PMI for pensioners is a growing corporate problem. Kim Strugnell examines the options.
Furthermore, private healthcare schemes are now being used in different ways to their initial intent. They are now no longer seen as supporting elective treatment that the NHS did not consider to be urgent, they are now the first port of call for anyone who needs medical attention.
The most dramatic shift of usage has been the treatment of cancer, where the private health sector has mostly agreed to fully fund treatment including expensive drugs not always available through the NHS.
Pensioner populations are especially susceptible to cancer costs and we have recently seen one of our City-based clients with around 130 affected pensioners. In 2009 cancer claims from pensioners accounted for just 2% of claims; by 2012, this had risen to 33%.
The issue is now that employers may be happy for their current employees to take advantage of such a system, but the value of funding pensioners to ‘replace’ the NHS is under serious review.
Is PMI for pensioner populations going the way of final salary pension schemes? Across the private healthcare industry, it is universally accepted that drastic measures are required and recent developments have seen providers innovate to help address the situation, such as the removal of consultant choice, commonly known as open referral.
Open referral has been met with mixed reactions, due to the removal of patient choice, a key factor in the decision to purchase private healthcare. While controversial, many employers are starting to review this in order to ensure scheme sustainability.
Such changes may be difficult to impose on employee populations, but obtaining greater control of treatment delivery for pensioners is an increasingly attractive prospect for many corporate sponsors.
NHS reform fears
The government’s reforms of the NHS, due this year, could also give employers cause for concern regarding the impact on those retirees who still enjoy private healthcare as an employee benefit.
The reforms will see GPs take more control over expenditure and how it is allocated. With a finite budget, GPs may find themselves encouraging those with private provision to make greater use of their cover.
There would be an even greater incentive to transfer the costs of treating retiree populations to the private sector, due to their greater demand for medical intervention and more expensive treatment times. The concurrent impact upon the costs incurred by corporate healthcare schemes with significant retiree memberships is easy to predict.
There is no universal solution and each scheme requires individual review. Thus far we have seen some employers try addressing the issues by passing on a greater proportion of the premium increases to the pensioner members.
However, these measures normally only result in a downward spiral, as low or non-claiming pensioner members start to opt out of the scheme. What remains is a small number of high claimers, who will never voluntarily leave the scheme, representing a substantial long-term risk exposure for the organisation.
