Private medical insurance

Private medical insurance buys speed and choice in how a condition is treated. It does not replace the NHS and it is not a health service in itself: it is a contract that pays for certain treatment, from certain providers, in certain circumstances.

The distinction that runs through almost every policy is between acute and chronic. Cover is generally built around conditions that respond to treatment and then resolve, rather than long-term conditions that are managed over years. Where exactly a policy draws that line, and what it does with a condition that crosses it, is the single most useful thing to understand about the one you are being offered.

Employer schemes differ from personal policies in how membership is underwritten and in how much choice the individual has. In a group scheme the employer sets the shape of the cover and the employee joins it.

It tends to be considered where waiting has a real cost, either to the person or to the work, and where the employer wants people to be able to get seen quickly. It is often the benefit employees rate most highly in the abstract, which is not the same as the one they use most.

It also tends to be the most expensive line on a benefits bill, and the one whose price moves most at renewal. That makes the question of what you are buying, rather than what it is called, worth more attention here than almost anywhere else.

Whether it suits your organisation, and at what level, is a regulated question. This guide is general information and does not answer it.

Features that appear often in employer schemes. Whether any is in yours, and on what terms, is a question for the policy document.

Commonly present, subject to policy terms:

• Inpatient and day-patient treatment for covered conditions, which is the core of most policies.
• Outpatient cover, often as a separate layer with its own annual limit, and sometimes optional.
• Diagnostics such as scans and tests, which may sit inside the outpatient limit rather than outside it.
• A hospital list that defines where treatment can happen. Narrower lists usually cost less.
• Mental health cover, which varies more between policies than almost any other element, and is worth asking about specifically.
• Added services such as remote GP appointments or second opinions. These are often the most-used part of a policy and the least communicated.
• An excess, per person per year, which the employer chooses and which affects the price.

We have deliberately not printed a list of standard exclusions. There is no standard list, and one presented as though there were would be wrong for a large share of readers while looking authoritative. What is stable across the market is the set of dimensions on which policies differ.

Establish where your policy sits on each:

• How pre-existing conditions are handled. Group schemes are set up on different underwriting bases, and the basis chosen decides whether something a person already has is covered, excluded, or excluded for a period and then reviewed. This is the term that most often surprises people.
• Where acute becomes chronic. A condition that stops responding to treatment and starts being managed may move outside cover. Policies word this differently.
• What the outpatient limit really covers. If diagnostics sit inside it, a single investigation can use a lot of it.
• What mental health cover means here. Whether it exists, what kinds of treatment it reaches, and any session or monetary limits.
• Which hospitals are on the list, and whether the ones near your people are on it.
• Who is eligible, whether family members can be added, and who pays if they are.
• What emergency care is not. Private medical insurance is generally not a route into emergency care, which remains an NHS matter.

The employer arranges the scheme, chooses its shape, and pays the premium. The tax treatment is well defined and worth getting right.

Where you pay the provider directly, HMRC requires you to report it on form P11D and pay Class 1A National Insurance on the value of the benefit. Where the employee arranges the treatment and you pay the provider, the value is added to earnings for Class 1 National Insurance through payroll but not PAYE tax. Where you reimburse the employee, it is treated as earnings with PAYE tax and Class 1 National Insurance deducted through payroll.

Several related things are exempt from reporting, and these are more useful than they look because they are often forgotten. HMRC lists: one health screening or medical check a year; eye tests required by health and safety legislation for employees who use a screen, and glasses or contact lenses provided for screen work; flu vaccinations; treatment or insurance for injuries or diseases resulting from the employee's work; medical treatment while an employee is working for you overseas; and up to £500 of costs for an employee to return to work, where they have been assessed as unfit for work, or absent because of injury or illness, for at least 28 consecutive days.

That £500 exemption is the one most worth knowing, because it fits exactly the situation an employer is usually trying to help with and is frequently missed. Note that benefits provided under salary sacrifice are reportable and not covered by these exemptions.

A version you can adapt. Keep the qualifications.

Your employer provides a private medical insurance scheme. It may pay for private treatment of conditions the policy covers, which usually means conditions that come on and can be treated, rather than long-term conditions that are managed over time.

It is not a substitute for the NHS and it is not the route for an emergency. Whether any particular treatment is covered depends on the policy, so the honest answer to "is this covered" is always to check before you book, not after.

You may be taxed on it. Because the employer pays for it, it is usually reported as a benefit in kind, which can affect your tax code.

The parts people forget are often the most useful: remote GP appointments and similar services frequently sit inside these schemes and can be used without anything being wrong. Ask your employer for the membership documents, and use the provider's own helpline to confirm cover.

Renewal is where the terms move as well as the price, and the price movement usually gets all the attention. Ask about both.

• What underwriting basis is the scheme on, and what does that mean for someone who already has a condition?
• Where does this policy draw the line between acute and chronic, and what happens to a condition that crosses it?
• What is the outpatient limit, and do diagnostics come out of it?
• What does the mental health cover actually reach, and what are its limits?
• Which hospital list applies, and are the hospitals near our people on it?
• What is the excess, and per person or per claim?
• Which added services are included, and how would an employee use one tomorrow without making a claim?
• What has changed in the terms since last year, separately from the price?
• If we move insurer, what happens to anyone mid-treatment?

The failure mode here is specific and expensive: people believe they are covered for something they are not, discover it at the worst possible moment, and the employer wears the disappointment even though the employer did not write the policy.

So the communication that works is unusually plain. Say what kind of thing the policy is for, say that cover depends on the terms, and make the phrase "check before you book" part of how the benefit is described rather than a footnote. Give people the provider's number rather than making yourself the interpreter of a document you did not write.

Separately, promote the small services. Remote GP access and similar are used far more often than surgery, need no claim, and are the part of the scheme most likely to be worth something to most people in a given year. They are also the part most often left out of the announcement.

On tax, tell people once, clearly, that it is a taxable benefit and may show up in their tax code. Finding that out from a coding notice is a bad way to find out.

Private medical insurance answers the question of how someone gets treated. It does not answer what happens to their income if they are off for a long time, which is group income protection, and it does not cover routine everyday costs like dental and optical, which is a health cash plan. Those three are frequently confused with each other, and they do genuinely different jobs.

For support that is about how someone is coping rather than about treatment, see the employee assistance programme guide.