What is private medical insurance (PMI)?
Group PMI provides employees with access to private healthcare services, including inpatient and outpatient treatments, surgeries, specialist consultations, and diagnostic tests much faster compared with the NHS, which is often burdened by long waiting times.
According to figures from Laing Buisson’s Health cover UK data insights report, published in January 2025, the PMI business is booming, with employers offering PMI as a benefit being the key driver of growth. Employees are increasingly prioritising their health and wellbeing, recognising its impact on both their personal lives and their performance at work. This is reflected in the value they place on PMI as a part of the employee benefits package. In a survey published by Zest in September 2024, a third of employees named PMI as their most in-demand benefit, ahead of other perks such as increased pension contributions, employer support on energy bills and a wellbeing allowance.
The main benefit of PMI for employees is the ability to avoid delays in NHS care and gain fast access to the healthcare services that they need. Many PMI plans include mental health coverage and resources such as employee assistance programmes (EAPs).
The popularity of PMI among staff means offering it as part of the benefits package helps employers to attract and retain talent, and reduce sickness absence, because early treatment reduces sick days, saving employers significant costs and enhance productivity. Features like virtual GP services streamline care access, enable a faster recovery and return to work.
Employers can decide who will be covered and one emerging trend is a broadening of eligibility. The days of PMI being reserved as a perk for senior leadership or specific grade levels are over as cover is increasingly being extended to a broader proportion of the workforce. Many plans have options to include employees’ partners and/or children or to add dependents, with the extra cost funded by the employee.
What are the cost implications?
Offering PMI as an employee benefit comes with significant cost implications for employers, which vary depending on factors like workforce size, policy design, and healthcare trends.
Generally, the higher the number of people covered, the lower the price per employee. For small businesses, the cost will generally be higher, but there are specialist policies for those with fewer than 250 employees. The cost of employee health insurance for small businesses with up to 250 employees varies from £20 to £100 per employee monthly, depending on the package and services included.
Long delays in waiting for NHS treatments have meant that people with PMI are more inclined to seek private care earlier than in the past. This growth in demand has led to increased fees. As a result, employers have faced premium increases in recent years, with some seeing hikes of over 50% due to rising claims and medical costs.
Additional costs include the administration of a PMI scheme. Integrating this with existing payroll and HR systems can entail dedicated resource or system upgrades, which will impact on operational costs.
Are there any tax or legal issues?
Buying PMI is considered a business expense, so the cost attracts tax relief at the current corporate rate. Employers are also liable for Class 1A national insurance contributions (NICs) on the gross contract cost. For employees, PMI is treated as a benefit in kind (BIK). This means that the employee is taxed on the individual benefit value, that is, the premium the business pays for the employee’s PMI.
Employers must ensure that the scheme complies with legislation, especially around data. While the PMI provider handles medical information, any data shared with the employer must comply with GDPR. Employers should also ensure that the benefit is clearly communicated to staff and accurately reported via P11D processes.
What are the current market trends or developments?
One notable trend in the market is a move towards more preventative healthcare services, with PMI providers and insurers increasingly offering initiatives designed to maintain and support the wellbeing of employees before serious illness issues strike. This includes access to screening and other early interventions.
As with many aspects of the employee benefit offering, digitisation is becoming a key feature of PMI, with more schemes including digital health services, such as wellness apps, virtual GP services, online eye screening platforms that provide preliminary vision assessments, digital physiotherapy assessments and personalised care plans along with their core offerings.
Who are the main providers?
For traditional fully insured contracts, the key market players include Aviva, Axa Health, Bupa, WPA, and Vitality, which has gained popularity for offering more personalised plans with rewards for staying healthy, such as discounts on gym memberships. Other leading names include Allianz Care, HealthShield and Simplyhealth.
