A week in UK healthcare: Tax reform and the rise of private medical insurance

Two significant developments this week have underscored the evolving landscape of UK healthcare, particularly highlighting the growing importance of the independent sector in meeting patient needs and supporting the wider health ecosystem. From calls for fiscal reform to new figures on Private Medical Insurance (PMI) uptake, the message is clear: the independent sector is playing an increasingly vital role.

1. Marsh McLennan Urges Tax Reform to Incentivise Employer-Funded Healthcare

A new report from professional services firm Marsh McLennan has brought the issue of employer-funded healthcare right back into the policy spotlight, arguing that the current tax system actively discourages businesses from investing in their employees’ health.

The core issue is a significant financial disincentive: for every £1 an employer spends on healthcare benefits, they can incur costs of up to £1.26 due to the tax burden on health insurance policies. This punitive approach acts as a barrier to greater investment in preventative care, which is a missed opportunity for the nation’s health.

Why this reform matters

• Boosting preventive care: Removing this tax penalty would make it financially sensible for more businesses to offer health insurance, increasing access to early diagnosis and preventative health services. A healthier workforce means a more productive workforce.

• Relieving NHS pressure: Earlier intervention through employer-funded care means fewer people progressing to needing urgent, complex treatment via the NHS. This directly helps to alleviate the strain on public services.

• Strengthening public-private integration: The report's recommendations go beyond tax, advocating for national standards on data sharing and patient consent. This is crucial for enabling seamless collaboration between the NHS and the independent sector, particularly in time-sensitive areas like diagnostics and cardiology.

Marsh McLennan also calls for rotational workforce programmes, shared training platforms, and regional centres of excellence. These are practical steps towards the Integrated Doctors Federation's (IDrF) long-standing vision for a truly integrated healthcare system where public-private collaboration enhances outcomes for all patients.

2. Private Medical Insurance Coverage Soars Past 8 Million

Further reinforcing the growing relevance of the independent sector are the latest figures on PMI coverage, as reported by LaingBuisson on BBC Radio 4's Money Box Live.

Tim Read, Director of Research and Content at LaingBuisson, confirmed that over 8 million people were covered by Private Medical Insurance in 2024. This represents a significant 4% year-on-year rise, continuing the strong growth trend seen since the COVID-19 pandemic.

The significance of the surge

• Responding to demand: This surge—equating to roughly 5 million adults and their families—reinforces the independent sector’s essential role in addressing patient demand, often driven by long NHS waiting lists.

• A national asset: With the independent sector increasingly relied upon, the importance of a favourable policy and tax environment, as advocated by Marsh McLennan, becomes even more critical. Sustaining this growth requires an enabling framework that encourages investment, which is a key position of the IDrF.

The data clearly demonstrates that private medical coverage is no longer a niche market but a significant component of the national healthcare picture. The combined force of rising consumer and employer engagement in PMI, coupled with strong, evidence-based calls for tax reform, indicates a growing recognition that the independent sector is a core partner in building a more resilient, effective, and sustainable healthcare system for the UK.