Employer's guide to health cash plans
A health cash plan is an insurance policy that helps with the costs of routine medical expenses, such as eye tests and dental treatments. Advanced plans will cover a larger range of medical care such as physiotherapy, chiropody, health assessments, prescription charges, and cosmetic procedures.
By Alan Boswell Group
Many companies offer a health insurance cash plan as part of an employee benefit scheme. Health cash plans are a great way of attracting and retaining employees, as well as helping to make sure they stay fit and healthy.
What is a health cash plan as part of an employee benefit scheme?
Many employers offer a health cash plan as part of their employee benefit scheme as it can have a positive impact on engagement, attendance and retention.
A health cash plan differs from a traditional health insurance policy as it focuses on routine and expected treatments, as opposed to unexpected events that insurance policies would traditionally cover. Its purpose is to support staff wellbeing so an employer will reap the rewards of a stable and supported workforce.
There are three forms of health cash plans:
Paid for solely by the employer.
Basic cover supplied by the employer, with the option of added cover paid for by the employee.
Voluntarily paid for solely by the employee.
Read more: Financial wellbeing in the workplace: a guide for employers
How do health cash plans work?
When an employee has paid for a treatment which is covered by a company’s health cash plan they need to submit their bill and receipt to the insurance provider. A percentage of the money will be refunded, up to the maximum amount agreed in the policy. Most plans will have a qualifying period, once this has elapsed it takes just a few days for the money to be reimbursed.
What are the tax implications of a health cash plan?
Health insurance is a taxable benefit-in-kind (BIK).If an employer is paying a premium of £4.33 per calendar month, the employee will be liable to pay income tax on that amount. At the current rate of 20% the employee would pay £0.86 income tax. Where the employee has opted to pay for additional cover, the payment is taken directly from their wages and this is also subject to income tax.
The cost of providing health cash plans is an allowable expense and can be deducted for the purpose of corporation tax.
Taxable BIKs are not subject to Class 1 (employee’s) National Insurance (NI). They are, however, subject to Class 1A (employer’s) NI.As a health cash plan is set up for routine treatments, it’s generally possible to calculate costs up front.
What do health cash plans cover?
Health cash plans are varied and can be customised depending on the level of cover an employer wants to offer. A basic plan would normally cover:
Dental checks and treatments.
Eye tests and prescription glasses.
These basic policies will typically pay out three to seven times the premium amount.
When choosing the appropriate cover, it should be noted that individual pay-outs will not necessarily be 100% of the submitted bill. Therefore, before submitting any claims it’s important to calculate how much you would get back and whether it would be worthwhile.
Health cash plans can also include:
Maternity payments.
Hospital stays.
NHS prescriptions.
Mental health support.
Legal, financial and family care help lines.
Hearing tests.
Dietary advice.
Infertility treatment.
Cosmetic dentistry.
Employee health cash plans: what are the benefits to employers and employees?
Whilst the NHS provides heavily reduced cost medical treatment, it can sometimes be a struggle to cover the expense of routine appointments. If, for example, employees refrain from attending a dental appointment or physiotherapy session, their condition will likely worsen. Wearing glasses with an out-of-date prescription can cause headaches and nausea, leading to lack of engagement or sick leave.
As the price of NHS dental treatment continues to rise, an increasingly large proportion of people in the UK are choosing not to visit the dentist. It’s estimated that around 30% of adults avoid dental treatment due to the expense.
A company health plan provides a level of security that gives an employee the confidence to receive medical treatment when it’s needed. Even if the policy is paid for solely by the employee, there’s a benefit in that the premiums are exempt from NICs, as well as the financial benefits of pay-outs.
A plan that’s funded by the employer is a fantastic perk and likely to attract new talent. And it’s a foundation for healthy, engaged employees. In addition to health cash plans there are other insurance policies available that support staff wellbeing. Early intervention schemes and group critical illness cover are additional health insurance policies that are worth considering.
In 2018, an estimated 141.4 million working days were lost to illness in the UK; that’s an average of 4.4 days per worker. Absence, staff cover, lack of continuity, reduced morale, and fractured teams amount to higher costs and a weaker workforce.
Contact Alan Boswell Group
To talk to us about how insurance can help support your employees’ wellbeing please don’t hesitate to call our team of experts on 01603 967955.
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