The premium gap between company medical insurance and individual cover is widening, with thousands of employees now enjoying chunky rate reductions not offered elsewhere.

Tens of thousands of employees at more than a dozen of the country’s largest companies are benefiting from lower than market increases in their private medical insurance (PMI). Some are even seeing their annual PMI premiums cut by as much as fifth.

The reason why corporate PMI is bucking the medical inflation trend – which has seen individual PMI rise by about 8 per cent year-on-year – is that companies are keeping a lid on claims’ costs and passing on the benefits to staff.

“Lots of companies are looking at ways to manage claims by investing in ‘wellness’ strategies to improve workforce health, as well as tightening their claims management,” says Nick Reynolds, head of intermediary sales with Norwich Union.

“They are also tweaking policies and looking at benefit design.”

The rate reductions will make the case for signing up to an employer’s scheme, or adding a family member to an existing corporate policy, more compelling.

Most people buy PMI for benefits such a private hospital room and the ability to bypass NHS waiting queues for major and minor surgery, scans and other therapies. Policies can be designed to suit all budgets.

But the cost of “comprehensive” PMI, which will pay for full inpatient and outpatient treatment, can run to almost £1,000 per year, doubling or even tripling for partner and family cover.

However, most companies will offer this “Rolls-Royce” cover to staff at a fraction the cost.

Company-paid PMI is treated as a benefit-in-kind by HM Revenue & Customs, with employees paying tax on the cost at their marginal rate. This means that, for an £800 single policy offered through an employer, a basic rate taxpayer will pay £160 and a higher rate worker £320.

“If you have an option to buy through the workplace, it is often at a huge discount,” says Reynolds.

“You will often be paying hundreds of pounds less compared with equivalent cover on the open market.”

There were more than 3m workplace PMI schemes in force in January 2008 and they offer several other advantages over schemes sold on the open market.

Unlike buying a policy off the shelf, employees are accepted on to a group scheme without paperwork.

This is a big plus for those with existing illnesses or injuries, who might be declined cover or have their premiums loaded if they bought privately. However, some chronic conditions, which require ongoing treatment, may not be covered.

Premiums are also typically set at a flat rate for all employees aged under 65.

“It’s a no-brainer really, if you are offered the chance to sign up and you need it,” says Mike Izzard, chairman of the Association of Medical Insurance Intermediaries and managing director of Premier Choice Healthcare.

“Workplace PMI can be even better value for the over-55s as premiums really accelerate at this age,” he adds.

Most companies will open their schemes to new members once a year with an option to extend cover to families and partners.

The premium will be based on the company’s claims’ experience, which means that rates can also swing up as well as down.

“Companies do go through periods where premiums can change due to changes in their claims’ experience,” says Fergus Craig, healthcare commercial director with Axa PPP.

“These changes can include fewer staff making claims, but also fewer higher-value claims. It can also be because the numbers in the scheme had expanded or maybe they have taken more healthier staff.”

With the recession straining businesses across all sectors, there is concern that companies will claw back their PMI benefits – as is the case with many small to medium-sized businesses.

But the industry is adapting to the economic climate and finding new ways to keep cover affordable.

“We are reducing rates where appropriate for clients based on two key factors – ensuring their benefit plan design is still suitable and on their own claims experience,” says Marco Bannerman, head of sales with Bupa UK, the market leader for corporate PMI.

“We work with our clients to understand the pressures they are under and their current and future healthcare needs.”

Individuals who do not have the opportunity to sign up to a workplace scheme could consider other ways to keep their PMI affordable, say advisers, including no claims discounts, claims exclusion periods or cost sharing. “The market is getting more competitive,” says Izzard.