Contractor Health Insurance pays for private medical treatment allowing you to bypass NHS waiting lists and receive treatment when you need it most. Individuals who contract through a limited company often don’t get sick pay. Choosing private medical insurance (PMI) speeds up access to medical care so you can get back on your feet and earning as soon as possible.
Your coverage depends largely on the policy options you choose.
Certain conditions and treatments are covered as standard, while others may only be covered if you enhance your plan with additional options for an extra premium.
Importantly, Medical Insurance isn’t designed to replace the NHS entirely.
The NHS remains best-placed to deal with emergency care, for instance. Given that PMI only supplements the NHS, even with a plan in place you’ll still use the NHS for some elements of your healthcare.
Regardless of whether it’s private or NHS, all medical care is divided into:
You don’t have to add outpatient cover to your policy if you don’t want to. A basic Medical Insurance plan covering just inpatient treatment is cheaper than one with added outpatient cover.
However, this does mean you’ll need to rely on the NHS for outpatient appointments, tests and scans. This could delay your private inpatient care.
A policy with outpatient cover gives you access to private consultations, tests and scans to diagnose your symptoms. This can speed up your care and mean, if you require inpatient treatment, you receive it faster.
Another important distinction when it comes to Private Medical Insurance is that between chronic and acute conditions.
A chronic condition is one that remains with you for life and doesn’t go away with time and medical attention. Such conditions include asthma and diabetes, which can only be managed, not cured.
Acute conditions, on the other hand, respond to medical treatment and pass with time. These conditions include needing surgery to replace a joint, for example.
Private Health Insurance only covers acute conditions. It’s designed to pay for medical treatment for conditions that pass once that treatment has been completed successfully. For ongoing management of chronic conditions, you continue to access the NHS.
All policies offer a digital GP service along with your cover. This gives you access to a UK GP, usually 24 / 7, via your smartphone.
You either arrange a telephone appointment or a video consultation with a doctor at a time and place to suit you. You therefore no longer have to wait for an NHS GP appointment during traditional opening hours.
Virtual GPs offer all the same help and medical advice your own GP. They can also issue prescriptions and make referrals for private medical treatment under your policy if necessary.
Historically, you’d have to wait for an appointment with your NHS GP in order to get a referral for private healthcare. Now, with remote GPs built in to your plan, this is no longer the case.
In the UK, we’re very lucky to have the NHS. It’s quite rightly a much-loved national institution providing healthcare free at the point of use. The NHS is brilliant, but the reality is that external factors have placed it under unprecedented strain.
For example, government health spending towards the NHS budget has risen at a far slower rate over the past 10 years than it did previously. This has meant a funding squeeze and is one reason why waiting lists are growing.
At the end of July 2020, there were 4.05 million people on NHS waiting lists in England. More than half such patients — 2.15 million people — had been awaiting treatment for more than 18 weeks. 83,203 had been waiting more than a year.
As a contractor, you’re particularly vulnerable to long waiting times. Without sick pay to fall back on, many independent contractors would face a financial crunch if a health condition kept them from their company and the treatment necessary to get them back to work was weeks away.
Contractors tend to choose PMI to minimise disruption to their earnings. By ensuring prompt diagnosis and treatment of health conditions, it cuts the time you have to spend away from work and gets you back up and running as soon as possible.
Health & Wellbeing Expert at Drewberry
As a contractor, the cost of a plan varies depending on your circumstances and the policy options you choose. Major factors that impact the cost of healthcare insurance include:
To provide you with an estimate of the cost of premiums, we’ve used our calculator to obtain quotes from all the major providers in the UK market. The premiums below are for a contractor who is:
30 Year Old
40 Year Old
50 Year Old
40 Year Old Couple
To make your plan more affordable, you have a number of options available to cut the cost.
Similarly to car insurance, an excess is the amount you’re willing to pay upfront towards your medical treatment before your policy covers the rest. The higher your excess, the lower your premiums will be.
Excesses typically start at £100 and run all the way up to £5,000 with some providers for certain treatments.
While increasing your excess reduces the cost of a plan, always ensure your excess is affordable should you need to make a claim.
This cuts the cost of premiums by firstly checking the NHS waiting list in your local area if it becomes apparent you need inpatient treatment. If the NHS wait for that inpatient procedure is less than 6 weeks, you use the NHS for your care.
Only if the wait for treatment is longer than 6 weeks or the NHS doesn’t offer the procedure you need does your Private Medical Insurance kick in.
