If you’ve ever tried to get a straight answer on the cost of business health insurance, you’ve probably been met with a frustrating “it depends.” That’s because there’s no single price – the premium depends on your team, the level of cover, and the insurer you choose.
The good news? With the right information, you can get a realistic estimate quickly, and more importantly, make sure the policy you choose offers value, not just the lowest price.
Overview of SME Health Insurance Costs in the UK
To give you a ballpark figure:
- Basic SME cover can start from around £20–£40 per employee, per month.
- Mid-range plans with outpatient benefits and added extras might be £40–£70 per employee, per month.
- Comprehensive policies with full outpatient, mental health, and therapies cover can reach £80+ per employee, per month.
Illustrative Comparison Table – Average Monthly Premiums Per Employee
The 6 Biggest Factors Affecting Price
Let’s break down what really drives your premium.
1. Number of Employees
The more employees you cover, the more it costs in total — but the cost per employee can actually decrease as your scheme grows. Larger schemes sometimes qualify for more favourable underwriting (like Medical History Disregarded (MHD), which covers pre-existing conditions) and better group discounts.
2. Age Profile
Age is one of the biggest factors in pricing. Older members typically cost more to insure, as they’re statistically more likely to claim. A good broker will be able to work with you on this, and discuss any possible workarounds with you to reduce the overall costs.
Example: Covering a workforce with an average age of 28 will cost less than one with an average age of 52.
3. Location
Hospital and consultant fees vary by region. London and the South East are typically more expensive than other parts of the UK, so if your policy gives access to premium London hospitals, expect to pay more.
4. Level of Cover
A basic policy might just cover inpatient treatment (hospital stays and surgery). The more benefits you add — outpatient consultations, diagnostics, mental health support, therapies, dental, optical — the higher your premium.
5. Underwriting Type
- Moratorium underwriting – often the most cost-effective for SMEs and the easiest to set up from the outset. It excludes pre-existing conditions from the last 5 years unless you go 2 years without symptoms/treatment.
- Full Medical Underwriting (FMU) – slightly more expensive but offers clarity from day one about what’s covered.
- Medical History Disregarded (MHD) – covers all pre-existing conditions; generally the most expensive, usually requires 10–15+ employees.
You can find out more about MHD and other types of underwriting in this blog:
6. Claims History
If you’re renewing a company scheme, a history of high claims can push up premiums. Conversely, a low-claims history can help you negotiate a better deal.
Example Cost Scenarios
Here are some fictional examples to make the numbers real:
How to Keep Costs Under Control
The aim isn’t always to buy the cheapest policy — it’s to buy the right policy at the right price. Here’s how to balance value with budget:
1. Tailor Your Cover
You don’t have to buy everything. Focus on benefits your team will value most — for example, many SMEs add outpatient cover but skip dental/optical.
A good broker will be able to assist you with this. You know your team best and a cookie cutter approach favoured by price comparison sites doesn’t take into account the variety of people, teams, and employees and their needs.
2. Adjust the Excess
Choosing a higher excess (what the employee pays towards a claim) can lower premiums. Just make sure it’s still affordable for your team.
3. Use Guided or Restricted Hospital Lists
Some insurers offer “guided” hospital lists — you get a shortlist of top-quality hospitals/consultants. This can reduce costs without cutting quality.
4. Wellness & Preventative Care
Some policies include health checks, fitness apps, or lifestyle rewards, which can reduce sickness absence and improve productivity — adding value without necessarily adding cost.
These vary between insurers and your broker can discuss these add-ons with you.
5. Review Annually
Business needs and insurer pricing change. An independent broker can review the market each year to make sure you’re still getting the best value.
Tax Implications
In the UK, company-paid health insurance is considered a P11D benefit in kind. This means:
- The employer can usually claim it as a business expense.
- The employee pays tax on the benefit.
- You’ll need to report it via payroll/P11D forms.
This doesn’t mean it’s not worth it — many employees see private health cover as a major perk that outweighs the tax.
Why SMEs Invest in Health Insurance
Beyond the numbers, company health insurance can be a smart investment:
- Attract and retain talent – especially in competitive sectors.
- Reduce absenteeism – faster diagnosis/treatment means less time off.
- Boost morale – employees feel valued and supported.
- Improve productivity – healthy employees perform better.
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Final Thoughts
The cost of company health insurance will depend on your team, your budget, and the benefits you want to offer. There’s no one-size-fits-all price – but there is a policy that’s the right fit for your business.
By understanding the factors that drive cost, you can make informed decisions and ensure you’re offering a valuable, sustainable benefit.
Next step: Speak to one of our advisers for a no-obligation quote!
Lifepoint Healthcare works with all major UK insurers — including Bupa, AXA, Vitality, and Aviva — to help SMEs find the right cover, at the right price.
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