The health cash plan market seems to be in a bit of a David and Goliath situation.
Obviously there is not any fighting involved, but it could be said the small corporate division is thrashing the large consumer sector when it comes to demand.
Contributors to the individual market declined for a fourth consecutive year in 2011, Laing and Buisson research found.
The Health Cover UK Market Report 2012 said the sector experienced a 4.6% drop in individual contributor demand during the year. The contraction left the segment at 2.083m, marking an overall 22% decline since 2007.
Employer-paid contributors meanwhile steamed ahead in 2011, soaring 13.5% to 0.51m - a 120% expansion over the last five years.
Tony Wood, sales and marketing director at Bupa Health and Wellbeing UK, said: "The latest Laing and Buisson market report shows the consumer cash plan market saw demand decrease last year.
"However, the report also shows the corporate market grew strongly in 2011, demonstrating that employers continue to value cash plans for their employees."
Downbeat economy drives deals
Why are more employers buying health cash plans? Both providers and brokers have said economic instability, pairing them with private medical insurance (PMI) excess policies and product scope are behind the rising take-up.
As the country's economy has been in decline over the last five years the corporate sector seems to have grown.
Recession, crisis, squeeze and cut seem to have formed the basis of many savings plans that individuals and organisations alike have been trying to make.
"An individual cash plan, where staff are paying for cover themselves, is probably one of the first things that would be cut if you were stuck for cash," said David Castling, commercial sales manager at Engage Mutual.
"It is not an essential. It is nice to have. It is a good benefit. But if you really need the money, you could see why people would cancel that to spend the money on other more essential things they need in their day-to-day life."
And employers are no different, he added. Some have scrapped pricey PMI healthcare cover and opted for cash plans to reduce outgoings, according to Castling.
"We have had clients that have exited the PMI market and have taken out a cash plan as a bit of a half-way house - they cannot afford PMI but still want to offer some kind of healthcare benefit to staff," he explained.
"It is a far more affordable way of offering something rather than just saying we cannot afford PMI anymore and we are not doing anything else."
Of course a cash plan is not a substitute for a PMI, conceded Castling, adding: "But if your client is faced with the choice of exiting the PMI market because of cost and having nothing or a cash plan, the latter is the better option."
Happily married
But many would agree long gone are the days of either/or within the private healthcare arena. According to Colin Boxall, managing director of Advo Group, there has been a burgeoning trend since 2008 for a cash plan that pays the excess on a group PMI policy.
"Four years ago we realised cash plans had evolved into something a little bit more than the traditional blue collar version. At which point Advo begun working with them and pairing them up with PMI plans," said Boxall.
"That has certainly increased quite considerably over the last couple of years as the synergy between the cash plan and PMI excess has become a lot clearer."
The emergence of this trend into a more mainstream playing field has meant brokers have become more aware of other opportunities within the sector.
Boxall explained: "If companies put an excess on a PMI plan and use a cash plan, not only are they sharing the risk profile, but they are also helping to divert some of the PMI claims on to the cash plan, which could be more effective for some conditions."
Companies are also becoming increasingly aware of the benefits range cash plans can offer employees - from the cleaner up to the managing director.
This has enabled Advo to use the excess and cash plans combo to "great effect" with some of its clients.
Boxall said the combo had worked very successfully and helped to push purchases of cash plans within the corporate community.
But not everyone believes it is a match made in heaven. Castling said: "There are still some question marks over whether using a cash plan to pay off a PMI excess is the right thing to do."
He said he would argue the pairing was an unsustainable, short-term fix for high PMI premiums and is doing a disservice to cash plans.
Innovation
Elsewhere, Health Shield research shows the types of cash plan benefits being used within the corporate channel.
The friendly's recent surveys show claims for complimentary therapies including physiotherapy, Indian head massage and Reiki have been increasing recently.
Marketing manager Lara Rendell said demand for its health and wellbeing benefit, which covers 19 treatments, was on the up.
She said: "We have definitely seen a trend move to physiotherapy and health and wellbeing being considered as a very important benefit. I think people are realising they need to look after themselves and de-stress and relax."
Rendell said there had been a gradual move away from members just waiting to get ill to use a cash plan and that it had opened up and strengthened the market.
More employees are using the policy to support their lifestyle and more companies are taking out schemes to give staff tangible benefits, according to Rendell.
Rendell said Health Shield would continue to endeavour to advance the market "by monitoring it as much as possible and making changes to the products accordingly".
Adaptation
Paula Aitken, commercial manager at Private Health Partnership (PHP), said providers have so far been successful in growing the market.
She said: "Cash plan providers have been absolutely excellent in terms of rising to the challenge of meeting the needs of employers' specific requirements instead of just offering an off-the-shelf product."
Aitken has one company client that claims quite heavily on therapy and chiropractic needs because its employees do a considerable amount of lifting and subsequently suffer with various orthopedic conditions.
PHP designed the company a heavily accentuated specific therapy cash plan excluding benefits that are not as important.
"It is fantastic to be able to tailor things in a much more unique way for each company," said Aitken.
"However, it is not to say that every company wants that. Some like the spread of benefits, and the fact that you have got both to choose from and you can tinker with things is brilliant."
Going forward
Both cash plan providers and brokers expect the sector to continue to flourish because there is value in providing a tangible staff benefit that is paid for by the employer.
Wood said: "Healthcare cash plans are able to provide companies with cost-effective healthcare solutions for their employees, whether they complement existing PMI cover, add a new employee benefit or are introduced alongside a pay review.
"Companies and intermediaries are seeing the value healthcare cash plans add to their organisation, and as a result, we are seeing an increasing number of companies considering healthcare cash plans for their employees."
But it seems the market is still quite small in terms of the number of companies that have got these kinds of benefits in place; Castling said this just meant there was a lot of room for further expansion.
He said: "It is still where the opportunity lies. It is the smaller chunk of the market, but it is the bit that is growing."
