Health insurance for a small business is cheaper than it is for private individuals, and it also helps avoid waiting lists for health care appointments that can slow down work.
The cost of small business health insurance per employee or as a group varies. This guide will help you understand the factors that affect total insurance costs and why getting an insurance policy is expensive.
What are the costs of small business health insurance?
The total cost of small business health insurance depends on many elements, such as age, location, and benefits offered to your employees. One of the key factors that affect insurance costs is the number of staff an employer has. According to reports, over 5 million small businesses operate in the UK as of 2024 – 5.45 million have 0 – 4 employees, 37K businesses have 50 – 2,499 workers, and 8,250 have over 250 employees.
There are three tiers in health insurance plans: low, middle, and high. For small businesses with less than fifty employees, the average cost of health insurance per employee is between £169 and £211 per month. On the other hand, business owners with over 50 employees pay £1,686 to £2,105 for each of their staff’s health plans monthly.
Average cost of health insurance for small businesses per employee
When enrolling your company for medical care assistance, the typical cost per employee is around £45 per month. But this still depends on their age and tier cover. Here is the sample cost of small business health insurance per employee according to age:
- Low Tier or Basic includes inpatient health care and hospital expenses.
- £23 (20s), £26 (30s), £34 (40s), £48 (50s), £77 (60s)
- Middle Tier or Medium includes inpatient and outpatient care bill payments.
- £27 (20s), £30 (30s), £38 (40s), £54 (50s), £87 (60s)
- Higher Tier or Comprehensive includes semi to full coverage payment on inpatient, outpatient, extra medical treatment, mental health counselling, and other medical services.
- £27 (20s), £32 (30s), £42 (40s), £61 (50s), £102 (60s)
Factors affecting business health insurance costs
Small business health insurance schemes are the same as a Premium or Private Health Insurance Policy, but a company pays for it, not an individual. Many factors can play a factor into the cost of health insurance for small businesses. these include:
Number of employees
Group health insurance is much cheaper than individual plans: the larger the group, the more affordable the cover. Insurance policy providers offer larger group discounts to lower the cost of premiums.
Age group
Case studies show that health insurance for older employees’ is much higher than for younger staff because of the type of medical service they need. A policy for a group of people over 50 years can end up 2 to 3 times higher than regular premiums.
Job risk level
Another factor that greatly impacts a small business’s health insurance schemes is the occupation of the worker. The riskier their daily tasks, the higher the medical costs to pay. For example, an office-based worker has lower cover cost than a roof worker who is at a higher risk of a claim.
Area or settings
The company’s location can also play a factor when taking out health insurance in the UK. For example Private hospitals in central London are usually the most expensive among health care facilities in the country. The reason why area affects cost is because the medical cost per employee depends on the prices of each medical service in the area. If you are in a small town, the charges are likely to be lower.
Our case
We have an example of a small businesses’ health insurance costs based off the services they want to provide for their employees. This will give you a greater understanding of the cost of premiums from different providers to give you an idea of how much it could cost your company.
Case – 52 employees
Desired core:
- Full outpatient cover
- Therapies
- Mental Health
- £100 excess
- Moratorium underwriting
Quotes for this company:
- Aviva – £519 per employee = £26,988 per year
- Axa – £607 per employee = £31,564 per year
- Bupa – £586 per employee = £30,472 per year
- Vitality – £702 per employee = £36,504 per year
How to calculate small business health insurance
Usually, health insurance provdiers calculate the cost of premiums by assessing the factors we have mentioned above along with moratorium underwriting. Moratorium underwriting is where insurers allow individuals not to disclose their full medical history and exclude all the pre-existing conditions in the five years before the cover starts.
