Employers are increasingly choosing to provide health cash plans as a cost-effective way to support employees’ wellbeing.
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- The number of company-funded health cash plans increased by 13.5% in 2011.
- Employers using cash plans to cover PMI excesses is a new trend.
- Dental and optical remain the most popular treatment areas for health cash plan claims.
The number of employers funding health cash plans rocketed for the sixth consecutive year last year, according to Laing and Buisson’s UK health cover report 2012.
The number of company-funded plans increased by 13.5% to 510,000, representing about one-fifth of the 2.6 million cash plans taken up in 2011. The remaining 2.1 million plans were taken up by individuals, according to the report, which was published in August.
Paul Gambon, head of sales at Medicash, says: “Most of our growth is in the corporate sector, organisations choosing to pay for a plan for all of their workforce. The voluntary side of things has not changed very much this year; it is corporate-paid that is pushing growth.”
The growth can, in part, be attributed to the economic downturn, with employers on the hunt for low and zero-cost benefits to support their workers. Health cash plans, which give staff access to health cover in return for a monthly cash premium, offer clear advantages to employers keen to limit or avoid the higher cost of private medical insurance (PMI).
David Castling, commercial sales director at Engage Mutual, says: “We have been through two recessions in the last three years and a lot of [employers] looking to dip their toe into the healthcare market have found PMI too expensive, and those that already offer PMI are struggling to manage the costs. We have even seen some consider [dropping the benefit].”
The rising popularity of company-funded health cash plans has contributed to increasing sales for a number of providers. Brian Hall, sales and marketing director at BHSF, says: “Over the last two years, we have seen a rise of 56% in the number of applications coming in [from company- and individual-paid sources] despite, or possibly because of, the economic climate.”
Employers that launched a health cash plan in 2012 include Yorkshire Building Society, which introduced a plan for its 4,000 staff in August, and William Grant and Sons, which added a health cash plan to its flexible benefits scheme in July. Also this year, Oscar Mayer Group altered its cash plan by withdrawing hospitalisation benefits and introducing funding for prescriptions, consultations, diagnostic tests and health screening.
Cash plans offer cover for a wide range of health issues, but dental and optical treatments continued to account for most claims in 2012, according to Laing and Buisson’s report. The biggest proportion (31.2%) of claims paid out in 2011 related to dental care, including routine check-ups, dental treatments, and dentures. Optical claims accounted for 27.8% of payouts, with cover relating to sight test fees, fitting fees, prescribed spectacles and contact lenses.
Medicash’s Gambon says: “The most popular treatments are dental and optical. You see the highest value claims from optical because people will elect, in general, for a more expensive pair of glasses knowing they can claim back the cost. On the dental side, it is not necessarily an elective thing and people only get treatment for what is needed at the time.”
Employers are also using cash plans to tackle issues that could lead to staff absence, such as stress and musculoskeletal disorders. Support includes employee assistance programmes (EAPs), physiotherapy and doctor helplines. Tony Wood, sales and marketing director at Bupa Health and Wellbeing UK, says: “Mental health and musculoskeletal are two of the biggest issues, and employers have been looking for lower-level products in that area.”
A newer trend is using health cash plans to cover PMI excesses. Plans from Simplyhealth and Medicash, for example, allow employers to cover excesses between £100 and £300.
But Engage Mutual’s Castling questions the sustainability of this trend. “One of the trends that has been around this year has certainly been PMI excess underpinning with a cash plan,” he says. “However, I don’t think it is particularly sustainable and I don’t think it will be around for the long term because cash plans were never designed to cater for that.
“Ultimately, someone is being shortchanged and this is likely to be addressed. I suspect PMI providers will be assessing the discounts they award for plans with an excess.”
Nevertheless, demand for company-paid plans is predicted to continue to grow, which, according to Laing and Buisson’s report, is because of current low take-up rates and lack of competition from other products. Castling says providers will seek to boost growth by targeting small and medium-sized employers.
Cash plan claims for treatments to combat sickness absence are also expected to rise in 2013. Medicash’s Gambon says: “We have seen a steady increase in claims for complementary therapies, such as physiotherapy. It is down to people’s awareness that they can treat a bad back now, rather than putting it off.”
CASE STUDY: DAISY GROUP
Health cash plan covers PMI excesses
Business communication provider Daisy Group launched a fully-funded health cash plan in August to cover the cost of private medical insurance (PMI) excesses.
This means employees can use the plan to offset the cost of any excesses incurred when claiming on the employer’s PMI policy, which is provided by Bupa.
Rebekah Tapping, group HR director at Daisy Group, says: “One of my frustrations with PMI plans is the hoops you have to jump through to be able to do anything, and it doesn’t really help with prevention. However, a health cash plan helps a lot more if an employee needs to see a physiotherapist or osteopath quickly, for example.”
Daisy’s PMI policy is a result of the consolidation of six PMI policies it held after acquiring 19 businesses in the past two years. Those deals saw the organisation’s workforce grow from around 70 employees to 1,500. The health cash plan, provided by Medicash, is offered to 300 staff, but there are plans to extend it to management, which has access to PMI only.