The soaring cost of providing healthcare plans for workers could see them suffer the same fate as final salary pension schemes, a leading healthcare consultancy has said.
UK businesses face an additional £1.1bn bill for private medical benefits in the next five years – a 70% rise on the current £1.6bn cost, said Buck & Willis Healthcare, an international firm of business employee consultants.
Healthcare provision in the UK could follow the US trend, where rising costs have forced companies to restrict how much they are prepared to pay towards such schemes. The consultancy predicted that underlying medical inflation – currently 11% a year – would lead to the average annual cost of £550 per employee, for firms with 100 or more staff, rising to £930 over the next five years.
Adrian Norris, managing director at Buck & Willis Healthcare, said: “Employers need to take action now to prevent the cost of medical benefits escalating out of control, or the existence of company medical plans could be threatened, compromising an important aspect of any employer’s benefit package.
“These spiralling liabilities could see medical plans going the same way as final salary pension schemes.”
About 4.5m people in the UK have private medical cover for themselves and their families. About 60% are company-paid and another 10% are companysponsored, with employees making sizeable contributions.
Norris said there was, so far, little evidence of companies completely withdrawing such cover, but employers had been increasing staff contributions and imposing excess rules, so that individuals paid the first £100 of any claim.
Buck & Willis said it expected the next stage for employerfunded private medical benefits would be “defined liability” healthcare plans, which range from benefit and contribution redesign to replacement of the core benefit with a salary enhancement, passing the responsibility for sourcing an appropriate healthcare solution onto the employee.