New rehabilitation insurance suggested

Health insurers will appreciate the irony of a major health insurance idea being hidden away in the small print of the recent Sickness Absence Review.

Some insurers responded joyfully before they had read the documents, another irony, to early indications that the review had suggested that employers and employees could obtain tax relief on private medical insurance.

This was never a starter as David Cameron has as part of his campaign for reform, made a definite promise to the NHS that he will never allow tax relief on private medical insurance.

What the review actually suggests is a new type of employer paid health insurance that would get tax relief - ‘Expenditure by employers targeted at keeping sick employees in work or speeding their return to work - such as medical treatment or vocational rehabilitation should attract tax relief.’

It would be almost impossible to define what treatment or health help in a current private medical insurance policy would or would not fit the tax relief criteria.

Currently, if an employer pays for medical treatment to help get someone back to work, it is treated as a benefit in kind. The employee pays tax on the benefit, and the employer pays national insurance contributions on top.

The solution is for insurers to develop new vocational rehabilitation insurance plans that would be cheaper than traditional private medical insurance and could offer services targeted to particular types of worker.

The report suggested that employers could get such cover for between £70 and £100 per employee per year – which is all rather pie in the sky until an insurer develops and prices a product.

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