Why do companies offer health insurance benefits?

21.04.2022 ∙ Roman Danaev ∙ 10 min read

When starting or running a small business, it’s important to make sure you have the resources necessary to keep your employees safe and healthy.

This means that not only should you provide a safe and clean work environment but also make sure your employees have access to quality healthcare.

One of the most common benefits provided by employers is health insurance coverage. Let’s take a look at why small businesses should offer health insurance benefits to their employees.

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If you’re a small business owner, we’ll also help you calculate how much business health insurancewill cost, how you can benefit from it, and what it entails:

Why should I invest in business health insurance?

Investing in company health insurance provides not only security for employees but also unlocks numerous benefits for the employer. It is an investment that delivers returns through employee productivity and morale.

What type of cover are you looking for?

You

Couple

Family

Business

Make employees feel valued through family coverage

All employees want to feel appreciated by their employers, which is why so many companies provide employee benefits in the first place.

A very effective solution for this is providing group health insurance, which allows employees to access private healthcare swiftly, in comfort, and with more control over their treatment.

Some firms allow employees to add their families to their insurance policies. This means that private medical treatment for employees' spouses and children is also covered, which can provide comfort to employees, knowing they don’t have to worry about extra bills.

Ensure the health of your employees

A healthy workforce translates into far-reaching benefits that go beyond fewer absences. Better physical and mental health management leads to increased productivity and a more pleasant working environment.

In addition to health insurance, you can offer the following resources to cater to your employees’ health needs:

  • Therapists and consultants: Mental health is just as important as physical health, and more often than not, employees may not be entirely comfortable discussing their personal life or problems with their supervisors. Thus, a therapist at work can be extremely effective in boosting employee morale.
  • Dental or optical coverage: These medical conditions are either partially covered by the NHS or there are long waiting lists that make access extremely difficult, so company coverage can make a difference.
  • Discounted gym memberships: This can encourage employees to join a gym and improve their fitness and, in turn, their health.

Fitness trackers: Technological devices such as digital watches that track fitness, for example, by logging daily steps or reminding them to drink water, can encourage employees to improve their health.

Reduce the number of absences

One of the most compelling reasons to buy private health insurance is that it can significantly speed up diagnosis and treatment. NHS waiting lists can be weeks or even months long, leaving people with little time to cope with their medical problems.

This could result in more time away from work to treat an illness, especially if it is painful and/or distressing. Thus, this situation can be avoided by offering business health coverage to all employees.

Offer treatments that the nhs does not provide

The NHS only offers immediate treatment for conditions that are urgent, life-threatening and/or require prompt surgical care. This is why private health insurance has become so common in the UK.

These policies also cover procedures and medicines that are not readily available on the NHS (given you purchase that level of coverage). Examples of these treatments include:

  • Certain medicines
  • Experimental therapies
  • Several cancer-related treatments
  • Acupuncture and osteopathy therapy

Employees may find it comforting to know that they have greater access to various treatments if needed.

Reduce employee turnover

Employee perks aren't simply for those who are already employed by your company. They also serve as a way to attract fresh personnel and set expectations for your company.

An excellent employee benefits package can assist you in both recruiting and retaining high-quality additions to your company.

Even though 44 per cent of UK employees want benefits that help them manage their health and wellness, only 12.6 per cent of businesses offer Private Health Insurance to their employees.

This means that firms who prioritise their employees' health may have a competitive advantage that makes them stand out in the eyes of potential candidates.

Why are health insurance and benefits so important to employees?

Many small businesses offer health insurance benefits to their employees as an enticement to work for them. By offering these benefits, a company can attract higher-quality workers and help reduce its employee turnover rate.

While employees generally focus on the annual wage before accepting a job, private medical bills can amount to thousands of pounds. Thus, offering health insurance as part of the employee benefit plan can give you an edge over other companies.

Moreover, with an increasing number of firms offering health insurance to their employees, people are more likely to leave if they have to pay out of pocket for medical care. A 2017 survey showed that 60% of employees understand their health benefits.

