Is Private Health Insurance Worth It for Small Businesses?

By Lifepoint Healthcare

Thinking about offering health insurance to your employees? Here’s how private medical insurance can benefit your small business and whether it’s worth the investment.

Is Private Health Insurance Worth It for Small Businesses?

Private health insurance in the UK is designed to give individuals, families, and businesses faster access to medical treatment, greater choice of specialists and hospitals, and added comfort throughout the care journey. But how exactly does it work alongside the NHS? And is it right for you or your company?

In this blog, we break down how private medical insurance (PMI) works in the UK, what it covers, and how to choose the right policy.

What Is Private Health Insurance for Businesses?

Private health insurance (often referred to as group health insurance or company medical cover) is an employee benefit that gives staff access to private healthcare. That means faster diagnosis and treatment, access to private hospitals and specialists, and often a more comfortable, tailored experience than using the NHS alone.

You pay a monthly or annual premium to cover your employees (and sometimes their families), and they gain access to a range of services including:

Private hospital treatment
Specialist consultations and diagnostics
Physiotherapy
Mental health support
Cancer care
Some policies even include extras like dental, optical, or virtual GPs

Why Offer Health Insurance as a Small Business?

You might think benefits like health insurance are reserved for large corporations, but more and more SMEs are seeing the value too. Here’s why:

1. Attracting and Retaining Talent

In a competitive job market, benefits make a difference. Offering health insurance signals that you care about your employees’ wellbeing and want to invest in them. For smaller teams, where each hire matters, this can be a powerful edge.

2. Reducing Sick Days and Downtime

The NHS is under pressure, and waiting times can be long. With private cover, employees can get diagnosed and treated faster, helping them return to work sooner. That reduces the cost of long-term absences.

For small businesses, each absence day can really be felt. By addressing problems as soon as they arise, you can avoid lengthy, and expensive absences.

3. Supporting Mental Health

Life is stressful at the moment. Many health insurance policies include counselling and mental health services—something that’s become increasingly important in recent years. Offering this kind of support can make a real difference to your team’s resilience and wellbeing.

4. Boosting Morale and Loyalty

Employees who feel looked after tend to stick around. Health insurance is a benefit they can use and appreciate, especially if they have families or health concerns.

As you will know your employees more intimately than those within larger corporations, caring for them by provide private health insurance can really boost morale for the whole team and provide a welcome safety net.

5. Tax-Efficient Remuneration

Health insurance can be a tax-efficient way to reward staff, particularly for directors or high earners. In many cases, it costs less than the equivalent salary uplift and provides a more meaningful benefit.

What Does It Cost?

Costs vary depending on your business size, location, and the level of cover you choose. On average:

Basic SME health insurance plans start from as little as £20–£30 per person per month
More comprehensive cover (with added benefits) might range from £45–£80+ per person per month

Factors that affect pricing include:

Number of employees covered
Average age of your team
Level of benefits (basic vs. full outpatient + inpatient)
Underwriting type (e.g., medical history disregard vs. moratorium)

Working with a broker can help you compare options and find the most cost-effective policy for your business.

Unfortunately, the reality is that health insurance premiums do increase each year. This was such a commonly asked question that we created a specific blog for it. Check out 5 Reasons Why Health Insurance Premiums Rise Here!

Is It Mandatory?

No—there’s no legal requirement to offer health insurance in the UK. But as competition for top talent grows, it’s becoming an increasingly popular benefit, especially in sectors like:

Professional services (law, finance, consulting)
Tech and IT
Creative industries
Startups and scale-ups

Even covering just your directors or leadership team can be worthwhile for tax planning and peace of mind.

What Are the Alternatives?

If you’re not ready for full health insurance, you might consider:

Health cash plans – reimburse employees for everyday healthcare (e.g., dental, optical)
Employee Assistance Programmes (EAPs) – low-cost mental health and counselling support
Private GP memberships – faster access to consultations

However, these don’t offer the same depth of cover or access to treatment as full PMI.

How to Get Started

Setting up a policy is easier than you might think, especially with the help of a broker. Here’s how it works:

1. Speak to an adviser to assess your business needs
2. Compare quotes from leading insurers like Bupa, AXA, Vitality, Aviva and WPA
3. Choose your cover level, excess, and underwriting type
4. Enroll employees and set up contributions if required
5. Access ongoing support to help with claims and renewals

Final Thoughts

For small businesses, private health insurance isn’t just a “nice to have.” It can be a powerful tool to build a happier, healthier, more productive team. While there is a cost involved, the return in reduced absences, improved morale, and better retention often makes it well worth it.
At Lifepoint Healthcare, we help small businesses across the UK find the right cover—tailored to their size, budget, and goals.
Want to explore what’s possible for your business? Speak to one of our expert advisers today.

Is Private Health Insurance Worth It for Small Businesses?