What is private medical insurance?
Health benefits are among the most requested by employees, but the two most common options work very differently. Understanding the distinction helps you spend budget where it has the most impact.
Private medical insurance (PMI) covers the cost of private treatment for acute conditions - things like consultations, diagnostics, surgery, and inpatient care. It kicks in when something goes wrong and the employee needs access to treatment faster or outside of NHS waiting lists.
What is a health cash plan?
Health cash plans work differently. Employees pay a fixed monthly amount (or you pay it as a benefit) and claim back a percentage of the cost of routine health expenses: dental, optical, physiotherapy, and similar. There is no underwriting or medical history requirement.
PMI typically costs £500–£1,500+ per employee per year. Cash plans cost £100–£300. Many employers offer PMI to leadership and a cash plan to the wider workforce.
How do PMI and cash plans compare?
PMI pays for private treatment when an employee is referred by their GP for an acute (not pre-existing, not chronic) condition. The key benefits are speed of access, choice of consultant, and private facilities. For employees, this is often cited as one of the most valued benefits they receive. Most policies now include mental health cover, which has become a baseline expectation. Some providers include digital GP access as a standard feature. Major providers include Bupa, AXA Health, Vitality Health, Aviva Health, WPA, and Cigna.
Cash plans are funded either by the employer or by the employee at subsidised group rates. Employees claim back set amounts against receipts. Coverage typically includes dental check-ups, eye tests and glasses, physiotherapy, osteopathy, and sometimes counselling sessions. They are easy to administer, have no underwriting, and are accessible to all employees regardless of health history. Usage tends to be high because employees interact with them regularly. Key providers include Simplyhealth, Healthshield, Westfield Health, and Medicash.
Which is right for your business?
If budget is limited and you need broad coverage with high visibility and employee engagement, a cash plan delivers strong value. If you are competing for specialist hires or operating in a sector where PMI is expected, it is often a non-negotiable part of the offer.
The most effective approach is to audit what your employees actually want before deciding. Survey data consistently shows misalignment between what employers assume employees want and what employees actually value. If you are also reviewing your pension auto-enrolment obligations, it is worth considering health benefits as part of a broader financial wellbeing strategy.