In the current economic climate intermediaries face the difficult task of designing healthcare benefit packages that are not only affordable for the employer but which also provide adequate cover for employees.
An increasingly common way to keep costs down is to run a cash plan alongside an existing private medical insurance (PMI) policy. A company can introduce an excess on their PMI which will lead to an immediate reduction in premiums. They can then encourage employees to use a cash plan for smaller claims, such as initial consultations and physiotherapy, thus minimising premium increases in the future.
Peter Lauris, sales and marketing director at Medicash, says: “A major part of PMI is diagnostic – an initial check-up affects the premiums straightaway. Instead, employees can use a cash plan for their initial consultation before they go into their PMI policy. If companies can encourage employees to do this they can avoid hikes in premiums because cash plans are not guided by the claims experience.”
Health Shield says that some companies have introduced its cash plan on a cost neutral basis whereby simply implementing a cash plan and increasing the excess on the PMI will pay for the cash plan with the savings made on the PMI scheme. And Brian Hall, sales and marketing director for BHSF, says the savings achieved in PMI terms can exceed the cash plan premium, even if optical and dental benefits have been included.
HSF health plan has demonstrated the savings that can be made by comparing inpatient PMI claims with cash plan hospital benefits. HSF says a typical company PMI scheme costs around £45 per month per employee. It is possible to get a reduction in the subscription of around £8.50 per month if there is a £100 excess. This can buy an HSF Scheme 200 health plan, which pays £32 per day/night for time spent in hospital. When the subscriber has spent three days/nights in hospital for treatment the £100 excess is virtually covered.
Mike Picken, associate director at Henderson Healthcare & Employee Benefits, says: “I am a great believer of running a cash plan in tandem with PMI, especially in the current financial environment when companies are introducing pay freezes. A cash plan is low cost but it has a high perceived value – employees are getting benefits they can use, and if it is used correctly the company can save money.”
Cash plans may also result in indirect savings by helping a company to cut absence rates and boost productivity. Most cash plans include a 24/7 GP helpline which allows employees to speak to a GP without having to take time off work. Stephen Duff, deputy chief executive of HSF health plan, says 70% of the calls made to its GP helpline result in an effective course of action which negates the need to visit a GP.
Many cash plans also have counselling helplines which can help to tackle stress. According to the latest Confederation of British Industry/AXA PPP Absence and Labour Turnover survey, stress, anxiety and depression is one of the most significant causes of long-term absence. It can also result in presenteeism – where the employee is at work but is not working to their full potential.
Medicash’s Lauris says: “If someone is working under stress their productivity levels will be diminished. Some companies offer occupational therapy, but the individual has to access this through HR and this in turn can increase their stress levels because they expose themselves. With a cash plan, the counselling is provided 24/7 and it is anonymous so the employer never knows who phones for advice.”
The optical and dental benefits included in most cash plans can also help to improve the health of the workforce and reduce absenteeism. Research suggests that dental cover can not only stop people from developing oral health problems, but can also prevent a range of general health conditions as well. Oral health has been linked to diabetes, strokes, heart disease, osteoporosis, respiratory diseases and even cancer. Similarly, eye checks reduce the chances of headaches and migraines by ensuring someone has the right prescription glasses and also detect diseases such as glaucoma.
Jill Davies, chief executive of Westfield Health, says: “Cash plans are a preventative healthcare solution. They sort out the problem early, thereby saving time, effort and money.”
It is not only employers that can benefit financially by introducing a cash plan. If a company decides to lower its PMI premium by introducing an excess the intermediary’s commission will also be lower, but they can supplement this fall in commission by putting in place a cash plan. Similarly, cash plans help employees to budget for their everyday healthcare costs and can also cut their P11D liability if it is offered in place of PMI. Karen Gamble, regional director for employee health solutions at Heath Lambert Consulting, says there are elements in a cash plan which are not deemed to be benefits-in-kind, such as employee assistance programmes (EAPs), spectacles for visual display unit (VDU) purposes and even online health screenings. This could reduce the taxable part of a £60 annual cash plan premium to £31, which Gamble says is the sort of amount that the local inspector of taxes can waive on the grounds of triviality.
Introducing a cash plan alongside PMI also has non-financial advantages. Employees will be able to access a much wider range of healthcare benefits, which can assist the company in its recruitment and retention. In addition, the employer will be meeting their duty of care obligations because cash plans cover eye tests and spectacles for employees using VDUs, and incorporate EAPs.
Dave Willetts, head of business development at Health Shield, says: “We have seen a marked increase in business, from brokers especially, introducing an excess on a PMI scheme and saving between 7% and 9% on the cost. This saving is then being channelled into a health cash plan to help cover the excess and to provide additional benefits to cover everyday healthcare costs including dental, optical, health and wellbeing treatments and many more. By introducing a health cash plan companies are adding value to the employee’s benefit package and are also helping the company ensure that their duty of care obligations are taken care of.”
The relatively low cost of cash plans means they can be offered to the whole workforce, whereas many employers reserve PMI for senior executives.
“Due to their low cost, health cash plans make healthcare provision more accessible to companies, allowing them the ability to introduce healthcare cover for all staff,” says Willetts. “For companies with PMI already in place, it enables them to extend healthcare cover to those employees who would not normally be eligible.”
One of the main challenges for an intermediary in setting up a cash plan alongside PMI is ensuring that employees understand the two types of benefits and when to use them.
Ingrid Skoglund, managing director of intermediary firm Benefits for Business, says: “In theory introducing a cash plan alongside PMI saves money, but it depends how well the cash plan is promoted by the employer. If it is well-promoted and well-used it works.”
Skoglund adds that employers need to view the schemes as a long-term solution to budgeting stability because introducing a cash plan is often not a major money saver in the short-term.
Another challenge is ensuring the cash plan and PMI administrators are willing to communicate with one another. Heath Lambert’s Gamble says the intermediary has to ensure that in communication, literature and compliance the providers are working together.
“It is down to us to bring two radically different philosophies together,” she says.
Henderson’s Picken believes that in the future cash plan and PMI providers will have to work more proactively together. He says the line between cash plans and PMI has already been blurred with the introduction of Westfield Health’s Surgery Choices, which offers companies the chance to add a degree of medical insurance cover to a cash plan.
“In the past cash plan and PMI providers thought there was a conflict of interest, but they are now realising that they complement one another,” says Picken.
With the economic gloom showing no signs of lifting, companies will be increasingly looking to control costs on healthcare benefits. Recommending a cash plan is a positive way of doing just that.
HOGG ROBINSON GROUP
Corporate travel services company Hogg Robinson Group had a flexible benefits programme provided by Remedi which had been in place for about 10 years. It discovered that the number of employees taking out healthcare cover was reducing and that younger employees were using their flex points to buy extra holidays.
Following the advice of its employee benefit consultant Heath Lambert, Hogg Robinson increased the excess on PMI to £200 and introduced an HSA cash plan. It then provided its employees with a document explaining how PMI and cash plans relate to one another. It also entered an agreement with Remedi, whereby an individual who has both plans will use Remedi as their first port of call and Remedi will explain whether the claim should be made through them or through HSA.
David Kast, head of human resources at Hogg Robinson, says: “One thing that we were trying to achieve was to put a control on the escalating cost of our healthcare plan. Nine months in, this is actually working. Everyone in the company has access to healthcare and our costs are being controlled.”