Health insurance, often known as private medical insurance, is a popular perk offered by many big employers and although some insurers have cut back their benefits, for most people it’s still worth having.
Private medical insurance is a luxury most of us have to go without. The idea of avoiding NHS queues and being whisked into a private hospital might be appealing, but the reality of paying hefty premiums month in month means it’s out of reach for the vast majority of people.
That’s why health insurance offered as a benefit through work is so appealing. The most obvious benefit is the fact it’s cheaper (and may be free) and the cover is normally better than on individual policies. But some employers in recent years have cut the cost of medical insurance by offering cheaper policies with reduced benefits.
Types of work-based health insurance
There are different types of medical insurance that you may be offered through your work, with pros and cons to each.
Private medical insurance (PMI)
This is the traditional policy that most of us think of and it’s a great perk to have through work. The main advantages are that you’ll get a discount (often a significant one) and that you can normally be covered no matter what your medical history is.
There’s another benefit which is that medical insurance policies that you buy individually often have very limited cover for stress and psychiatric illnesses compared to employee-based PMI. With an employee policy, you’re often covered for inpatient and outpatient treatment and there’s a higher limit on treatment costs. Find out more in our guide Do I need private health insurance?
Corporate healthcare trusts
Here, employers set up a trust into which they make payments, with money from the trust being used to pay claims. Some employers prefer these because they can be cheaper to run than traditional PMI schemes, but there can be advantages to employees if there’s a larger list of hospitals and/or consultants for you to choose from.
With both PMI and healthcare trust plans you pay tax on the benefit in kind through your P11D tax form.
Typically, these pay for outpatient diagnosis (which means you can find out what is wrong without having to wait for an NHS appointment), dental treatment and eye tests and sometimes physiotherapy and osteopathy. Some plans will pay towards the cost of hospital stays, but not all do.
Health insurance options
Even within the category of health insurance (as opposed to cash plans), there is quite a lot of variation between the different schemes. It will often come down to your employer’s budget and the extent to which they see medical insurance as a good way of retaining and motivating staff.
You may be offered:
- Overseas cover: If your employer has offices outside the UK, it’s useful to know that workers will be covered.
- Family benefit: Some companies cover husbands/wives/civil partners for free, others will charge a premium, which is usually subsidised.
- Travel insurance: Not to be confused with overseas cover, some policies will include worldwide travel cover.
You can find out more about what private medical insurance policies usually include in our guide What does private medical insurance cover?
Leaving your employer
If you leave the company you may be able to take your PMI policy with you, but the bad news is you’ll usually have to pay a lot more for it.
Contact your insurance company before you leave. They will tell you whether or not you can switch to a ‘follow on’ policy.
The advantage of a follow on policy compared to buying one from another provider is that you can keep the same or similar benefits to those provided through your employer. But you’ll usually have to pay a lot more for it (expect the premiums to rise by 40% or more).
Some insurers won’t let you take out a follow on policy, in which case, if you still want to have cover, you’ll have to shop around for a new policy.
Make sure you compare several different policies before buying. Most insurers provide a range of private medical cover, with some covering the bare minimum and others covering pretty much every possible scenario. Depending on the level of cover you need, you could end up paying for services that you are unlikely to use, so it is worth checking what level of cover you have and whether you could look at a more basic option. This may include taking off options for outpatient treatments such as therapies, scans, tests or consultations.
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