Daniel owns a publishing company that employs 350 staff. He believes in taking a paternalistic stance towards his employees and is offering them income protection (IP) and critical illness (CI) cover. He now wishes to offer them private medical insurance (PMI) in case they need treatment. He prefers comprehensive cover, but the firm's budget is limited. What options are available to the company?
TOBIN COLES, Jelf Group
For Daniel, several factors will determine the initial premium offered by the insurers including: number of employees to be covered, his company location, gender split, age profile of the employees, and industry sector.
The insurer will then benchmark these criteria against its existing portfolio to establish an expectation or projected premium required.
The average UK single rate for an employee only is currently £350 with annual medical inflation averaging 10% - notably higher than indices such as RPI or AEI.
So Daniel needs to consider whether covering 350 employees only on a comprehensive basis is feasible. If not, there are a number of policies and levels of cover available to fit a wide range of budgets.
Comprehensive cover on a fixed budget is possible and is likely to include a combination of cost containment measures such as cover within a hospital network, exclusions for pre-existing medical conditions, possibly a limit on outpatient cover (set at £1,000, £800 or £500), restrictions on specific treatment such as drug or alcohol related cover, or an excess. Alternatively, there are many modular products on the market including Norwich Union's Solutions and even lower cost options from HSA, offering a core product to which benefits can be added to or removed from.
For a company such as Daniel's that is already providing IP and CI cover, it is advisable to fully integrate the range of healthcare benefits to ensure the most appropriate insurance is used at the right time, preventing long-term cases and long-term costs. He should consider negotiating discounts with the IP insurer if taking out PMI, because in practice this should reduce the number of long-term claimants.
JACK BRIGGS, BCWA
Daniel's company employs 350 staff. This would be large enough for a special group scheme (SGS). This tailored scheme will aim to match Daniel's precise needs and will provide him with a broad choice and flexibility when it comes to choosing the right cover. This is where the intermediary will play a vital role.
We would offer Daniel our product, Service+, plus assisted care, which would see our staff help members find the best healthcare for their needs. This will give his staff a caring service and reduced cost: exactly what Daniel wants. At BCWA we believe this approach makes every customer feel special. They are buying more than insurance, and we aim to be the patient's advocate and support.
To offer the best solution for Daniel we would want to find out more details from the intermediary about his requirements. For an SGS group like Daniel's it would cost £298 a year for each employee for provincial single cover in their first year.
We would offer the following discounts: 15% for taking out Service+; 4% for £50 excess; and 8% for £100 excess. Full medical underwriting or moratorium would attract a 16% discount. Therefore, it would cost £196 per year per employee on the provincial scale with Service+, full medical underwriting or moratorium, and £100 excess. For a couple it would cost £392 or for a family it would be £490. These rates are valid for one year.
The company would have to pay for the employee. Dependants can be included by voluntary deduction from salary. Monthly and quarterly payment terms are also available to Daniel.
SOROYA CHAMBERLAIN, BUPA
To meet Daniel's objectives for a comprehensive scheme for 350 employees within a limited budget, a number of options can be considered.
In terms of the benefit package itself we would propose our Premier Plan, restricted to the BUPA partnership network hospitals with limits on outpatient benefit. To keep the premiums affordable Daniel might choose to fund only the employee.
Given the company's paternalistic culture it may invite employees to pay to include spouses and dependants. It would, however, be wise to consider medical underwriting and/or a deductible, for example £100 excess per person per year for spouse/dependants. These measures would help control the risk associated with "voluntary" membership and are sensible controls for employers introducing a new PMI scheme - it is much harder to introduce such controls in later years.
The subscriptions could be reduced further if medical underwriting and/or excess were also applied to the employees. Such controls to the employee benefit would certainly play a role in maintaining costs but would also result in restricted benefits, which may not compare favourably with other similar employers or suit the company culture.
BUPA is able to provide clients of this size with a comprehensive PMI plan tailored to suit their budget and cultural needs. The examples above are just some of the more common methods adopted and we would work with Daniel to understand his needs fully and put together a suitable package. Rates depend on factors such as package, basis of funding, age and membership profile, but as a guide the full insurance rate for employee cover only based on a middle-aged population is likely to be £350 excluding insurance premium tax.
