Buyer’s guide to health cash plans

What are health cash plans?

The origins of health cash plans can be traced back to the 19th century when they were originally provided by charitable or non-profit organisations. As a support system that pre-dates the creation of the NHS in 1948, cash plans helped employees pay for their various healthcare needs.

Despite its long history, health cash plans remain a popular and valued benefit; LaingBuisson’s Health cover UK market report, 17 edition, published in June 2022, found that 3.3 million people were covered by 2,531,000 health cash plan policies in the UK at the end of 2020. Of these, 42% were employer paid.

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Health cash plans are often used by employers to specifically cover private medical insurance (PMI) excess; many cash plans incorporate cover for this as standard.

How do the schemes work?

A health cash plan allows an individual to claim back the expense of everyday healthcare costs. They primarily cover optical care, dental care, physiotherapy and chiropractic treatment. The benefits are paid whether the treatment is carried out on the NHS or privately.

However, health cash plans can also be tailored to include more varied benefits, such as the provision of diagnostics with an MRI or X-ray. Many health cash plan providers offer value-added services with the schemes, which include access to a 24-hour a day seven days a week GP helpline, mental health support, employee assistance programmes, and retail and leisure discounts.

Health cash plans are available as either an employee- or employer-paid benefit. It can be offered to the employee as either a voluntary benefit, whereby the employer offers access to the scheme, but the cost lies with the individual; or as a corporate-sponsored product which the employer funds on behalf of the employee.

Employers can choose which products to include or exclude for their employees’ plan. This flexibility and access to healthcare cover at a minimum cost, can help feed into a wider health and wellbeing strategy because, as well as leading to general improvements in the health of a workforce, health cash plans can contribute towards reduced sickness absence rates.

What are the costs involved?

Within the employer-paid market, the standard ÂŁ1-a-week model is still predominant. The cost of health cash plans is inclusive of insurance premium tax (IPT). The market average is just over ÂŁ100 per year, per employee, because not every employer opts for the base level plan. If an employer does opt for the base level, there is the facility for employees to upgrade their own cover.

Health Shield’s employer-paid plan, which starts at £4.73 a month, has no outlay for employees and includes their dependent children at no extra cost.

Westfield Health offers additional modules for purchase to enhance coverage. This includes the option to add private medical insurance starting at ÂŁ6.12 per month per employee, subject to underwriting terms.

Within the voluntary benefits market, contributions could fall anywhere between ÂŁ5 and ÂŁ10 a month. As with the corporate-paid plans, adding bolt-on options to a basic plan will also increase costs. Health Shield reports that average voluntary paid premiums remain higher, at more than double the cost for equivalent cover, due to claims rates being around three times higher than an employer-paid plan.

What is the annual spend?

LaingBuisson’s 2022 Health cover UK market report found that total spending on health cash plans in the UK at the end of 2020 was £411 million. Of this, £146 million was from employer-paid plans. The total benefit paid was £219 million. The average annual price paid per employer-paid plan was £100, and for individuals was £248.

Are there any tax or legal issues?

Employer-paid health cash plans are treated as a benefit-in-kind for tax purposes and the value of the benefit is determined by the premium paid rather than the cash that is repaid to an employee.

There are no legal implications associated with a cash plan, although an employer can use one to help fulfil its duty-of-care requirements to employees’ health and wellbeing.

What are the current market trends/developments?

With the current economic climate, the pressure on the NHS, and costs of living continuing to rise, providers have seen employers’ appetites to support the wellbeing of staff through benefits increase, just as employees have come to expect more.

Health Shield has seen an increasing number of employers looking for enhanced cover in the last year as opposed to the lowest cost offerings. It has seen a 73% increase in the use of its virtual GP service, while average claims value for dental treatments continues to grow as more members are accessing private dental services.

Simplyhealth and the Chartered Institute of Personnel and Development’s (CIPD) Health and wellbeing at work report, published in September 2023, found that UK employees are absent on average for 7.8 days over the past year.

Employers have a vital role to play in supporting the health and wellbeing of their employees through benefits schemes; however the report found only 25% of organisations offer their employees health cash plans that provide access to independent services like GP appointments, physio, chiropractors, or counselling, meaning they are missing out on the opportunity to provide their employees quicker access to health services and avoid long NHS waiting lists.

Simplyhealth reports that there is growing engagement in the small- and medium-sized enterprises (SME) space as entrepreneurs look to provide better benefits for their employees.

Mental health support continues to be a big area of focus for employers, so the add-on services that come with a health cash plan, such as EAPs, GP helplines and telephone counselling, are proving to be ever more valuable. Mental health and musculoskeletal (MSK) issues were identified as the top causes of long-term absence in the Health and wellbeing at work report. This is reflected in the demand for Simplyhealth’s own services:  44% of calls to its virtual counselling and advice service relate to mental health conditions, and more than one in ten calls to its virtual GP service relate to MSK ailments. Back, knee, and shoulder problems are the most common issues referred to its virtual physio assessment service.

Incidence rates have increased as a result of the cost-of-living crisis, reports Simplyhealth, with more people making use of every bit of help they can find financially.

Westfield Health has seen the year-on-year average call volume to its 24/7 private GP phoneline service, DoctorLine, more than double in the past 12 months. Calls have increased by an average of 110%, and it saw a peak in March 2023 of 171% more calls than March 2022.

Westfield Health has also seen increased use of the value-added wellbeing services and alternative therapies, while dental usage has decreased this year.

Technology has improved the way employees are able to access their benefits. Many providers now offer digital platforms, rather than paper forms, to enable individuals to process their claims.

Over the past 12 months, Health Shield has invested heavily in improving digital capabilities in order to make onboarding and managing a cash plan even more straightforward for employers and intermediaries. Its Breeze platform gives employees access to a counselling helpline, a mental wellbeing app, a doctor via phone or video, and prescription delivery, among other benefits.

Westfield Health customers are able to use its claiming mechanism through its digital wellbeing service, MyHealth, and also access its online digital community, Togetherall, which helps support individuals with their mental health.

Simplyhealth has made a number of changes in 2023 including access to discounted diagnostic scans via a partnership with Scan.com; access to discounted physio services via a partnership with Ascenti; and cash benefits, services, virtual GP and physio services are all available through one single app.

Who are the main providers?

LaingBuisson’s report shows that within the health cash plan market, SimplyHealth, Westfield Health and Health Shield held the top three places of market share by income in 2022. Other providers include BHSF Group, Medicash, Sovereign Health Care, Bupa, HSF, Benenden Health, The Exeter, Paycare, and WHA.