The employer contribution is only around 1%.

Where on earth do you get this idea? Please see this link http://www.hmrc.gov.uk/paye/rates-thresholds.htm

It is 13.8% for employers!

so its not coming out of my pay and companies don't have the expense of running their own health systems and they dont need to employ extra HR people to administer them. It also means that startups don't have to compete against big companies that can afford health benefits which act to lock employees into big companies