How much does small business health insurance cost?

Small business owners ask one practical question when they look at private medical cover for staff: how much will it cost? The short answer is that costs vary. Price depends on who you cover, what you include, and how you structure the plan. The longer and more useful answer is in the detail: how insurers price risk, which benefits drive premiums up or down, the tax treatment, and how to build a plan that protects your team without straining cash flow.

This guide explains UK small business health insurance costs in depth. It translates the moving parts into clear numbers and choices. You will see example budgets. You will learn how to control premiums without watering down the value to your employees. You will also see how Utility4Business fits in. While we are best known for lowering your energy, water, and waste bills, we also help UK businesses source and compare essential services, including health cover, so you spend wisely and keep your team healthy and productive.

What Counts As “Small Business Health Insurance”?

In the UK, small business health insurance (often called company health insurance, SME health insurance, or private medical insurance, PMI) is a policy the business buys for employees. It pays for private treatment for acute conditions, with access to private hospitals, consultants, and diagnostics. It can sit beside the NHS to reduce downtime and speed up the return to work.

You will see four phrases used throughout this article:

• Small business health insurance and small business medical insurance – general terms for employer-paid PMI for SMEs.
• Affordable health insurance for small businesses – cost-managed PMI with smart benefit design.
• Best small business health insurance plans – plans that balance breadth of cover, employee experience, and price for your specific workforce.

What Is The Typical Cost Per Employee?

There is no single price for all firms. However, recent UK market analyses and insurer examples give a solid range to plan around:

• Independent research suggests small business owners typically pay around £26–£150 per employee per month, depending on age mix, cover level, and options chosen.
• Broader UK data across individual and family policies shows average adult private health insurance at about £80 per month in 2025, which is a useful anchor when you translate individual pricing into group budgets. Group plans can be lower or higher than individual prices depending on demographics and benefits.
• Major insurers avoid quoting a single “average” because prices swing with age, postcode, hospital list, and extras. They publish scenario examples instead, reinforcing why your own quote matters more than headline averages.

You should treat these figures as planning bands. Your exact premium will reflect your team’s profile and your design choices.

The Key Price Drivers You Control

Who You Cover

• Age profile has the strongest influence. Older groups cost more because claim likelihood rises with age.
• The number of members matters for total spend, but can improve per-head rates once you pass insurer breakpoints.
• Dependants push costs up. You can offer employee-only cover or allow partner/children on a voluntary basis.

What You Cover

Benefit choices move the dial more than anything else after age:

• In-patient and day-patient (core) cover: surgery and hospital stays. This is the foundation and drives a big share of the cost.
• Outpatient diagnostics and treatment: adding full outpatient often raises premiums sharply; capping outpatient (e.g., £1,000–£1,500) can control costs while keeping fast access to scans and consultations.
• Therapies, mental health, and cancer cover: valuable but price-sensitive. Cancer cover with comprehensive drugs and care is a meaningful uplift that any SMEs accept because of the impact on outcomes and absence costs.
• Add-ons: dental, optical, travel, health screenings, and virtual GP upgrades each add incremental cost.

Insurers publish example configurations and note that underwriting and options influence the final price.

Underwriting Method

How you underwrite a scheme affects price, admin, and what pre-existing conditions are covered:

• Moratorium: no full medical history at join; pre-existing conditions from a set look-back period are excluded until symptom-free for a period. It is simple to set up and popular with SMEs. Some sources note it can cost a little more due to uncertainty for the insurer, while others say moratorium vs full medical underwriting (FMU) does not always change headline price; insurers price the whole risk. The best approach is to request both options.
• Full Medical Underwriting (FMU): members declare medical history up-front; cover is clearer and exclusions explicit. It can suit older workforces or teams with known conditions where clarity is worth it. Guidance from brokers explains the pros and cons.

Excess (Deductible)

Setting a higher excess (e.g., £100–£250 per claim) reduces the premium. The excess is what a member pays first per claim or per year, depending on the policy rules.

