-effective way of paying for this, depending on the nature of your work. It typically covers regular check-ups, glasses and contact lenses.

Dental cover pays for routine check-ups and treatments and can cover dental emergencies so your employees can access treatment quickly.

Mental health treatment

A basic health insurance policy typically provides access to counselling, CBT and mental health helplines as standard. However, you can also extend your coverage to include more treatment sessions or treatment for more serious psychiatric conditions. This can be valuable if you have a small team working in a high-pressure environment or doing stressful work.

An extended hospital list

Each health insurance policy includes a standard hospital list so you can choose where to receive treatment. A standard list may not include your nearest hospitals if your business is in Central London or another major city. Some hospitals have higher treatment costs because their rent, utility bills and staffing costs are higher. Choosing an extended hospital list costs more but may be worthwhile if your staff can be treated privately close to home.

Membership perks and discounts

Even if you have a basic small business health insurance policy, you and your staff can benefit from member perks and discounts that your insurance company includes with your policy. Perks range from free coffee to discounted cinema tickets, gym memberships and holidays. Vitality health insurance allows members to earn increased rewards by hitting their activity and well-being goals.

Other services

Health insurance providers offer additional services, often at an extra cost. Some services are only available to corporate health insurance customers. However, it's worth shopping around and speaking to a specialist health insurance broker to see what's available.

Some insurers offer employee assistance programs providing health advice, mental health support and legal or financial advice. You may also be able to provide vouchers to fund private flu vaccinations.

Policy exclusions

Health insurance covers private treatment for acute conditions that can be cured with the proper treatment. It doesn't cover chronic illnesses, such as asthma or diabetes, that need long-term monitoring.

Health insurance also excludes pre-existing medical conditions that your employees sought treatment or advice about in the five years before they joined the policy. If they stay symptom-free for two years after joining, your insurers can remove the exemption.

Every policy also has standard exemptions, so you must check exclusions before buying a policy. Typical exclusions include:

  • Fertility treatment
  • Straightforward pregnancy and birth
  • Cosmetic surgery and weight loss treatment
  • Emergency care
  • Treatment for alcoholism or addiction

Does small business health insurance offer a good return on investment?

The right employee health insurance can give you an excellent return on your investment. It helps to reduce absenteeism, meaning you'll reduce your overall sick pay spend. When you have a small team, absence can quickly result in stressed staff as they try to cover their colleague's workload.

Health insurance can also help you to create a more positive company culture with motivated and productive employees and lower staff turnover.

Tax benefits

Health insurance premiums are an allowable expense for corporation tax, so you can save money by offsetting your premium cost. Speak to your accountant or financial advisor for tailored advice. If you pay the premiums, HMRC treat health insurance as a benefit in kind, so you'll need to complete form P11D, and your employees will pay additional income tax; you must keep them informed.

How much does business health insurance cost?

Various factors affect your health insurance costs, including:

  • The number of employees you want the policy to cover
  • Your employees' average age
  • The underwriting that applies to your policy
  • Your location
  • Whether you have a basic or comprehensive policy
  • The work your business does and what each employee's role involves.

While each of these factors influences the cost of health insurance, they don't tell the whole story. For example, a comprehensive policy may be more expensive than a basic one. Still, it can offer a greater return on your investment by reducing the time an employee spends away from work.

How can I reduce the cost of business health insurance?

Tailoring your private medical insurance to your business can involve reducing costs in one place so you can spend more elsewhere. Here are some common ways to reduce your business health insurance costs.

Choose full medical underwriting

As mentioned, health insurance excludes pre-existing conditions for the first two years of the policy. When you choose moratorium underwriting, your insurance company won't ask for any medical information when an employee joins the scheme. By contrast, when you have full medical underwriting, your employee must complete a questionnaire with medical history details.

Full medical underwriting gives your insurance company and employees greater certainty about what's covered and excluded from the outset and reduces your premiums.

Offer voluntary enrolment

Voluntary enrolment allows employees to decide whether to join the company's health insurance scheme and pay the premiums themselves. Group health insurance premiums are typically lower than individual policies, making a voluntary scheme more affordable for employees considering paying for health insurance but needing lower premiums.

However, you'll need at least two employees to join if you want to qualify for a group policy. A small team runs the risk that you won't get enough subscribers.

Increase your policy excess

The excess on private medical insurance works in the same way as on your car insurance. You can reduce your premiums by increasing the amount employees pay themselves when they claim. The policy excess must be affordable for your staff. Otherwise, they may decide to wait for NHS treatment, and you risk losing the benefits of private medical insurance.

Six-week wait option

Including a six-week wait option on your policy means that your staff will only receive private care if they need to wait more than six weeks for NHS treatment. Current NHS waiting times for elective treatment mean you'll likely wait longer than that. However, it can cause issues in some circumstances.

For example, say you have a heart attack and an ambulance takes you to A&E. You need to be admitted to the hospital for further tests and treatment. Without the six-week wait option, you can ask to transfer to a private hospital and claim on your medical insurance. With it, you'll need to receive all your continuing care with the NHS, as they've already treated you within the six-week limit.

Opt for a guided consultant list

A guided consultant option reduces the choice an employee has over which consultant treats them. Your insurer will give them a shortlist of 3-5 consultants when they claim. This is fine if they don't have strong opinions about who they see. However, if they need highly specialised treatment, it may mean their preferred provider isn't on the list.

Can other types of insurance help?

If private medical insurance isn't suitable for your business, but you want to protect your business from the impact of an employee absence, key person insurance could help. Key person cover pays out when an essential employee dies or is away from work because of a critical illness. Larger businesses typically use it to cover the CEO, members of the management team and employees with essential skills or vital contacts.

A key person policy typically only pays out in the event of a death or a serious or terminal illness, so it has more in common with a life insurance or critical illness policy than with medical insurance. However, you can use the payout to hire temporary cover or get specialist support. It can also cover the costs of any resulting business loss or pay off loans.

Your insurer will need proof that your business would lose profits due to the key person's absence before they issue a policy. You'll need to consider who your key people are, as you may be unable to cover your whole team.

Get in touch

At Globacare, we're specialist insurance brokers providing tailored advice to help you find the right insurance for your business. If you'd like to learn more about how private medical insurance can benefit your small business, get in touch for a comparison quote.

Fabio Peixoto
Senior Broker & SME Expert

Fabio Peixoto

Fabio is a senior health and life insurance broker with stacks of knowledge to share. He has over five years of experience and has held senior positions in other brokerages.

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