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- The cost of employee health insurance for small businesses ranges between £20-200 a month.
- Numerous factors affect employee health insurance costs, including the size of your team, their age and health, the location of your company, and the type of work you do.
- There are ways to lower the monthly cost of employee health insurance, like raising the excess, including the NHS six-week rule, and opting to pay annually rather than monthly.
- The cost of employee health insurance is worth it if your team faces a high risk of physical injury, but if it's mental health you want to support, you’d be better off investing in a specific mental health solution like Spill.
- Proactive mental health screening and personal therapy programmes generate the highest return on investment for employee wellbeing solutions, at £6.30 for every £1 invested.
With companies tightening their belts amidst the rising costs of, well, everything, a new trend has made itself known in 2023: the perk-cession. First coined by the Wall Street Journal, the perk-cession is causing companies to take a closer look at their employee benefits programme. But in the face of decreasing levels of employee wellbeing, how do they decide what stays and what goes?
Employee health insurance is one such company perk but like everything, it comes at a price. But what is the true cost of employee health insurance? And if decisions need to be made over which benefits to keep, should you be prioritising physical or mental health care for your team?
Let's find out. Here, we’ll guide you through the cost of employee health insurance, and weigh up whether buying health insurance for employees is really worth it from both a financial and business perspective.
How much does employee health insurance cost?
The cost of employee health insurance for small businesses with 0-250 employees ranges between £20-100 per employee, per month.
It’s one of the first questions business owners want to know when it comes to introducing (or keeping) a company benefit: how much will this cost?
For health insurance, small businesses can expect to pay anything between £20-100 per employee, per month. By small businesses, we’re referring to a company with 250 employees or fewer. But, this figure could be higher (or lower) depending on the size, age, and health of your team (more on that later).
To give you a clearer idea of the cost of health insurance for small businesses in particular, we’ve done some initial research using Bupa’s guide price tool. It’s worth noting that these prices are only for Bupa’s ‘key cover’, which is their most basic level of business cover out of three. Plus, providers tend to offer optional add-ons, which will add to the monthly cost.
The prices in the graph below are the total company health insurance cost per month, not cost per employee.
As expected, the monthly cost of employee health insurance increases both with the number of employees on a team and their age. Now, we’re not assuming that everyone in your team falls within the same decade but hopefully it gives you an approximate idea of what your monthly (and therefore yearly) outlay could be.
Tax implications of employee health insurance costs
Employee health insurance is considered a benefit in kind, which means it's a perk that employees receive on top of their salary and which benefits them personally (i.e. it’s not considered ‘wholly, exclusively, and necessary’ for your business).
It’s also a taxable benefit in kind, which has implications for your employees (see below) and for you, the employer. But don’t worry, it’s not necessarily a bad thing!
If you provide employee health insurance to your team, you’ll need to pay employer’s National Insurance at a rate of 13.8% of the value of the benefit. But, employee health insurance is also considered a tax-deductible expense — it can be taken off your profits, reducing the amount of corporation tax you’ll need to pay.
What is the cost of health insurance for employees?
The whole point of employee health insurance is that it’s a perk for your team, but there can still be a cost for them depending on how you offer it.
If you buy employee group health insurance for your team, you’ll pay a monthly premium for the coverage. It’s up to you whether you choose to enrol everyone or just a few people (as few as two people can be covered by employee health insurance), but either way, your company will be paying for the cover. Depending on the plan, employees may have to pay an excess towards their treatment before the insurance takes over, but they’ll still benefit from not having to pay all the costs themselves upfront and reclaim it back at a later date.
Alternatively, you can offer employee health insurance as a voluntary benefit: members of your team can choose to opt in and if they do, they’ll pay for their own cover. But, it’s still a benefit because group health insurance is cheaper than taking out an individual plan.
However.
There’s also a slightly hidden cost of employee health insurance for your team in the form of tax. As a taxable benefit in kind, your employees will have to pay income tax on the cost of the monthly insurance premium. This amount will come out of their monthly salary. It’s worth noting that despite paying income tax on employee health insurance premiums, your team won’t have to pay National Insurance, which is a nice tax saving if you ask us!
⚠️ It goes without saying that we’re not giving out financial advice: please speak to your accountant, tax advisor, or HMRC directly to fully understand the tax implications of offering employee health insurance.
