Need to know:
- Integrating private medical insurance (PMI) into an overall health and wellbeing strategy can cut long-term costs.
- Excesses and benefit caps enable employees at every level to have access to PMI with lower overheads.
- Introducing incentives to improve employee health and wellbeing can be more effective than cutting services.
Private medical insurance (PMI) is a popular benefit, offering employees access to private medical treatment and helping employers to reduce sickness absence.
It is no surprise to see that in the Employee Benefits/Health Shield Healthcare research 2017, published in September 2017, PMI was the third most popular benefit offered by respondents. The research also saw a steady increase of the percentage of employers offering PMI for their staff, with 77% of respondents offering the benefit in 2017 compared to 66% in 2004.
However when budgets are tight, there are ways for employers to keep costs affordable.
Basic cost-cutting
There are a number of ways of keeping policies and premiums to a minimum and, ultimately, cost effective. These include reducing the level of benefit by introducing caps on cover levels, removing more specialist cover such as psychiatric benefits, or restricting the network of hospitals where treatment can be accessed.
The most common way employers tend to cut costs is by incorporating a higher policy excess whereby employees will be expected to pay towards the cost when making a claim, ranging from £50 to £1,000 or more per course of treatment.
This means employers can still offer employees access to a range of benefits but limit the cost of exposure by having the employee contribute to their treatment. However, Pippa Andrews, director of corporate business at Vitality Health, says: “The downside to providing a plan with an excess is that it might limit access to the benefit for some employees when they go to claim and can’t afford the excess, making it counterproductive if employees can’t access the treatment, and can’t get back to work quickly. It might solve one problem in the short term but create another one in the long term.”
Benefit caps, as a cost-reduction option, limit the level of cover that employees can access within a PMI scheme to a certain extent. But this may have unforeseen consequences if the employee gets to a certain point and is unable to claim any further, meaning their ability to recover and return back to work or indeed continue to access the treatment they need to stay healthy is cut off, says Andrews. “It can not only cause a problem for the employee but also create bad feeling against the employer because [the employee] has got half way through their treatment and then feel like they have been cut off, even though the employer set that plan up with the best intentions.”
Another option is to limit hospital access to avoid treatment in the most expensive of locations or limit the way in which individuals can access the treatment, for example, through open referral where the insurer can guide a claimant’s treatment plan more cost effectively through a select choice of consultants rather than allowing the employee to choose their own.
Utilising PMI alongside an organisation’s other health and wellbeing benefits provision can also work to support a scheme’s cost efficiency. For example, employers can signpost employees to benefits that may be under-utilised but can help improve PMI claims, such as employee assistance programmes (EAPs), counselling services and health cash plans. These can also help to fill any gaps in PMI cover, for example, if a scheme does not include psychiatric cover.Patrick Watt, corporate director at Bupa UK, says: “[This] can also alert a business to the services that do not resonate with their workforce, so they can be withdrawn and potentially replaced with more meaningful alternatives.”
Incorporating PMI into a health and wellbeing strategy
Incorporating PMI into a broader health and wellbeing strategy can also be one way in which employers can encourage staff to adopt a healthy lifestyle, thereby acting as a preventative measure for ill health. Encouraging employees to look after their overall health is one way of keeping down the cost of high premiums and ongoing treatment, as well as viewing cost effectiveness in terms of lower sickness absence. Although organisations might spend more money on health benefits in the long run, they are saving money by avoiding long-term absences.
Nick Jeal, head of corporate marketing at Axa PPP Healthcare, says: “Our challenge has shifted from cost effectiveness and how do you get the price down, to ‘how do I get the most value out of it? Early intervention is key and the earlier people can access services, generally speaking, in the longer term is more cost effective.
“Engaging employees and sending them relevant information can start to resonate with employees and is a tangible step towards getting employees to take charge of their health and wellbeing and to make changes to their lifestyle. That’s going to have good outcomes.”
PMI over the last five to 10 years has evolved to include a lot more health and wellbeing initiatives, says Andrews. “The aim is getting treatment or indeed preventing that claim from even occurring, and keeping people healthy in some way before it becomes a bigger issue. For example the introduction of a private GP is all about keeping people healthy but also for getting them in quickly, in the right way and to ensure they get the right treatment, and and to be more cost effective in the first instance,” she explains.
Understanding employees
If an employer is planning on changing its healthcare offering for its workforce, a targeted approach to wellbeing and taking the time to understand its workforce demographic, can maximise its investment. Understanding the needs of employees will help tailor an effective wellbeing strategy that is also good value, says Watt. “Many UK businesses now take an employee-led approach to providing physical and mental health and wellbeing initiatives, which are based on the concerns and challenges faced by their employers,” he explains.
The future of PMI
Increasingly, organisations are seeing the added benefits of an overarching health and wellbeing programme that incorporates PMI.
A number of employers now view medical policies more as risk management-based tools and less as an employee benefit, says Rachel Western, principal at Aon Employee Benefits. As such, they are now more considerate of the benefits they offer to help manage costs.
With the introduction of technology and the data-driven insights these provide, employers can also get right to the heart of the health and wellbeing issues within an organisation. This helps businesses to decide where best to invest to improve their people’s wellbeing, says Watts. Advances in digital platforms and apps mean that even businesses with employees who work remotely can successfully engage with the wellbeing agenda, safeguarding their employee’s mental and physical health to try and avoid long-term health issues.
Preventing illness is impossible, but to a certain extent focusing on keeping employees as healthy as possible will keep overall PMI claims down. In any scheme, claims are inevitable, however, there are a number of steps employers can take to ensure the cost effectiveness of PMI.
PMI along with Well-being initiatives do form part of a risk management strategy, however, it depends on how they are deployed. In my opinion, higher PMI excesses will most likely deter the less highly paid members of staff from using the PMI scheme. There are also limitations of cover e.g. chronic conditions and claims issues with underwritten schemes. Well-being programmes can be extremely beneficial, however, gym membership will do little to help a member of staff dealing with a Cancer condition. By adding in additional benefits from different to plug gaps in cover means there is limited interaction between the various providers on the grounds of confidentiality and commercial reasons.
At Patient Advocate, we have developed a centralised and integrated solution and believe that it helps to address many of the issues identified in the article above including the cost of delivering these programs.