Private medical health insurance

Private medical cover has become a core element in many employee packages and is a significant incentive to individuals as part of the recruitment process. However, there are several legal issues which human resources practitioners should not lose sight of in order to protect the employer.

Legal issues

All too often contracts of employment simply state that private medical cover under a particular scheme is to be provided. It is sometimes not made clear as to the extent and level of this cover: whether it extends to the employee’s spouse and dependant children and what range of cover it will include. Information should be provided to employees, giving them an idea of the scope of cover to be provided and the procedure for activating claims. The latter point is important since many individuals embark on treatment only to find that they need retrospective agreement from the provider, which may not always be forthcoming.

The drafting of the contract of employment is also vital. The employer should always reserve the right to amend the provider of the cover and the scheme provided, in order to be able to take advantage of market changes. This is a very fast moving area, and employers should not be bound up with contractual difficulties with their staff when choosing the best deal for the company. It is quite common, however, to add for the benefit of employees that any replacement scheme will be “broadly comparable” or, in some cases, “no less favourable” than the previous scheme.

One point often overlooked by employers is to ensure that they are not left, through individual circumstances or legal drafting, to effectively guarantee such cover to an employee at its own expense. One would normally state in the insurance cover that the benefit is provided subject to the terms and conditions of the scheme. It is also prudent to add that where the entry of a particular individual is heavily weighted in some way, usually due to a pre-existing medical condition, or a family medical history, or age, that the employer is obliged only to pay premiums up to a certain limit, with the individual being asked to top up that amount to the actual premium if he or she wishes to take advantage of the scheme. This can usually be argued as being fair to the other participants in the scheme and the employer, as otherwise the increase in premiums might be borne by all concerned. This is a particular concern where private medical health cover is “purchased” by employees as part of a flexible benefit scheme, since it might otherwise increase the value of the benefit for the other employees.

Other points

It is quite common for individuals leaving an employer to negotiate continued cover to the end of a notice period, even if they have been pay in lieu, or up to the next extension date of the scheme. Employers should always check this is possible under the terms of the scheme, since some require those gaining protection to be employees at all times. Another issue to be aware of is where ongoing treatment needs to continue after the termination of employment. Employers should be careful not to inadvertently commit them to funding future treatment at its own expense in such circumstances, and approach this situation sensitively.