Download our free employee health insurance evaluation checklist
Make sure you're asking the right questions when buying an employee health insurance plan (or weighing up the one you already have)
What affects the cost of employee health insurance?
Unlike other wellbeing benefits, such as gym memberships, employee assistance programme (EAP) contracts, or indeed Spill’s rolling monthly subscription, employee health insurance costs change based on more than just the number of people on your team.
5 factors that change the cost of employee health insurance
1. The cost of employee health insurance changes depending on the level of cover
The specific details of every employee health insurance plan vary but one thing remains constant: the more comprehensive the cover, the more expensive it will be. By cover, we mean what the insurance policy includes. Most providers offer a basic level cover with the option to add extras onto your policy, like mental health treatment, dental and optical treatment, travel cover, and a wider range of outpatient tests.
2. The cost of employee health insurance changes depending on your team’s age
It’s a sad fact of life that as we age, our health deteriorates and our need for healthcare increases: 58% of people over the age of 60 have a long-term condition compared to just 14% of those under 40. Insurance companies will charge a higher monthly premium for older team members, which will increase your total monthly spend.
3. The cost of employee health insurance changes depending on your team’s health
It's thought that in the UK, 15 million people live with one or more long-term health conditions — that’s 30% of the total population. While health insurance policies tend to exclude pre-existing conditions, your team’s medical history can affect your monthly payment. Likewise, employees that are deemed as ‘at risk’ health-wise, such as being a smoker, may also cause the price to increase as there’s a higher likelihood of a claim: it’s thought the difference in premium between a smoker and non-smoker can be as much as 30-50% depending on the insurance provider.
4. The cost of employee health insurance changes depending on your business type
Each company’s line of work comes with its own set of risks: a construction company has very different risks than an office-based company, for example. The kind of industry your company works in will have an impact on the potential for risk or illness, which in turn will affect the price of your plan. Remember, the more likely your team is to make claims, the higher the cost may be.
5. The cost of employee health insurance changes depending on the location of your company
Private healthcare varies in cost around the UK: London has some of the most expensive hospitals, so if you’re a London-based company, you might find you’re paying more. Likewise, if you’re a distributed team, it might be more expensive to get treatment on a national level: for example, Bupa offers a network of 300 treatment facilities on their most basic cover, rising to 600 on their most comprehensive plan.
Spill surveys the wellbeing of your team every week with a team meeting integration and then proactively gets mental health support to those in need.
5 ways to reduce the cost of employee health insurance
The cost of employee health insurance is considered one of the more expensive company perks, but it’s also one that benefits both you and your team. Here are five things you can do to offer cover while keeping costs down.
1. Increase the excess
The excess is a pre-agreed amount (that you’ll set when taking out the policy) that your employees will pay towards the overall cost of their claim. This could be anything from £0-500. By raising the excess amount, the cost of the premium will be reduced. This is generally considered a good option for businesses with a lower likelihood of claims.
2. Include the six-week NHS rule
It’s possible to include a clause in your policy that means your team will only be seen privately if they’re unable to get NHS treatment within six weeks. Considering nearly 60% of people on the NHS waitlist have waited more than 18 weeks for treatment, you can expect your employees to indeed get private care. But, it does mean some people will still get treated via the NHS. It’s thought that this rule could reduce the cost of employee health insurance by 25% because it reduces the risk of you/your employees needing to make a claim.
3. Set eligibility criteria
By setting certain criteria for joining your company’s health insurance scheme, you can reduce the number of people covered by the policy. It goes without saying that any restrictions need to be non-discriminatory and you should seek advice if going down this route. Popular criteria include things like only covering full-time members of staff or only enrolling employees once they’ve been at your company for a full year.
4. Pay annually rather than monthly
Most company health insurance policies will offer monthly payment and for many businesses, this is an attractive option as it spreads the cost. But, like many other payment plans, paying the full amount upfront can often be cheaper: if you’re looking to cut costs, consider paying for your plan annually rather than monthly.
5. Do your research
It might sound obvious but just like bringing anything into your business, employee health insurance needs researching. Getting a quote directly from an insurance provider might be easy (we get it, insurance is complicated), but remember: they’re good at selling. Gather multiple quotes, research the policies, get advice, and talk to your team — you need to make sure the cover you get actually covers their needs. And if you’re up for renewal, take the time to shop around for new deals rather than just letting your contract roll over.
