Health cash plans: What are the key elements of a health cash plan?

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• A health cash plan reimburses members for the full or partial cost of health services such as dental, optical, physiotherapy and employee assistance programmes.

• In the past, cash plans were paid for by the employee, but there is a growing trend for employers to make a contribution to the cost of the premiums.

• Employees’ ability to enhance their basic plan with additional benefits, such as surgical cover, has blurred the line between cash plans and private medical insurance.


Case study: Childcare staff get helping hand from cash plan

Last June, Cheshire-based childcare firm Kids Allowed set up an employer-paid cash plan for its 200 staff.

Carla Rodgers, HR manager at Kids Allowed, says: “We do not pay sick pay, but we wanted to look after the wellbeing of our staff. It is a strenuous job.”

The organisation pays £1 per employee per week for a basic scheme that provides access to perks such as dental, optical and chiropody care, four prescriptions a year and an employee assistance programme (EAP) with a helpline and up to six face-to-face counselling sessions. Staff can upgrade their cover and cover their partners too.

Rodgers is delighted by the way staff have used and appreciated the benefit, which is provided by Health Shield.

Childcare is a fairly low-paid sector and the EAP has proved particularly useful for Kids Allowed’s, generally young, employees seeking debt advice in the current tough economic climate.

“From an HR point of view, it has been a great return-to-work tool,” says Rodgers. “For example, we had one person whose father had passed away and she was really struggling with coming back to work, so we helped her get counselling sessions through the EAP.”


More employers are seeing the advantages of investing in health cash plans for employees, says Peta Hodge

The health cash plan can claim to belong to a select club: products that appear to be attracting increasing investment from employers in the economic downturn.

One of the main attractions of a health cash plan is its simplicity. In return for a premium, it reimburses members for the full or partial cost of health services such as optical and dental care, physiotherapy, osteopathy, chiropractic, chiropody and employee assistance programmes (EAPs).

According to Laing and Buisson’s Health cover UK market report 2011, published last July, the value of the UK cash plan market grew by 11% between 2009 and 2010, from £602 million to £670 million. Individual purchases were static over this period, so the growth is entirely attributable to increasing investment in employer plans.

Matthew Judge, technical director at Jelf Employee Benefits, says: “Employers see the need to enhance employment packages in times when salaries are being frozen.”

High perceived value

Despite the economic climate, there has been little desire by employers to cut cash plans – and some have even been encouraged to set one up for the first time, says Paul Moulton, sales and client relationship director at Axa PPP Healthcare. “They are seen as benefits of relatively low cost that have a high perceived value for employees,” he explains.

In the past, cash plans tended to be set up on a voluntary basis, with employees covering the cost of their own premiums. Provider Simplyhealth, for example, reports that three-quarters of its corporate cash plans are still run on a voluntary basis.

But it is clear the market is changing and employers are increasingly willing to make contributions on behalf of their staff.

According to Laing and Buisson’s report, there was actually a 2.9% drop in the total number of contributors to cash plans in 2010, the third consecutive annual fall. But this was entirely down to contractions in the individual and voluntary market; the number of employer-paid contributors – although a much smaller part of the market – grew by 11.2% in 2010, to 450,000.

This overall market picture seems to be echoed by the experience of providers. Lara Rendell, marketing manager at Health Shield, which has seen growth over the past three years, says that although plans have traditionally been sold on a voluntary basis, 70% of the firm’s new business is now employer-paid. “The employer-paid market is one of only two healthcare market segments to have grown in the last year,” she says.

Medicash has seen a rise of more than 50% in new employer-paid business year on year from 2010 to 2011. Likewise, Westfield Health released figures in November 2011 showing it had achieved overall sales growth of 29%, with most new business coming from employer-paid schemes.

Paul Shires, executive director for sales and marketing at Westfield Health, says: “Organisations recognise the importance of offering healthcare benefits to enhance their risk management capabilities and help improve staff morale and productivity.”

Big attractions

One of the big attractions of cash plans is that they are relatively cheap – typically from about £1 per employee per week. For example, Health Shield offers an off-the-shelf, basic-level, employer-paid plan, Essentials, for as little as 75p per employee per week.

Howard Hughes, head of business marketing at Simplyhealth, says: “Cash plans are an affordable healthcare employee benefit and one that employees can use regularly and therefore feel the value. Unlike private medical insurance (PMI), employees do not have to wait until something goes wrong to appreciate the benefit.”

Axa PPP’s Moulton says one interesting development over the past 18 months has been the trend, particularly among medium-sized employers that already have PMI in place, to put a considerable excess on the PMI scheme and use the premiums saved to fund a cash plan (see also page 11). “In the current climate, that can be cost neutral,” he says, “But it has the potential to be highly regarded by staff because they are more likely to use cash plans than PMI.”

But Moulton adds employers should see this as more of a stopgap than a permanent solution, because the discount from the PMI excess is unlikely to rise at the same rate as cash plan premiums in the long term.

Employee Benefits/HSF Health cash plan research, conducted in December 2011 (see box right), found the range of benefits on offer is a crucial factor in determining which provider an employer chooses. Most basic plans will include perks such as optical and dental care and physiotherapy, but some include more unusual benefits. The Best Doctors benefit offered by Medicash, for example, gives employees access to a second opinion from more than 50,000 consultants specialising in a broad range of health issues.

Enhanced plans

Providers also offer a range of enhanced plans and add-ons. For example, employers that take out Simplyhealth’s basic plan can add benefits such as: face-to-face counselling from 15p per employee per week; absence management for 50p per employee per week; up to 20 nights in hospital from 30p a week (including personal accident cover of up to £10,000); and a new child benefit from 20p per week, to help with the costs of having a new baby in the family.

Some add-ons available with cash plans are blurring the line between the traditional cash plan and PMI markets. Cash plans have generally been seen as a way of maintaining staff health and preventing health problems occurring, but add-ons such as surgical cover have now taken cash plans into what has traditionally been seen as PMI territory.

Westfield Health’s Shires says: “We recognised some time ago that healthcare provision would continue to evolve and we are now seeing an upsurge in the amount of employers and employees who see the value of this benefit as the future of non-urgent surgery on the NHS remains uncertain.”

Surgical cover is the most popular add-on available through the plan offered by manufacturers’ body EEF. Kathy Riley, EEF’s commercial director, says: “This might be in reaction to the uncertainty surrounding the NHS and the services it can provide.”

Jelf’s Judge adds: “With the government planning to save £20 billion from the NHS budget, it is thought some services currently provided free at the point of use may fall off the NHS menu or may attract a charge. It is felt cash plans could assist in these areas.”

Cash plans could increasingly become a ‘must have’ for employers trying to manage the cost of their healthcare.


Cash plan benefits

Health cash plans can typically include a range of benefits, and increasingly providers are offering flexibility to enable employers to tailor this to suit their workforce. Cash plans can include:
• Acupuncture
• Cash payment for new child
• Chiropody/Podiatry
• Chiropractic
• Cognitive behavioural therapy
• Consultations
• Dental visits, including check-ups and treatment.
• Employee assistance programme (EAP)
• Health screening
• Homeopathy
• Hospital stays
• MRI, CT and PET scans
• Non-urgent surgical procedures
• Optical treatment, including eye tests, prescription glasses and contact lenses.
• Osteopathy
• Physiotherapy

Read more on health cash plans