Many insurers offer you a choice of hospital lists to choose from.
The most comprehensive hospital lists cover the top private facilities in the UK (including those in Central London). This is the most expensive option to choose. You have the option to reduce your hospital list to save money, which may see you limited to having care only in local private facilities or private wings within NHS hospitals.
As mentioned, coverage for outpatient care is an optional extra for an additional premium. The cheapest policies won’t provide any outpatient treatment at all.
A comprehensive policy, meanwhile, covers all outpatient treatment in full. However, this is the most expensive option.
There is a happy medium between having no outpatient cover and having everything covered. A mid-range policy offers some level of outpatient treatment, capped at a set monetary amount per policy year. This limit is often £1,000.
A mid-range policy offers you as a contractor cheaper Private Medical Insurance without sacrificing too much in the way of quality of cover.
Yes, if you’re a contractor working through your own limited company, your limited company can pay for your Health Insurance. Depending on your circumstances, having the company pay usually offers tax efficiencies over paying for a policy out of your own pocket.
IMPORTANT NOTICE 🧐
Speak to your accountants to ensure you’re aware of the tax implications of your company paying your Health Insurance premiums.
The tax savings result largely from the fact that, when you buy a policy as an individual, you pay using income (e.g. salary and dividend payments) that HMRC has already deducted tax from.
For example, to pay for a £1,200 annual premium from dividend income taxed at the higher rate (32.5%), you’d need to receive a dividend payment of £1,778.
Then, because dividends are paid net of corporation tax, you’d need to generate £2,195 within the company before you could pay yourself the dividends used to buy Health Insurance personally.
An umbrella company is a third party company that you pay to effectively act as an intermediary between yourself as the contractor and your employer. It’s an alternative to setting up your own limited company.
Umbrella companies do most of the administration for you, including receiving your earnings and paying tax and National Insurance contributions on your behalf before passing net pay on to you.
While some companies may offer insurance, whether or not an umbrella company can pay for a contractor’s Health Insurance is a complicated matter you’re best off discussing with your accountant and your chosen umbrella company.
The expenses you can claim as an employee of an umbrella company are more restricted than is the case when working through a limited company, so it pays to make sure you’re on the right side of HMRC’s rules in this area.
When your limited company buys Health Insurance for you, the company can offset the premiums against corporation tax.
However, there are other tax implications for both you and the business.
When a company pays for the policy on behalf of it’s staff, including a limited company paying for contractor medical insurance, HMRC considers it a P11D / benefit in kind. This means you as an individual will have to pay extra tax on the value of the benefit you receive.
This is because, as your company pays premiums with pre-tax earnings and provides it in addition to your remuneration, HMRC effectively sees that as your pay increasing without any subsequent increase in its tax take.
To reclaim the additional tax, HMRC requires employers to either take the owed tax from their employees through their payroll, or declare these expenses at the end of the tax year so HMRC can value and tax them accordingly.
Meanwhile, the business must pay Employers’ National Insurance Contributions at 13.8% on the benefit.
There are five major providers in the UK market, each with their own unique products and additional benefits:
Given each insurer has their own underwriting philosophy, the most appropriate and cost effective option will be heavily dependent on your age and location. It is why it’s so important to compare quotes from all the leading UK insurers when doing your research.
Drewberry searches for premiums from each and every insurer on your behalf. We compare Health Insurance quotes from the entire UK market so you know you’re getting the best deal.
Health Insurance renews every year, just like car insurance. That means your insurer will write to you on an annual basis laying out your premiums for the coming year.
If you find the cost of cover is creeping up, it’s worth speaking to an adviser to undertake a market review. They’ll take your current circumstances and premiums and go back to the whole market to see if you can get cheaper cover elsewhere.
Assuming you can reduce premiums by switching insurers, your adviser will facilitate this for you. Crucially, by switching you with the correct underwriting, they’ll be able to ensure continuity of cover between providers.
Many contractors look for Health Insurance, recognising that it can be a valuable benefit that gets you back to work as quick as possible. However, finding the best policy can be a minefield. With so many benefit levels and policy options that you need to consider, why not ask an expert for help?
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health. Below are just a few reasons why it makes sense to talk to us.
If you need to review an existing private medical insurance policy or set-up new cover give us a call on 02074425880 or email firstname.lastname@example.org.
Very helpful from start to finish. Talked through all the points and gave great advice.