Is the cost of employee health insurance worth it?
Finding return on investment (ROI) data on employee health insurance has proven tricky, which in itself might be telling. The only data we’ve found comes from a report by ABI, which states that ‘of the 5.5 million people covered by private medical insurance [in 2021], three out of every four policies were provided by an employer as part of a group policy. The health services provided by this product were accessed 5.2 million times’. But, there’s no clarification on whether that figure includes multiple uses for the same individual.
Ultimately, we think it boils down to the problem you’re trying to solve.
It goes without saying that there are some companies that operate in an industry that’s more prone to physical injury: construction, agriculture, and manufacturing all come with risk of injury and work-related ill health. In 2022, the Health and Safety Executive reported that in construction (which accounts for 6% of the workforce in the UK), 53% of work-related ill-health was due to musculoskeletal problems while stress, anxiety, or depression accounted for just 27%.
Clearly, that’s an industry that could benefit from physical health insurance, but the facts and figures about mental health at work in general tell a very different story. In short, the workforce generally needs more mental health support than physical. And with stress, anxiety, and depression being the number one cause of sickness absence from work (accounting for 28%), we think there’s a strong case for putting your money towards proper mental health support rather than the diluted support that’s often tagged on to health insurance.
The cost of mental health support with Spill
Spill is a digital mental health provider that makes effective therapy accessible, affordable, and free at the point of use. Everyone in your team can benefit from therapy with Spill: there’s no exclusions clauses whatsoever and with therapists covering 80+ areas of expertise, your employees can get specialist support from the top 13% of qualified therapists.
With Spill, there’s no need to compromise on treatment in order to save pennies:
- We don’t raise prices based on employee age or industry
- There’s no excess to pay
- There’s no waiting list at all
- We include pre-existing conditions (and don’t charge more for their care)
- You can start by covering one employee or cover the whole team
- Our lowest price is available with no annual contract
In short, we recognise that everyone, at all times in their life, can benefit from mental health support.
Let’s look at a team of 15 people: five of them are in their late 20s, six are in their early-mid 30s, and four are in their 40s.
For basic level cover with Bupa, you’d be looking at a guide price of £393.20 per month for all 15 employees — but remember, that’s just the price for those ages with no medical history shared with Bupa. It could easily go up if younger members of the team were replaced with older employees, or if they added their medical history. The mental health support in that cover offers mental health treatment as an outpatient, inpatient, or day patient for up to 45 days, but the details of what this treatment includes is vague. And remember, health insurance excludes people with pre-existing conditions and often, those with ADHD, OCD, bipolar disorder, and other developmental, behavioural, or learning problems.
At Spill, you’d be looking at £75 per month for all 15 employees as a platform access fee. And then, any therapy sessions booked will cost £65 on top of that. The statistics show that 25% of your team will struggle with their mental health this year: in a company of 15, that’s four people. If those four people accessed one therapy session with Spill per month, your total would be £335.
So, for £335 a month you can give the struggling 25% of your 15-person team free access to a luxury that’s all too often unaffordable: private therapy sessions can cost up to £180 per hour. Plus, that total isn’t going to change based on age, or industry type, either. It also includes anyone with a chronic or pre-existing mental health condition.
But Spill isn’t just about offering therapy — we provide proactive mental health care, too. Our unique algorithm proactively screens your team and flags anyone who’s struggling. And then, one of our therapists reaches out to offer them tailored support. This combination of proactive mental health screening and personal therapy offers businesses the highest ROI when it comes to wellbeing solutions. For every £1 invested, you can expect returns of £6.30.
Invest in solving the right problem
We’re not saying that the cost of employee health insurance isn’t worth it. What we’re saying is, think carefully about the problems facing your team and the right solution to solve them. If your company is suffering due to low mood, anxiety, depression, loneliness, burnout, or any other mental health challenge, a specialist therapy provider is your solution. And it’s not just needed, it’s wanted, too: 81% of employees say they’ll be looking for workplaces that support mental health in their next job search. And that could be you.
Download our free employee health insurance evaluation checklist
Make sure you're asking the right questions when buying an employee health insurance plan (or weighing up the one you already have)
Check how much it would cost to boost your team's wellbeing by providing next-day access to mental health support.