Hospital List

A restricted hospital network costs less. A London-inclusive or extended list costs more. If your staff are outside major city centres, a standard national list is often sufficient.

Claims and Pricing Basis

• Community-rated SME schemes spread risk within a band and keep pricing stable for smaller groups.
• Experience-rated pricing becomes more common as your scheme grows. Heavy claims can lift renewal premiums; good health years can help.

Example Budgets For SMEs

The numbers below are illustrative planning ranges to help you forecast. Your quotes may differ.

Micro-Team On Core Cover

• Team: 6 employees, ages 24–36, outside London
• Cover: In-patient/day-patient; limited out-patient (£1,000 cap); standard hospital list; £100 excess; moratorium
• Planning range: ~£30–£55 per employee per month
• Estimated annual budget: £2,160–£3,960

Justification: younger ages, capped out-patient, and a standard list keep costs at the lower end of SME ranges referenced in current market guides.

Growing Firm With Balanced Benefits

• Team: 20 employees, ages 25–50, mixed locations
• Cover: Core + out-patient up to £1,500; therapies; comprehensive cancer; £150 excess; FMU
• Planning range: ~£45–£95 per employee per month
• Estimated annual budget: £10,800–£22,800

Justification: a broader benefit shape moves toward the mid-market band seen across the UK, still below full out-patient and London premium levels.

Senior-Heavy Team, London Access

• Team: 12 employees, ages 35–62, several in London
• Cover: Core + full out-patient; mental health; extended hospital list; £100 excess; FMU
• Planning range: ~£90–£160 per employee per month
• Estimated annual budget: £12,960–£23,040

Justification: older ages, full out-patient, and London hospitals push pricing to the upper bands cited by market research.

These scenarios are guidelines. Utility4Business can collect like-for-like quotes across insurers so you can benchmark real figures against these bands and adjust your design before you commit.

Why SMEs Buy Health Insurance Even When Budgets Are Tight

Two drivers stand out:

• Speed to diagnosis and treatment

NHS performance varies by region and pathway. Research and polling in 2024–2025 highlight long waiting lists and the knock-on effect on employers and the wider economy. Faster access to scans and specialists reduces absence and supports productivity.

• Attraction and retention

Private health insurance ranks highly among valued benefits and signals that you invest in staff wellbeing. Major providers emphasise this in their guidance to employers, and it aligns with what we hear from SME owners across the UK.

The Tax Treatment You Need To Know

Employer-provided private medical insurance is generally a taxable benefit in kind. That means:

• You report it on form P11D for each employee (unless you pay the benefit).
• The employer pays Class 1A National Insurance on the benefit.
• Employees are taxed on the value of the benefit.

These HMRC obligations apply unless a specific exemption fits your arrangement. Always confirm with your accountant, but the baseline rules are clear.

Some accounting guides summarise the same point in plain English: HMRC treats employer-funded medical insurance as a benefit with tax and NIC implications, typically reportable via P11D.

How To Lower Premiums Without Losing Value

Cap Out-Patient Cover

Full out-patient drives cost. Capping to £1,000–£1,500 keeps most diagnostic pathways swift while limiting spend. It is the single most effective lever for many SMEs.

Use A Modest Excess

A £100–£250 excess dampens claims frequency for minor treatments and cuts the premium. Confirm whether the excess applies per claim or per policy year.

Choose A Standard Hospital List

Unless you have a strong London presence, a national standard list is usually enough. You can allow upgrades for specific staff on a contributory basis.

Set Clear Eligibility

Offer cover after probation. Decide whether you include partners and children. If you do, consider an employee-paid upgrade to avoid cross-subsidy strains.

Favour Simple Underwriting For Start-Up Schemes

Moratorium underwriting is quick to launch and reduces admin at join. If you have older staff or need clarity on complex histories, obtain an FMU alternative and compare the impact. Broker guides explain trade-offs and when each suits.

