Providers dismiss a 70% rise in the future cost of corporate schemes
Group private medical insurers have dismissed a report from consultancy Buck & Willis Healthcare, which states UK businesses will face an additional £1.1bn private medical in- surance (PMI) bill over the next five years. The figure comes from what it predicts to be a 70% rise in the current cost of healthcare.
Providers however, have dis-missed the figures, saying they are inaccurate and not in line with the true definition of medical inflation.
Tim Baker, commercial director at Norwich Union Healthcare, said the predicted increase is a 'nonsense figure' that fails to reflect true market conditions.
'The increase stated by Buck & Willis is a huge rate of inflation that does not fit with the market at the moment. An increase of £380 per employee for those companies with 100 or more employees means a doubling of premiums in five years. That is about 20% year-on- year, and we are seeing it at about 5% at the moment,' he said.
David Battle, head of corporate pricing at AXA PPP healthcare, agreed the figures need to be questioned.
'Buck & Willis' claims that medical inflation for corporate cover is 11% does not square with the situation described by Laing & Buisson, which states that, over the past five years, the average increase in the cost of corporate cover has been 4.2% per subscriber,' he said.
The report suggests that spiralling liabilities could cause medical plans to go the same way as final salary pension schemes, which Baker also contests.
'The cost of PMI in terms of a final pension salary scheme is a lot lower. That is not to say people are not worried about the costs, as they clearly are, but I do not think the situations are comparable.'
To help control spiralling medical costs, Buck & Willis proposes a 'defined liability' scheme allowing employers to cap their contributions and fix their liabilities.
While Baker welcomes market innovation, he stresses that a similar system has been available in the US for about five years and has only seen modest take-up.
Steve Flanagan, director of sales and distribution at BUPA, was adamant that defined liability products already exist under a different name within the UK market, and that the product has been re-branded to aid the shock value of the report.
'We can and do have a number of products and customers operating under that system. It is nothing new. To say costs will increase by 70% in five years is a grossly over-inflated statement,' he said.