There are different ways of calculating the cost of small business health insurance. However, you can use the guide below to see and estimate the cost of premiums based on the group size and their ages. Note that this is only for a mid-tier policy estimation and may differ from the actual amount by 10% – 30%.
| Age | |||||
| Number of Employees | 21 – 25 | 31 – 35 | 41 – 45 | 51 – 55 | 60 – 65 |
| 1 | £27 | £30 | £38 | £54 | £87 |
| 5 | £133 | £150 | £192 | £271 | £436 |
| 10 | £266 | £301 | £384 | £542 | £872 |
| 50 | £1,330 | £1,503 | £1,920 | £2,710 | £4,360 |
| 100 | £2,660 | £3,006 | £3,840 | £5,420 | £8,720 |
The reason behind expensive health insurance and small companies
Health insurance is costly because of its effects on a company. It can also become more expensive due to the insurer’s hospital list, which mostly consists of private healthcare facilities.
Additionally, if your employees are over 50 years old, they might need a more complex health plan that will cost you more. Modernisation is also a cause. Because of the continuous changes in policies and terms offered by the insurers, insurance has become confusing or costly for some employers. This is why some companies don’t have health insurance for their employees.
Several policies also significantly affect the cost of premiums, such as:
- Health insurance excess: including an excess reduces premiums by reducing the overall cost of medical care. High excesses result in lower health insurance premiums.
- Adding outpatient cover: The addition of this option results in a higher cost as it allows for faster diagnosis of conditions, including quick access to both outpatient care and inpatient procedures.
- 6 week wait: The insurer will check the NHS waiting list in your area for inpatient treatment if the worker needs it. An employee who has been ill for longer than 6 weeks will be treated privately at the expense of the insurer. The procedure is done on the NHS if the wait time is less than 6 weeks.
- Hospital list: Insurance companies offer different lists of hospitals that you can choose from, which determines the cost of your premiums. The best and most expensive hospitals in London are included as an additional tier by some insurers.
- Additional cover options: Many insurance providers offer optional extras that can be added to an existing policy for an additional charge.
- Underwriting: There are three main options available for underwriting, each affecting the cost of your insurance, such as:
- Full medical underwriting
- Moratorium underwriting
- Medical history disregard
How to save money on small business health insurance
JPMorgan Chase have highlighted that many small business owners want to offer health insurance but can’t afford to do so. Understandably, paying a monthly premium for each employee as a start-up or small business employer is costly. To help you with that, here are some tips for how you can save money on health insurance.
- Raise the pre-agreed amount that your employee should pay the insurer in the event of a claim.
- Lower the cover on outpatient medical services of your employee’s insurance.
- Avoid overpriced health care facilities and private hospitals.
- Shop around, do not stick to one single insurer or policy tier, and look for discounts offered by different UK health insurance companies.
- Save yourself and your employees from out-of-pocket costs by providing a variety of health plans for each worker.
- Educate your employees on the importance, cost, and terms of getting health insurance.
- Pre-tax and Tax credits should be available.
Conclusion
Business health insurance is an example of a financial benefit you can offer your employees for their loyal service. One great benefit of business health insurance is providing a safer and more comfortable working environment for your workers.
It is expensive but beneficial, especially if you reach the out-of-pocket maximum where the insurer will pay the full coverage on the medical treatment needed by your employee. It will help you retain and attract potential new talent that you need for your business to flourish.
If you are considering taking out small business health insurance our team at Healthplan are on hand to help you compare quotes from leading health insurance providers to find you the best deal. To get a quote get in contact with our team or fill out our form and let us find you the right deal.
FAQs
How do age and employee demographics influence premiums?
Younger staff typically cost less to insure due to lower health risks, while plans for older employees are significantly pricier. For example, premiums for workers in their 50s can be double or triple those for employees in their 20s.
Why does the location of my business affect insurance costs?
Insurance premiums are influenced by local healthcare costs. Areas with expensive private hospitals—especially in major cities—often lead to higher insurance rates, whereas smaller towns benefit from lower medical expenses.
What impact does job type have on the cost of cover?
Roles considered high-risk (e.g. manual labour) attract higher premiums due to a greater likelihood of injury claims. In contrast, office-based positions tend to qualify for lower rates.
Is it mandatory for small businesses in the UK to provide private health insurance?
No, private health insurance is not legally required for UK small businesses. However, some employers choose to offer it to improve staff retention and attract talent, especially in competitive industries.
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