Why Do Companies Offer Health Insurance Benefits?

Roman Danaev

8 January 2025

When you’re building or running an organisation, one of the most important things to focus on is the wellbeing of your team. It goes beyond just maintaining a clean, safe workplace — you also want to make sure your employees have the support they need to stay healthy, with access to quality healthcare.

One of the most powerful ways to do this is by offering health insurance benefits. Let’s look into why providing health insurance coverage is such a game-changer for your employees and for the success of your organisation.

8 Benefits of Health Insurance for Employees

Providing company health insurance offers security for employees and brings a range of advantages for the employer as well.

Faster Access to Treatment

A recent British Social Attitudes survey by The King’s Fund revealed that more than half of people are dissatisfied with the NHS — the highest level of discontent since the survey began. This drop in satisfaction spans across all demographics, from age and income to gender and political stance. The top reasons for dissatisfaction were long waiting times for GP and hospital appointments, staff shortages, and the belief that the government isn’t investing enough in the NHS.

Companies that offer health insurance benefits provide a solution to these issues and give employees quicker access to healthcare. Instead of being stuck on long NHS waiting lists, they can receive the treatment they need when they need it. This speeds up recovery and eases the stress and anxiety that comes with waiting for medical care.

Quicker Diagnosis

A timely diagnosis is critical for patient safety. Delays can not only lead to more serious health risks but also prolong recovery and complicate treatment. The earlier a condition is identified, the sooner effective treatment can begin.

Private medical insurance plans typically offer 24/7 access to GPs, along with coverage for essential diagnostic tests like blood tests, X-rays, CT scans, and biopsies. This means that when a health issue arises, your employees can get the diagnosis they need quickly. In the end, this means a faster recovery and better overall health.

Choice of Treatment Provider and Location

Private medical care through employment-based insurance offers a more personalised experience. Health insurers have a network of hospitals, clinics, treatment centres, and specialists, which gives employees the freedom to choose where and by whom they are treated. This makes the whole process smoother and less stressful.

When employees can select the care that best suits their needs, they feel more in control and valued, not to mention a better overall healthcare experience.

Treatment in Private Facilities

Private health benefits ensure a higher level of care and comfort than what employees might experience with the NHS. Along with excellent medical treatment, they can enjoy a more relaxed environment. Many private hospitals provide private rooms with en-suite bathrooms, so patients have more space and privacy during their stay.

The food options are also more varied and cater to different tastes and dietary needs. Private rooms come with a TV, Wi-Fi, and other amenities to help patients stay connected and entertained while they recover. Plus, they usually get high-quality toiletries and other thoughtful extras, so the experience becomes more comfortable and less like a typical hospital stay.

Referral-Free Treatment

When a health issue arises, the usual first step is a visit to the GP. If they think you need specialist care, they’ll refer you to a specific consultant at a particular hospital. While this is the standard process, it also means more waiting — first for the referral to go through, then for the specialist appointment itself.

With health insurance plans, these delays are cut down. In many cases, employees can see a specialist without needing a referral from their GP. This prevents employees’ health issues from escalating from minor to more serious; for example, early treatment for recurring headaches helps avoid chronic migraines. The insurance company can even coordinate the appointments.

Flexible Access to Medical Care

With health insurance, employees access private treatment in a way that fits around their schedule. Unlike the usual 9-5 service model, many insurers offer 24/7 support, so your employees can reach out whenever they need advice, whether it’s through a helpline or a direct consultation with a GP.

For instance, an employee may be working late into the evening and start feeling unwell. They don’t need to wait until the next day or take time off work to see a doctor. Instead, they reach out to their health insurance provider at any hour and speak to a GP, who provides advice or even arranges for a follow-up consultation at a time that fits their work schedule.

Income Protection

When employees are off work due to illness, it can have a real financial impact. One study found that people on long-term sick leave lose an average of £2,200 in income each year. This affects the employee and their family members.

A well-rounded compensation package can help prevent this and foster a productive, healthy workforce for the company.

Enhancing Company Culture

Offering medical coverage that includes both physical health and mental health treatment shows that a company cares about its people.

We’ve touched on the effect of poor physical health on productivity. But the financial impact of poor mental health, in particular, is also significant. In fact, a survey revealed that in the private sector alone, the cost to employers has reached £45 billion a year.

Addressing mental health issues as part of your employee benefit package will help build a positive workplace culture where employees feel valued and supported.

