A number of new services in the healthcare market are aimed at curbing long-term absence, so providing an alternative to group risk perks, says Sam Barrett
Traditional group risk benefits such as group life cover and group income protection may have a long history, but new healthcare products and services now provide employers with alternative options. Rather than paying out when an employee is too ill to work, is diagnosed with a life-threatening condition or dies, the focus of many of the new services is on early intervention.
By tackling health conditions early, or even helping to prevent these from occurring altogether, employees should stay healthier and productive for longer. In turn, this will reduce the incidence of claims on group risk products, which will drive down premiums. Alex Marshall, national sales manager for occupational health at Norwich Union Healthcare, says: “The more you can do at the front end, the more positive the result at the back end.”
Perhaps the most common of these new benefits are absence recording services. These are telephone-based programmes, which employees call if they are unable to come into work. Calls are either taken by nurses or trained call centre staff, or are handled by electronic recording systems. “We do find that both long and short-term absence reduces as a result of recording it. It can initially be perceived as a bit Big Brother-like but employees do appreciate it as it can provide support when they have a genuine health problem as well as reducing the amount of lead swinging,” says Marshall.
However the calls are taken, services can be tailored according to employers’ requirements. For example, while an employee taking a couple of days off with a cold might not require any further action, if they were absent due to stress or musculo-skeletal problems, their employer might want to refer them to an occupational health nurse to investigate further.
Additionally, other services such as private medical insurance (PMI) or an employee assistance programme can be pulled in to help support the employee’s return to work.
Another early intervention service that is becoming more common is case management. Healthcare intermediary the PMI Health Group offers case management alongside both PMI and with group income protection products to help with rehabilitation. Dr Trevor Smith, clinical director at PMI Health Group, explains: “This helps to ensure employees receive the most appropriate treatment and are returned to work as quickly as possible, which will save an employer money.”
Health and wellbeing initiatives are also a means of improving employee health and thereby reducing absence. Services, which can include everything from online health information and GP helplines to health assessments and fitness programmes, can either be bought as standalone products or are increasingly being included with the more traditional benefits such as PMI and group income protection.
Matthew Lawrence, practice head for risk at Aon Consulting, believes these are useful but explains that employers must look at their overall healthcare strategy first. “If you buy these in silo they won’t be effective. To get the best results, benefits need to work together and address issues the workforce might have,” he says.
For example, an employer with a workforce suffering from high stress levels might want to introduce tools that help employees identify stress.
Health screening can also offer benefits when it comes to managing employee absence. Whether checking blood pressure, cholesterol or screening for cancerous moles, an early diagnosis can reduce the cost of treatment as well as prevent these conditions developing into something more serious.
But Smith says the value of screening will depend on the type of workforce. “If you have a high staff turnover then it’s unlikely to be cost effective. But if you have a stable workforce then screening will bring benefits in terms of keeping employees healthy and in work,” he explains.
Unfortunately, with many of these new preventative services, the drawback is that there’s very little evidence to support their effectiveness. “It’s very difficult to quantify the effectiveness of these services. When someone is helped back into the workplace, it’s impossible to say how long they might have been absent without the support,” explains Marshall.
On top of this, it can take time before potential savings materialise. The nature of some conditions, for instance stress and musculo-skeletal problems, means that they might not result in long-term absence for several years after the problem initially occurring so intervening now could prevent a claim five or 10 years down the line.
Studies are beginning to emerge that provide evidence of perks’ effectiveness. These have mainly been run in the US, where these services are more established, but a few UK-based ones have been published. For instance, the Vielife/Institute for Health and Productivity Management’s Health and performance study, conducted by the Harvard Medical School on Unilever employees, found that for every £1 spent on a multi-component health promotion programme, the annual return on investment was in the region of £3.73.
But Lawrence admits it can still be tricky to persuade finance directors to invest in sickness prevention. “There’s still an education process going on although we are seeing more insurers prepared to consider a discount if these services are in place,” he says.
And, as more employers look at prevention rather than cure, there is certainly room for more creative solutions to managing employee health.
Reducing group risk premiums†
While it is still uncertain how effective preventative healthcare benefits are at managing sickness absence and reducing the need for group risk benefits, it is possible to reduce costs by altering the terms of existing benefits. Although the only real option for group life and group critical illness insurance is to reduce the sum assured, with group income protection (group IP) there are other alternatives.†
1. Longer deferred periods
The majority of group IP schemes have a deferred period of 26 weeks before benefits are paid, which fits in with the expiry of statutory sick pay, but it’s possible to opt for a longer deferred period. Many of the insurers offer deferred periods of 52 weeks and even 104 weeks, which can significantly reduce premiums. The downside of a longer deferred period is that employers would need to fund sick pay for a longer time. However, insurers will still provide their rehabilitation services before cash benefits become payable so it might be possible to help manage claims this way.†
2. Limited benefit terms
Traditionally, group IP is set up to pay until retirement but cost pressures as well as changes in the relationship between employers and their employees have resulted in the introduction of limited-payment term contracts. For example, Unum offers payment terms of two, three and five years, reducing premiums to 40% or less of those on a standard contract.†
3. Early notification
Notifying a group IP insurer of a potential claim as early as possible can help to reduce the number and size of claims. An improved claims history can have a knock-on effect on premiums and, in some cases, implementing an early notification system will be rewarded with a discount. Legal & General has such a scheme, where employers receive a 5% bonus of annual premiums providing 80% of their long-term absences are reported before the sixth week.
Case study: Acxiom
Acxiom plan for early warning To help it manage absence more effectively – and benefit from a bonus worth 5% of its annual premium – it implemented Legal & General’s early notification scheme in 2006. This requires it to report at least 80% of its long-term absences by the sixth week of absence. Within the first year, Acxiom successfully cut the length of its claims notification period, from an average of 23 weeks to just five weeks. This ensured that absent employees were dealt with more effectively and entitled it to a 5% bonus.
Tracey Macpherson, HR manager, says: “[The scheme] provided us with more control over our absence as well as given us appropriate support to help our employees.” This support has included occupational therapy, career counselling and cognitive behavioural therapy for employees suffering from stress.
Macpherson admits there is additional administration as a result of implementing the system, but adds: “All the benefits, including receiving the cheque at the end of the bonus year, make this worthwhile.”