As the owner of a small company, you may be considering buying private medical insurance (PMI) for yourself or offering it to your employees as part of a remuneration package. But what, exactly, does health insurance cover, and should you pay for it yourself or via your limited company?
Is it possible to enjoy the benefits of private insurance, while retaining the cover provided by your national insurance contributions?
The choice is yours
It’s important to see PMI as an additional level of cover to that already provided by the NHS. The main difference is that, with PMI, you will have greater choice about the level of care you receive and where, when and how it is provided.
For example, if you prefer not to wait for NHS treatment for a particular condition, you may be able to reduce your waiting time under the terms of your policy.
You may also be able to choose which hospital you attend for treatment and choose the surgeon you want, none of which is possible on the NHS.
Remember, if you decide to buy PMI, you are still entitled to free healthcare from the NHS.
What does PMI cover?
As with all types of insurance, the level of cover you get will depend on the terms of your policy.
Typically, PMI will cover the cost of most types of in-patient treatment, including tests, surgery, and other medical bills, if you choose to be treated privately.
PMI can also cover the cost of out-patient treatment by consultants and specialists, and you may be entitled to receive a fixed sum payment if you need to stay in an NHS hospital for a period.
Health insurance – further benefits
In addition to the above, PMI can make it easier to get a second opinion, as you can ask your GP to refer you to a specialist who is working privately. If you have to spend time in hospital and prefer not to be on a mixed ward, under the terms of your policy you can request your own room. As well as reducing the time you wait for treatment, PMI will give you quicker access to post-operative care, such as physiotherapy.
With PMI, you may also have greater access to specialist drugs and types of treatment not offered by the NHS, either due to the expense or because they are not currently approved. For some, the main appeal of PMI is that it provides the flexibility of being able to choose when to use the NHS and when to seek treatment covered by the PMI policy.
What PMI doesn’t cover
Typically, private medical insurance won’t cover you if you require an organ transplant, for a pre-existing medical condition or for cosmetic surgery to alter or improve your appearance. PMI won’t cover the cost of private treatment for pregnancy and childbirth or for treatment to injuries sustained while playing dangerous or extreme sports.
Some chronic illnesses, such as diabetes, hypertension, epilepsy and HIV/AIDS, are also likely to be excluded. It’s possible to choose a PMI policy that covers you for particular types of injuries and conditions, although you can expect to pay a higher premium.
Is PMI worth the extra cost?
The simple answer is: it depends. If you’re concerned about waiting times for treatment, a PMI policy gives you the assurance of being seen more promptly. If you need expensive or specialist care for a condition, your policy can represent excellent value for money. If you take part in a particular sport or activity that carries a higher risk of injury, PMI can give you the extra level of protection you need. As already stated, PMI offers extra flexibility and more choice when compared to standard NHS cover.
Buying PMI via your limited company
As a small company owner, you can buy PMI via your business, although it’s important to note that PMI is considered as a benefit in kind and has to be entered on each employee’s P11D form at the end of each tax year, and will be subject to further tax.
Your limited company will have to pay Employers’ National Insurance on the value of the benefit, and employees will need to pay extra income tax on the policy cost – the rate could be 20%, 40% or 45% depending on your tax band.
Even so, you still may be better off buying PMI through your company than personally, as businesses can often attract better deals for insurance providers.
If you are buying private medical insurance personally, you will have to extract the funds to pay for it from salary and dividends, which are taxed anyway. So, it may be worth working out the real cost of each option yourself, or ask your accountant.
If you do decide to go ahead and buy PMI, remember to make sure you understand what your policy does – and doesn’t – cover before signing on the dotted line.
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