As a business owner, it’s in your best interest to make sure your employees have access to healthcare and other valuable benefits to keep them from leaving your company for one that offers better perks.

Tax benefits of providing health insurance to employees

A great financial advantage of offering small business health insurance is the tax benefits that come with a group plan for the employer.

In some cases, it may be more tax advantageous for a business to purchase a corporate private healthcare plan rather than a personal one. This is because the company would be eligible for tax reduction (tax relief) on employee-related expenses.

As an employer, you must submit a 'P11D' form to HMRC once a year. This is the end-of-year costs and benefits form, which lists the salary and earnings of employees who have earned £8,500 or more in the previous year.

HMRC also requires a P11D(b) form in addition to the P11D, which outlines the amount of Class 1A National Insurance contributions owed on expenses and benefits paid to employees during the previous fiscal year.

When you provide healthcare coverage to your employees, it is referred to as a 'benefit in kind'. If an employee makes more than £8,500 per year, only then they are required to pay tax on the benefit they receive.

How much money can business health insurance save me?

To help you understand, here is an example:

  • The average number of working days missed due to absenteeism = 63/per year
  • Total number of employees = 10
  • Direct Cost = £7,896/year

Thus, your direct costs for each day an employee calls in sick are £125

But it isn't the end of the narrative. We all know that taking a sick day has financial consequences that extend far beyond the individual's pay. Every day an employee calls in sick, the real costs average out at £251, making your total absence cost per person per year £1,579.

Of course, workplace health insurance won't prevent employees from being ill, but it will ensure that they receive the care they need as soon as possible.

A quick calculation reveals that the potential saving available for investing in your employees' health and wellness is £3,158.

Is small business health insurance cheaper than an individual's?

It is interesting to note that purchasing group health insurance for even a small business is less expensive than purchasing individual policies. The cost of premiums can be reduced by spreading the risk across as few as two persons.

Furthermore, group insurance is less flexible and personalised, which might save money. As an alternative, Contractor insurance is available for freelancers; however, these fall under specialised coverage.

What else is typically covered by business health insurance?

Most employer health care insurance plans cover a wide range of medical services. You can acquire very basic to extremely extensive coverage depending on which plan you choose. The following are some of the services offered:

  • Private facilities such as rooms
  • OPD services (Consultations, tests, x-rays, scans etc.)
  • Therapy
  • Prescriptions for medication
  • Medication
  • Coverage for cancer
  • Video consultations with doctors
  • Physiotherapy
  • Hospital treatment (Consultation with a doctor, dressings and medication)
  • Health tests (Vitamin D, Cholesterol levels etc.)
  • Regular diabetes appointments

The list above is by no means comprehensive of all medical services covered by a company's health insurance plan. Each insurer’s plans may differ, so it’s important to choose one that fits your and your employees’ needs before purchasing one.

What is typically excluded from company health insurance?

Even the most comprehensive plans will often exclude some medical conditions, although many items are covered. The following topics are frequently excluded from business health insurance plans:

  • Ageing
  • Mental health issues
  • Menopause
  • Allergies or asthma
  • Contraception
  • Gender change surgery
  • Illnesses with a long duration
  • Pre-existing medical ailments
  • Cosmetic surgery
  • Reconstructive surgery
  • Treatment for obesity
  • Pregnancy and labour
  • Speech, vision, and hearing problems

How much will business health insurance cost?

This value will differ from provider to provider and will be determined by several factors like the age of your employees, the industry in which your company operates, and the location of your company.

However, we can give you a rough idea of how much a corporate health insurance plan will cost for a small firm based in Manchester:

Number of employees = 5

The average age of employees = 25 to 50

Type of plan required = Complete outpatient coverage, mental health coverage, and a £100 excess

The annual average cost per employee will be £962, and the total annual premium will be £4,810. This data is calculated as an average of 4 different insurance firms.

Let’s Conclude

Offering health insurance benefits provides an advantage to both employers and employees. It means a higher retention rate, more productivity and ultimately, a healthier lifestyle. If you’re running a business, it would do you well to consider offering these valuable benefits to your staff.

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