All About Private Medical Insurance

Private medical insurance is, along with pensions, one of the most valuable and sought-after employee benefits. A good occupational pension scheme and a respectable private medical insurance arrangement can make a significant difference when a company is recruiting. Furthermore, effective use of these benefits can help to ensure that valued staff are not lost to competitors with higher headline salaries.

Employer Responsibility

A recent study has suggested that an individual is more likely to take a job if they are offered private medical insurance as a benefit. Similarly, around three fifths of all employers have positively stated that they have a responsibility for the employees' health, and that this responsibility is equal to that of the employees themselves. As such, private medical insurance and healthcare generally are becoming increasingly important aspects of employee benefits. Frequently, the benefits of private medical insurance will be made available not only to the employee but also to their immediate family. In these cases, the value of the benefit is clearly increased in the eyes of the employee, but the cost to the employer may not be very much higher.

In the first instance, it is important to note that different private medical insurance policies work in different ways. Amongst the most important potential discrepancies is the method of payment by the insurance company in the event of a claim. Some insurers will insist that employees use their own accredited healthcare professionals; indeed, in the case of some BUPA plans, doctors will actually be provided on site. However, depending on the nature of the policy, employees may exercise some choice when they seek treatment. Some more flexible insurance companies will pay the employee directly, rather than settling bills with accredited doctors or hospitals. This gives the employee the freedom to choose where they are treated; indeed, some individuals choose to travel abroad in order to secure cheaper treatment, and save the difference. This is made possible as many insurers will pay a set fee upon diagnosis.

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Rapid Access

For both employer and employee, one of the major benefits of private medical insurance is the avoidance of long waiting times and inflexible bookings with the NHS. Frequently employees will be forced into a position in which they have to miss work in order to get treatment, or risk waiting months after being put to the back of a waiting list. Private medical insurance circumvents these problems, and provides rapid access to healthcare professionals. Clearly this is beneficial to both employer and employee, as it ensures that employees' afflictions are dealt with quickly, while minimising the amount of sickness leave suffered by the employer.

It is also important to consider the tax treatment of private medical insurance as an employee benefit. In essence, the employee will pay tax on the use of private medical insurance as if it were part of their salary. This is the case regardless of whether it is the employee or a member of their family who takes advantage of the insurance. Furthermore, the employer will have to pay Class 1 National Insurance Contributions on the sum.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Salary Sacrifice Calculator lets you see how a salary sacrifice scheme, such as pension, cycle to work or an electric car, affects your take-home pay and the tax and National Insurance you save. Try it now →