Finance directors and healthcare insurance providers are thinking along the same lines. Both are looking for where costs can be saved: FD’s in what they pay out for healthcare insurances and insurers for what they pay in claims.
This thinking is leading both parties to look to the advantages of ‘bundling’ healthcare products, that is, offering a core product, such as private medical insurance or group income protection and adding other products. These other products can include employee assistance programmes (EAP), occupational health services or health and wellbeing for employees. In some cases they are added for free.
As Employee Benefits/HSA Healthcare Research 2008 shows (see table), while cost is the key influence on the employer’s decision to buy health benefits, the range of products offered by the insurer is the second key influence.
But Adrian Norris, managing director health and welfare at Buck Consultants, says a lot of organisations continue to miss out on a range of opportunities associated with bundling: “It is not just cost-based and convenience-based – it is around the old mantra of joining up the thinking. Many employers buy healthcare insurances on a piecemeal basis, and no one really pays much attention as to where one product or process butts up against another. So you end up with a fair degree of overlap or gaps with one piece not handing over properly to the next piece.”
The ratio figure FDs may have interest in, says Norris, is the 80:20 rule. “If you take a medical plan there will be about 20% of your people in any year having recourse to the medical plan and 80% of the people who don’t. There is a lot of cost and thinking that goes into supporting the 20% but precious little thinking going into to how to maintain the better risk profile of the 80%.”
The follow through of that dilemma is to assess what linked health solution is in place, or could be in place, to support those 80% of employees and stop them being in the 20% group the next year.
“So, for example, you have an income protection product in place but if you were to put in an absence management programme, then what impact would that have across the piece; both in helping to protect the 80% but also on the premium you pay for the income protection?” Norris asks.
An added incentive is that insurers are prepared to quote lower premiums if they can see that employers are doing something about managing absence, so it is not just about cost savings of buying bundled products. Inevitably not withstanding cost savings of getting some products thrown in for free, detractors will argue you don’t really get the best from this.
Mark McLeod, risk benefits manager, technical planning at Towry Law, says he believes massively in the concept of EAPs and that they are critically important. “But like anything, there is always going to be a cost, and where does that cost appear?” he asks.
“If a client wants an EAP we should go out and source the right EAP for them rather than saying we will go with this provider for your income protection because they happen to have an EAP within their package,” he says.
Should employers worry about having all their protection eggs in one basket? Jeremy Garman, sales and marketing director Axa Icas, says: “To some extent you get what you pay for. If you have gone out to market and you have a separate insurances all with different providers as a result of the separate price negotiations, then you have not got an interactive product.”
While it might be cheap to source insurances separately, he says, it might not be as co-ordinated as employers want and the effectiveness of those programmes is diminished as a result.
“Ideally by looking at getting a holistic co-ordinated approach to your healthcare provision you get a lot more. We would rather hold our price than offer multiple bulk discounts for things because of the integrated approach we want to take,” says Garman.
“If the employee gets help quicker and more effectively and the outcome of returning someone to work is more efficient, then arguably that is better than the FD’s bottom line of reducing the cost by 10%.
“Don’t focus what you can get for free but for every thing working within the mix,” he adds.