What’s the difference, and why do employers often need both?
Many employers review their healthcare benefits and ask the same question: “Should we provide a Health Cash Plan or Private Medical Insurance?”
In reality, this is often the wrong question.
The most effective healthcare strategies do not treat Health Cash Plans and Private Medical Insurance (PMI) as alternatives. Instead, they are designed to work together. A Health Cash Plan helps employees with everyday healthcare costs, while PMI supports access to specialist treatment, diagnostics and hospital care when more serious health issues arise. When structured carefully, the combination can provide a broader, more valued employee benefit package whilst helping employers manage rising healthcare costs.
What is a Health Cash Plan?
A Health Cash Plan helps employees reclaim the cost of routine healthcare expenses that they are likely to incur throughout the year.
- Dental check-ups and treatment
- Eye tests and prescription glasses
- Physiotherapy
- Prescriptions
- Health screening
- Complementary therapies
- Everyday wellbeing support
Employees pay for treatment and then reclaim eligible costs, up to the policy limits provided by the plan. Because these are services that many people use regularly, Health Cash Plans often achieve high levels of employee engagement.
What is Private Medical Insurance?
Private Medical Insurance (PMI) is designed to provide access to private healthcare for acute medical conditions.
- Private specialist consultations
- Diagnostic tests and scans
- Hospital treatment
- Surgical procedures
- Cancer treatment
- Mental health support, depending on the policy
- Faster access to treatment than may be available through NHS pathways
PMI is generally intended for more significant healthcare events rather than routine healthcare spending.
Health Cash Plan vs PMI: a simple comparison
| Area | Health Cash Plan | Private Medical Insurance |
|---|---|---|
| Dental treatment | Usually included | Usually not included |
| Optical costs | Usually included | Usually not included |
| Physiotherapy | Often included | Often included, subject to policy terms |
| Prescriptions | Often included | Usually not included |
| Health screening | Often included | Sometimes included |
| Specialist consultations | Limited cover, depending on plan | Usually included |
| Diagnostic tests and scans | Limited cover, depending on plan | Usually included |
| Hospital treatment | Not generally covered | Usually included |
| Surgery | Not generally covered | Usually included |
| Cancer treatment | Not generally covered | Usually included |
| Everyday healthcare | Core purpose | Not the core purpose |
| Serious medical conditions | Not the core purpose | Core purpose |
Why more employers are combining both
Many employers want to provide meaningful healthcare support whilst maintaining control of benefit costs.
A Health Cash Plan delivers value that employees can see and use regularly. Dental treatment, physiotherapy, eye care and other everyday healthcare expenses are often claimed throughout the year, increasing employee awareness and appreciation of the benefit.
PMI, on the other hand, provides protection when employees need access to specialists, diagnostics or treatment for more significant medical conditions.
Together, the two benefits create a more complete healthcare proposition that supports employees throughout different stages of their healthcare journey.
How a PMI excess and Health Cash Plan can work together
A common approach is to combine Private Medical Insurance with a Health Cash Plan.
Many employers introduce a PMI excess to help manage insurance costs. The level and application of the excess will depend on the insurer and policy selected.
In some benefit designs, employers choose a Health Cash Plan that includes benefits which may allow employees to reclaim all or part of the PMI excess, subject to the terms, conditions and annual limits of the Health Cash Plan. This can help reduce the employee’s out-of-pocket cost whilst enabling the employer to benefit from the lower premiums often associated with a PMI excess.
Example
- The PMI policy includes a £100 excess.
- An employee makes an eligible claim under the PMI policy.
- The employee pays the £100 excess in accordance with the PMI policy.
- Subject to the Health Cash Plan’s terms and available allowances, the employee may be able to reclaim some or all of that cost through the Cash Plan.
This means the employer may benefit from lower PMI premiums, whilst employees continue to receive support with healthcare costs.
Potential benefits for employers
- Lower PMI premiums in some circumstances
- Improved control of healthcare costs
- A more sustainable long-term benefit design
- The ability to maintain valuable private medical cover without necessarily reducing core benefits
Potential benefits for employees
- Continued access to private healthcare when needed
- Potential support with the cost of a PMI excess
- Access to everyday healthcare benefits
- Greater perceived value from the overall benefits package
Important: The availability and amount of any reimbursement will depend on the specific Health Cash Plan benefits, annual limits and policy terms. Employers should not assume that all Health Cash Plans will reimburse PMI excesses in full. The interaction between the two policies should be checked before the arrangement is communicated to employees.
Why HR teams like the combined approach
HR professionals are increasingly expected to balance employee wellbeing, talent attraction, retention and cost management.
A standalone PMI scheme can sometimes be expensive and may only be used by a proportion of employees each year. A standalone Health Cash Plan often generates stronger day-to-day engagement, but it does not provide the same access to private diagnosis and treatment when employees face more significant medical issues.
Combining the two benefits can help employers achieve both objectives:
- Everyday healthcare support for the wider workforce
- Protection against more significant health events
- Stronger employee engagement
- Better perceived value from benefits spend
- Greater flexibility around budget management
- A more balanced healthcare strategy
Most importantly, employees can understand that support is available whether they need routine healthcare or more specialist medical treatment.
A more strategic healthcare benefit
A practical review, built around your people
The strongest employee healthcare strategies are rarely built around a single benefit.
Health Cash Plans and Private Medical Insurance serve different purposes. One helps employees manage everyday healthcare costs and encourages preventative care. The other provides access to private diagnosis and treatment when it matters most.
When thoughtfully designed, the two benefits can complement each other, helping employers provide valuable healthcare support whilst managing long-term costs and improving benefit utilisation.
For many organisations, the question is not whether to choose a Health Cash Plan or PMI. The real question is how to combine both in a way that is appropriate, affordable and valued by employees.
Talk to IHC
Every workforce is different, and there is no single healthcare solution that suits every employer.
Whether you already provide Private Medical Insurance, are considering introducing a Health Cash Plan, or want to understand whether a combined approach could improve value and control costs, the team at IHC would be delighted to help.
We help employers review, benchmark and optimise their healthcare benefits so that they remain competitive, cost-effective and aligned with workforce needs.
Contact IHC for a friendly, no-obligation discussion about the suitability of a Health Cash Plan, Private Medical Insurance or a combined healthcare strategy for your organisation.
IHC can help you understand the available options and consider a solution that is appropriate for your people, objectives and budget.
