Changing times offer new opportunities and this could very well spell good news for the health cash plan sector, says Jill Davies.
If the economic climate continues to tighten and budgets continue to be squeezed accordingly, low-cost, high-return options could become ever more popular contenders in the health insurance market. Already, companies are not just simply renewing their staff health insurance benefits but are looking again at both outlay and cover.
This is where the health cash plan (HCP) comes in. Traditionally a mainstay during tough times, the cash plan is, in some instances, finding itself to be the must-have product in the portfolios of intermediaries and a priority for many HR managers.
But this wasn’t always the case. For years HCPs were dismissed by some as the ‘poor relation’ of PMI. Before the foundation of the National Health Service, HCP products offered a low cost form of health insurance, enabling low income families to pay for basic everyday healthcare.
So what has changed and what factors are behind the rise of the HCP?
Many employers are avoiding knee jerk reactions, recognising that it would be a false economy to lose all health insurance cover in favour of overly stringent cutbacks. A short-term and short-sighted perspective could well lead to a drop in staff morale as employees may feel less valued.
Equally, losing healthcare cover could prompt a spike in sickness absence levels as staff may require longer convalescence periods due to a lack of previously available treatments such as physiotherapy or chiropractic. Additionally they may need more time off before an operation because of longer NHS waiting times.
If the economy continues to falter and premiums rise, many employers may think again about the merits of offering PMI to only a handful of management staff, particularly when introducing a HCP for the whole workforce could add value and also give them a return on their investment.
This could be a sound investment when, according to the CIPD, the average cost of sickness absence rose in 2008 to £666 per employee from £659 the previous year.
An increasingly popular way of keeping costs down is to operate a cash plan alongside existing PMI to complement the cover.
For example, employees can use their cash plan cover to claim for diagnostic consultations and physiotherapy, which could minimise premium increases on their PMI or offset an excess through claims on their HCP.
Intermediaries can also benefit. If employers can lower their PMI premiums by introducing an excess, intermediaries’ commission levels may suffer, but by encouraging the company to add value and purchase a cash plan, intermediaries could see their commission levels rise. Although commission may be lower with a cash plan, the numbers of policyholders covered could be far greater than with PMI for senior staff only.
The cost of an HCP may be offset against a company’s corporation tax. This makes the HCP a ‘win/win/win option’ – benefiting the intermediary, client and employee alike.
Preventative Care
Changes in the NHS have also had a knock-on effect on the cash plan sector. Anticipating and matching changing healthcare needs is key and the proactive provider strives to identify where provision and availability is diminishing, and to develop innovative new products accordingly.
For example, a benefit offering quick access to MRI, CT and PET scanning facilities will be perceived as high value. In recent years, a leading cash plan provider led the market by widening their offering with surgical cover – historically the domain of PMI. This was in the form of an add-on benefit to supplement its standard cash plan products.
This approach can be seen as combining the best of both worlds – the cash plan benefits which help employers to meet their duty of care obligations, reimbursement for employees’ everyday healthcare bills and surgery cover for non-urgent operations if and when illness does strike, which can help employers to cut sickness absence levels.
But while cash plan providers may be developing new benefits outside the traditional ones such as dental and optical, the changes in dental provision since the introduction of the 2006 dental contract demonstrate that the importance and popularity of these core benefits should not be underestimated.
Emphasis on preventative healthcare has helped to increase the profile of the HCP and to close the gap between cash plans and PMI. Benefits such as GP telephone consultation lines and health club concessions enable employers to help staff stay fit and healthy, and minimise the chance, and sometimes duration, of illness.
Beyond PMI and HCPs, some companies are finding that difficult times call for simpler solutions and have opted to replace the former with a hybrid HCP. A hybrid HCP could indeed take the place of PMI at a much-reduced premium.
The hybrid approach
Increasingly, employers are exploring the possibility of switching from a PMI scheme to a hybrid HCP as a result of rising premiums and this trend could be set to continue as companies look to save costs. The arrival of the tailored HCP also lends weight to this theory.
Bespoke cash plans enable employers to choose the benefits that are best suited to the needs of the company and the workforce. The beauty of a bespoke plan is its flexibility as it can be tailored to the requirements of the client.
Many HCP providers are not-for-profit organisations, which can be appealing to employers looking to introduce a form of health insurance.
It is important not to underestimate the current influence of corporate social responsibility. More and more companies are keen to demonstrate that they understand the impact of their actions and influence beyond the boardroom and are making inroads into balancing output, efficiency and profits with environmental initiatives, fundraising activities and community support.
Many employers are looking to other factors to influence their product choices and are aligning themselves with brands that have a similar ethos to their own.
All this has helped to create a new perspective on HCPs for employers, employees and intermediaries alike.
It may not be head of the health insurance family just yet, but the ‘poor relation’ tag has certainly long gone.
Jill Davies is Chief Executive at Westfield Health
