Are providers of health cash plans so obsessed with offering a spread of obscure benefits that they risk undermining their core business? At least one provider believes that the plethora of extra benefits that have sprouted around cash plans in the 1990s have more to do with selling than offering a genuine service.
The trend to having 30 or 40 categories of claim inevitably adds cost – and this could be putting premiums beyond the reach of traditional subscribers, argues Michael Gilbert, chief executive of Bedford-based PHS, a provident association writing cash plans and private medical insurance (PMI). He fears cash plans overall could be heading the same way as PMI.
In other words, cash plan providers risk pricing themselves out of the market just as happened in the stagnant PMI world, where former policyholders self-pay for private care as need arises.
“You get a lot of unnecessary benefits put in health cash plans just to make the table look good,” says Gilbert. “Personal injury is the archetypal benefit in this category – large sums for loss of a limb, say. It’s mainly there to look good.
“You also get variations to make the table look longer,” he says. “You get accident benefit, which is basically hospital benefit, where the insurer waives the qualifying period if you have an accident in the first six months – although it doubles if both the subscriber and the spouse are on the registration of the hospital at the time.”
Gilbert says these are broken out into completely separate benefits “for no obvious reason other than to make the table larger”.
There are certainly wide variations in the benefits offered in plans. Market leader HSA offers 21, Westfield, 17, Healthsure 15, Forrester 13, and Paycare 10. BHSF and Medicash both offer 14. But it is the new market entrants that appear most inclined to the “more is best” approach. HSBC recently entered the market flaunting an unparalleled 46 benefits. And new arrival Bupa – 23 benefits – is also way above average.
At the bottom end, Gilbert’s PHS has just 10 benefits. Four key areas account for 90 per cent of claims. These four, which Gilbert sees as the bedrock of the business, are hospital overnights, optical, dental and maternity.
PHS’s six extra benefits are day-case surgery, worldwide hospital cover, out-patient therapy (physiotherapy and alternative treatments osteopathy, chiropractic, acupuncture and homeopathy), specialist consultation and chiropody.
However, HSA spokesperson Sue Richmond argues that some apparently minor benefits can be important. “In the last financial year, HSA paid out 11,000 home help fees and over 8,000 parental hospital stays,” she says.
Gilbert criticises cash plans seeking to market themselves as bargain alternatives to PMI. They are being lured away from their traditional customers, he says. Cash plan providents seeking to change their culture risk “offering an inferior version of someone else’s way of doing things”.
One can argue the reverse – that PMI providers are encroaching more into cash plan territory rather than cash plans are stealing PMI business. Bupa is a clear example of this, says Richmond. “I can think of PMI providers offering cash plans but no traditional cash plan providers offering PMI,” she says.
Public confusion between cash plans and PMI is far from unknown, according to one informed observer. Intermediary Stephen Walker of Medical Insurance Services, a member of the PMI panel set up by the ABI following official concerns over regulation, has seen several cases where cash plan subscribers have discovered through harsh experience where the limits lie.
“Like many intermediaries, I’ve had cases where people have bought cash plans thinking they were buying PMI,” recalls Walker.
He has expressed his concerns within the three-person PMI panel, advocating a mandatory statement on point-of-sale material to the effect that cash plans won’t pay private medical costs.
“I have come across people who have cash plans – HSA for example – thinking they have PMI. It only becomes apparent they haven’t got PMI when they come to make a claim. It might pay them £100 a night in hospital, but it certainly is not going to pay their medical fees.”
However, Walker emphasises this is not foul play. “We are not talking about mis-selling. We are talking about mis-buying – people don’t understand what they are getting. It’s extremely important people understand what they are buying and, coming from that angle, I would agree with what Mr Gilbert has to say.”