Build Health Pathways That Reduce Claims

Virtual GP access, nurse helplines, mental health triage, and early physiotherapy reduce downstream spend. They also improve employee experience. Many insurers bundle these features into core cover or low-cost add-ons.

Review Annually, Not Just At Renewal

Gather absence data, survey staff about benefit use, and check that your configuration matches real-world needs. If out-patient caps are too tight, you will see top-ups and complaints. If no one uses dental, remove it.

Utility4Business helps you manage this cycle. We compare quotes, challenge loadings, and look at absence patterns so your plan stays cost-effective year after year.

Building A Budget: A Step-By-Step Method

• Define your aim

Is the goal faster diagnostics, a market-leading perk, or both? Clear goals set the benefit shape.

• Map your workforce

List ages, locations, and roles. Identify London-based staff and any safety-critical roles where a fast return matters most.

• Choose a starting design

Core in-patient/day-patient, capped out-patient, therapies, and comprehensive cancer cover create a balanced baseline for many SMEs.

• Select underwriting and excess

Start with a moratorium and a £100–£150 excess. Request an FMU alternative for comparison.

• Request three like-for-like quotes

Ask for the same benefits and hospital list. Insist on the same underwriting and excess so comparisons are fair. Insurer examples show how different options move the price.

• Pressure-test scenarios

Price one version with full outpatient. Price another with an extended hospital list. Use the quotes to decide where extra spending brings real value.

• Confirm tax and payroll process

Align with your accountant on P11D or payroll the benefit and Class 1A NIC.

• Communicate the benefit

Explain what is covered, how to claim, and how the excess works. Good communication reduces friction and unnecessary claims.

Utility4Business can handle steps 3–5 for you and present a clear side-by-side comparison with our recommendation.

Where Costs Are Headed

Business budgets face pressure from wage floors, NI changes, and wider cost increases. Employer groups warn that SMEs cannot carry every burden alone, yet health-related absence keeps rising. Against that backdrop, SMEs will continue to weigh the premium of health cover against the cost of lost productivity. Expect stronger interest in mid-range, capped out-patient plans plus digital access to GP and mental health triage as the mainstream choice for affordability and impact.

How Utility4Business Can Help

Utility4Business exists to help UK businesses spend less and get more from essential services. Our core work is cutting energy, water, and waste costs, but clients also ask us to coordinate benefits like small business health insurance We:

• Gather your workforce profile and benefit goals.
• Build two or three plan designs that reflect your budget.
• Source like-for-like quotes from reputable providers.
• Explain tax, payroll, and onboarding in plain English.
• Support annual reviews so you keep cover aligned with needs.

This joined-up approach lets you protect staff and cash flow at the same time. When we reduce your utility costs, you often free up budget for benefits that keep your team healthy and motivated.

A Short Buyer’s Checklist

• Aim for core + capped out-patient + comprehensive cancer as your baseline.
• Start with a £100–£150 excess and a standard hospital list.
• Compare moratorium vs FMU quotes; choose clarity or simplicity based on your team.
• Confirm P11D/Class 1A NIC handling with your accountant.
• Use data: absence days, referral bottlenecks, and employee feedback.
• Review benefits annually and keep communications simple.

Conclusion

Small business health insurance is not a one-price commodity. It is a set of design decisions. Your final premium reflects who you cover, what you include, and how you underwrite and administer the plan. Current UK evidence suggests a working range of £26–£150 per employee per month for SMEs, with many firms clustering in the £45–£95 zone when they choose balanced benefits and capped out-patient cover. The right structure speeds diagnosis, reduces absence, and improves retention outcomes that matter in a tight labour market with health pressures and NHS delays.

At Utility4Business, we help you make these choices with confidence. We cut waste in your overheads, we compare the market for your small business medical insurance, and we keep the process clear. If you want affordable health insurance for small businesses that still looks after your people, we will help you design and source the best small business health insurance plans for your team and budget.