Bit more formal this time, but I felt that it was important to talk about this, having read about employers who had, incorrectly, paid out.
Private medical insurance, permanent health insurance (PHI) and life assurance are all insured benefits.
This means that it’s the insurance provider who takes the decision on whether it will provide cover and benefits to your employees and on what terms, not you the employer.
An employee’s entitlement to benefits is governed by the terms of the provider’s policy and you won’t be liable to pay anything should the provider refuse payment.
For clients, we are now extending the benefits section of your handbook to confirm that in the event the insurer fails or refuses to provide cover you will not be liable to the employee.
This is because you might take out a group policy only to find that the insurer won’t cover a particular employee or will only provide limited cover for them, e.g. because they have a terminal illness or a pre-existing medical condition.
Therefore, our new wording (in the April 2017 handbooks) ensures that you’ve created no contractual commitment to provide the cover yourself or to make up any shortfall in cover.
Our wording will also give you the right to alter the benefits available under the scheme, or the scheme’s terms and conditions, at any time without any liability to pay compensation to employees.
In addition, where you provide PHI cover to an employee and that benefit entitlement is conditional on them remaining in your employment, in the absence of an express term to the contrary, there’s generally a presumption that you won’t dismiss the employee on account of any incapacity and thereby deprive them of the benefits which are payable under the scheme.
With this is mind, it’s sensible for you to reserve the contractual right to terminate employment due to ill health even if this defeats the employee’s PHI benefit.
We will therefore amend the PHI section in your handbook, if you offer this benefit, to provide that cover is subject to your right to terminate the employee’s employment: (1) due to incapacity; or (2) for any other potentially fair reason (even if this means they’re deprived of PHI benefits as a result).
Any questions, please let me know.