Attracting and Retaining Talent

Employee wellbeing is more important than ever. In fact, 74% of employees and job seekers say improving their wellbeing matters more than career advancement. Even though employee retention is influenced by many factors, health benefits play a key role. When employees feel supported in terms of their health and wellbeing, it boosts their overall job satisfaction and loyalty.

Why Are Health Insurance and Benefits So Important to Employees?

Many organisations offer health insurance as part of their benefits package to attract and keep good employees. With public healthcare struggling to meet demands and private healthcare being too expensive for many, you can stand out and reduce turnover by providing insurance.

Of course, salary is important, but the lack of comprehensive health coverage can be a dealbreaker for potential employees. As more companies provide health insurance, employees are more likely to leave if they have to pay for private medical care out of their own pockets. So, providing health insurance as part of the employee benefits package can be a major factor in drawing in top talent.

For business owners, healthcare and other important benefits are an effective way to keep employees content and committed, and it’s also a way to reduce the likelihood of them seeking opportunities elsewhere.

Tax Benefits of Providing Health Insurance to Employees

One of the key financial advantages for firms offering health insurance is the tax advantages it can provide for the business, particularly with a group health insurance policy.

In fact, it is more cost-effective for a business to invest in a corporate healthcare plan rather than individual coverage. This is because the company can take advantage of tax relief on employee-related business expenses.

As an employer, you’re required to submit a P11D form to HMRC each year, which lists the salaries and benefits of employees who earned £8,500 or more in the past tax year. You’ll also need to file a P11D(b) form, which details the Class 1A National Insurance contributions owed on the benefits and expenses provided to employees during the previous fiscal year.

When you offer healthcare coverage, it’s classified as a benefit in kind. Employees who earn more than £8,500 annually will pay tax on the benefit they receive, but those earning less won’t be taxed on it.

How Much Money Can Business Health Insurance Save Me?

To put it simply, here’s an example to illustrate the point:

• Average sick days per employee each year = 63
• Total employees = 15
• Direct cost = £11,844 per year

This means each sick day costs around £125.

But the real costs go beyond just wages. When you factor in the full impact of absenteeism, each sick day actually averages £251. That brings the total cost of absence per employee to £3,969 a year.

Even though health insurance won’t stop employees from getting sick, it guarantees they get the care they need quickly. In the end, investing in employee health could save your business around £5,634.

What Else Is Covered by a Business Health Insurance Policy?

Employer health insurance plans typically cover a wide range of medical services, from basic care to more comprehensive coverage, depending on the plan you choose. Some common services included are:

• Private hospital rooms
• Outpatient care (consultations, tests, X-rays, scans, and more)
• Therapy sessions
• Prescription medications
• Cancer treatment
• Video consultations with doctors
• Physiotherapy
• In-hospital treatments (doctor visits, dressings, medications)
• Health check-ups (Vitamin D, cholesterol levels, etc.)

This isn’t an exhaustive list because different insurers offer different plans. So, make sure to carefully choose a plan that fits the needs of both you and your employees before making a commitment.

What Is Typically Excluded from Company Health Insurance?

Even the most comprehensive health insurance policies come with exclusions. Here are some common areas that may not be covered:

• Pre-existing medical conditions
• Chronic or long-term illnesses
• Age-related health issues
• Pregnancy and childbirth
• Contraception and fertility treatments
• Gender reassignment surgery
• Cosmetic and reconstructive surgeries
• Obesity treatments
• Allergies or asthma
• Speech, vision, or hearing problems
• Experimental treatments or new medications

How Much Will Business Health Insurance Cost?

The cost of corporate health insurance varies depending on factors like how many employees you have, the age of your employees, the industry you’re in, and where your business is located.

For example, let’s say you’re based in Manchester and interested in small business health insurance:

• Number of employees: 5
• Average age of employees: 25 to 50
• Plan type: Full outpatient coverage, mental health support, and a £100 excess

In this case, the average annual cost per employee would be around £962, which brings the total annual premium to about £4,810 for the business. Of course, prices change based on the specifics of your company, but this gives you a rough idea of what to expect.

Final Words

Providing private health insurance to your employees has very few drawbacks. It does require an investment, but the cost is nothing compared to the billions UK businesses lose annually to sick pay and long absences. So, offer business health insurance to help reduce these costs, build a strong reputation for your business, and show your team that they’re truly valued.