How much does group health insurance cost for a small business?

1. Average cost per employee

For a small business in the UK, group health insurance typically costs between £300 and £600 per employee per year for a standard policy with a mid-range level of cover. More comprehensive plans — including cancer cover, mental health support, and specialist therapies — can push costs to £800–£1,500 per employee per year or more.

To put that in monthly terms: a basic plan for a team of ten might cost in the region of £250–£500 per month in total. A more comprehensive plan for the same group could be £700–£1,250 per month.

These figures assume a reasonably mixed workforce by age. If your team is predominantly younger (say, under 35), you should expect to pay toward the lower end of each range. If you have older employees — particularly those over 55 — premiums will be higher.

2. What affects the price?

Insurers calculate group health insurance premiums based on the expected claims risk of your workforce. Several factors influence this:

Age of employees

This is the single biggest driver of cost. Older employees use healthcare more frequently and for more complex conditions, so premiums increase with age. A group of employees aged 50–60 may cost two to three times more to insure than a group of the same size aged 25–35.

Number of employees

Larger groups generally benefit from better rates per head. If you have fewer than five employees, some insurers may treat the group as individual policies, which tends to be more expensive. Most standard group schemes start from three to five employees.

Level of cover

The more comprehensive the policy, the higher the premium. A basic plan covering inpatient treatment and specialist consultations will cost considerably less than one that also includes mental health support, physiotherapy, dental, optical, and cancer care. You can usually build cover modularly, so you only pay for what you actually want.

Excess chosen

Most group health policies allow you to set an excess — the amount each employee pays toward a claim before the insurance kicks in. Common excess options range from £0 to £500 per person per year. Choosing a higher excess can meaningfully reduce premiums, sometimes by 15–25%.

Location

Where your employees are based affects the cost of healthcare provision, which feeds into premiums. London and the South East tend to attract slightly higher premiums than other regions, reflecting higher treatment costs at private facilities in those areas.

Claims history

At renewal, insurers will typically review the claims made under your policy during the previous year. If your group has had significant claims, your renewal premium will reflect that. A clean claims history, on the other hand, can help keep costs down and may attract loyalty discounts with some providers.

3. What's included vs what costs more

Group health insurance policies vary considerably in what they include as standard versus what you need to add on. Here's a general guide:

Typically included as standard

• Inpatient and day-patient treatment at private hospitals
• Outpatient specialist consultations (often with limits)
• Diagnostic tests — scans, blood tests, imaging
• Surgical procedures
• Emergency treatment (secondary to NHS A&E, not a replacement)

Often available as add-ons

• Mental health cover — inpatient psychiatric care and, increasingly, talking therapies and online counselling
• Physiotherapy — a fixed number of sessions per year, often 10–20
• Cancer cover — some policies include this as standard; others make it an add-on or offer enhanced versions
• Dental cover — routine dental care (check-ups, fillings, hygienist) is usually a separate add-on
• Optical cover — eye tests and a contribution toward glasses or contact lenses
• GP helpline and virtual GP access — increasingly included as standard, offering same-day or next-day GP appointments via video
• Health screening — annual health assessments for key staff

4. Is group health insurance tax deductible?

Yes — for the business. Premiums paid by a company for group health insurance are generally allowable as a business expense for corporation tax purposes. This means you get tax relief on the cost, reducing the effective price of the policy.

For employees, group health insurance is treated as a benefit in kind by HMRC. This means the value of the premium paid on their behalf is added to their taxable income and reported on a P11D form. Employees pay income tax on the benefit at their marginal rate, and the business pays Class 1A National Insurance contributions (currently 13.8%) on the value of the benefit.

Despite the P11D liability, group health insurance remains a cost-effective benefit. The tax treatment compares favourably to paying employees a salary increase of equivalent value, and employees typically value health cover more highly than a cash equivalent because of the practical access it gives them to fast, private healthcare.

Some businesses choose to pay employees' additional tax liability through a PAYE settlement agreement (PSA), effectively grossing up the benefit. Speak to your accountant if you want to explore this approach.

5. How to reduce the cost

There are several practical ways to reduce your group health insurance premiums without stripping out meaningful cover:

Choose a higher excess

Setting an individual excess of £100–£250 per employee per year can meaningfully reduce premiums. Employees still benefit from fast access to private treatment; they simply contribute a modest amount toward any claim they make. For most employees, the excess never applies — but the saving on the premium is real every year.

Use age banding carefully

If you have a mostly younger workforce, make sure your insurer is using individual age-based rating rather than applying a blended group rate. Age-banded pricing means younger employees are priced cheaper, which can reduce the overall group premium if your team skews young.

Build cover modularly

Rather than choosing a pre-packaged “gold” or “platinum” tier, work with a broker to build a policy that includes exactly what your employees need — and excludes what they don't. Adding mental health and physiotherapy, for example, is often worth the cost. Adding optical cover for a group that has little appetite for it may not be.

Shop the whole market at renewal

Renewal premiums from your existing insurer frequently increase year on year, even without significant claims. Insurers rely on inertia. Using a whole-of-market broker at renewal to compare alternatives almost always results in a better deal — either with a new insurer, or by using competitive quotes to negotiate with your current provider.

Consider a six-week option

Some policies include a “six-week wait” clause, meaning the insurer will only fund private treatment if the NHS waiting time for the same procedure exceeds six weeks. This significantly reduces the insurer's liability and can cut premiums by 15–20%, while still giving employees access to private care when they genuinely need it.

Review the policy annually

Employee demographics change. If staff turnover means your group has become younger on average, or if a high-cost claimant has left, make sure your premium reflects the current group — not last year's. A good broker will review this with you at each renewal.

6. How to get a quote

Getting a group health insurance quote is straightforward. Here's what to expect:

1. Tell us about your group — number of employees, their ages, and your location
2. Choose your priorities — level of cover, any specific benefits you want to include, excess preference
3. We search the whole market — we compare all major UK insurers including AXA Health, Bupa, Vitality, Aviva, and WPA
4. We come back to you with options — typically the same working day, with a clear comparison across providers
5. You choose and we arrange everything — including policy documents, employee communications, and ongoing support

There's no cost to your business for using CompanyPMI. We're paid by the insurer, and the premium you pay is the same whether you go through us or direct. The difference is that you get whole-of-market access and expert advice at no extra cost.