UK Employers watering down private healthcare perk as NHS backlog soars


James Fitzgerald
Fri, 8 December 2023 

Healthcare perks are being watered down

Employers are watering down private healthcare perks after premiums rose by 60pc due to NHS delays.

Firms are removing dependent cover from policies, asking staff to ‘co-pay’ on claims and in some cases restricting cancer support to reduce the cost of delivering the workplace benefit, according to consultancy firms.

Insurers paid out a record of nearly £3bn in claims last year, the Association of British Insurers said, as NHS backlogs caused a growing number of employees to use their workplace scheme for the first time.

The increase has led to premiums rising by between 20pc and 60pc and piling more cost on their employers who pay for the schemes.


Luke James, of health insurance consultancy Mercer Marsh Benefits, said: “Twenty per cent rises in premiums is on the low end of the cost rises. Our figures show that we are seeing 40pc to 60pc premium rises in the UK and across Europe. It’s huge, and we don’t expect much to change in 2024.

“All of this is driving up costs for employers [who offer private health cover]. I think the issue we have is that it is the No1-valued employee benefit, so it isn’t something an employer can decide not to offer anymore. If a member of staff is unwell, employers need their employees to get better and back to work.”

Mr James said to manage costs, employers are instead limiting the cover or asking employees to ‘co-pay’ on claims.

“They are also removing some treatments from the cover but these are short-term quick wins that are not sustainable for employers,” he added.

In eyecare alone, 640,000 people are in the queue for an NHS appointment or treatment, according to analysis by the Association of Optometrists, leaving them at risk of going blind. The average wait time is over a year.

According to research publication Corporate Adviser Intelligence, there were 60,995 British businesses covered by the country’s biggest insurers at the end of 2022, including Canada Life and Aviva, a 5.2pc jump year-on-year.

The employer typically pays for the cover but, in some cases, employees pay the excess if a procedure, care, or treatment is above an agreed threshold. The cost of insurance depends on age, risk, and health - with a comprehensive policy costing around £25 a month for a 20-year-old, and more than £150 for someone in their 80s.

Rachel Western, of consultancy firm Aon, said some businesses are removing dependent cover, which is common for workplace health policies, to save some money.

“We are seeing clients considering the longer term impact of premium rises, so conversations we have with clients are looking at lots of ways to limit cost in the future,” she said.

According to Ms Western, these cuts to employee health benefits include adding in excesses, reducing outpatient cover, restricting cancer benefits to avoid some high-cost exposures, restricting network options and looking at who the benefit covers – if this should be restricted or managed.

She said: “Private medical care has always been a high spend for workplaces but we are heading towards a place where private health cover is becoming one of the biggest costs in a workplace budget.

“The big risk is if that moves into these people getting more treatment and higher costs then these [workplace] schemes are going to potentially become unaffordable for corporate businesses, or a large part of their annual budget.

“There are three main ways a corporation can reduce costs on a private health scheme: cover people for less, or make people healthier – focus on preventative medicine and health and wellbeing strategies – and some element of contributions [from employees].

“Also, there is a lot of dependent cover in place [in workplace schemes], that could become something that corporates look at [cutting]. Scrapping these options will not be seen well by employees and businesses need to weigh up whether these benefits are affordable – and how they offer them.”