The facts
What are health cash plans?
Health cash plans are a low cost way to provide employees with financial assistance towards the cost of everyday healthcare. Plans offer a set amount of benefit each year for items such as optical and dental care, physiotherapy and specialist consultations, with employees paying for treatment then claiming it back from the provider.
What are the origins of health cash plans?
Originally launched in the 19th century to help cover the cost of healthcare, workers traditionally paid one penny (1d) of their weekly wages into the pot every Saturday. Since then plans have evolved to enable people to budget for their everyday healthcare.
Where can employers get more information and advice?
More information on health cash plans is available from the Association of Financial Mutuals (www.financialmutuals.org), which has 10 providers among its members. The Association of Medical Insurers and Intermediaries (www.amii.org.uk) can also provide information and put employers in touch with a specialist adviser.
What are the costs involved?
Employer-paid plans start from as little as £1 a week for a basic plan, with competition in the market meaning some will go even lower. Costs are higher for voluntary schemes or to add optional extras such as Westfield Health's Hospital Treatment Insurance, which provides access to private treatment for a range of non-urgent surgical procedures.
What are the legal implications?
There are no legal implications although an employer could use a health cash plan to meet some of its duty of care requirements, for example, supporting employees' mental wellbeing with the employee assistance programme (EAP) included on a plan or safeguarding eye health with the optical benefit.
What are the tax issues?
Premiums are subject to insurance premium tax and employer-paid plans are treated as a benefit in kind for tax purposes.
What is the annual spend?
Figures from LaingBuisson's Health Cover UK market report, which was published in January 2017, show that 3.5m people benefitted from a health cash plan in 2015, making the market worth £442m. Of these, 896,000 people had an employer-paid health cash plan, with an average premium of £98.
Which providers have the biggest market share?
Simplyhealth continues to dominate with a market share of 43% according to LaingBuisson, with Westfield Health in second place at 13%.
Other providers in the market include Aviva, Axa PPP Healthcare, BHSF Employee Benefits, Bupa, Health Shield, HSF Health Plan, Medicash, and The Exeter.
Which have increased their market share the most?
Many providers reported healthy sales figures, with Bupa and The Exeter seeing market share growth as a result of acquisition. Bupa took over the Beneden cash plan scheme and The Exeter entered the market taking on Engage Mutual's cash plan business in 2015.
With their roots in the Victorian era, health cash plans are one of the oldest health insurance products, and they remain a popular employee benefit.
According to the Willis Towers Watson Employee benefits and wellbeing index, published in March 2017, health cash plans are the second most popular benefit, beaten only by contributory pensions. This popularity is also evident in the sales figures, with LaingBuisson's Health cover UK market report, which was published in January 2017, showing that 3.5 million people had cover at the end of 2015.
Popular healthcare benefit
There are several reasons for this popularity. Plans are low cost, starting at £1 or less a week, but enable policyholders to claim money back for a wide range of everyday healthcare costs including dental, optical, and physiotherapy.
Although those are the three most popular benefits, the choice has widened significantly over the last few years. Modern plans can include virtual GP services, home assistance support, which provides care following a hospital stay, prescription fee cover, and employee assistance programmes (EAPs). Some even include wellbeing benefits giving access to services as diverse as sports massage, reiki, and allergy testing.
Many cash plans also provide for employees' not-so-everyday health needs. This could include money towards specialist consultations, diagnostic testing including MRI scans, and cash back for nights spent in hospital.
Whether they claim for their regular check-up at the dentist or something more unusual, given that most employees will be able to use their plan at least once a year, they are a highly appreciated benefit. This has seen some employers offer them as an alternative to a pay rise, especially in times when the economy is struggling.
Their pricing is another key benefit for employers. As benefits are capped, prices can be held for several years with increases tending to be linked to a more fundamental change in benefit level, for example, the addition of a new service or an increase in dental cover to take account of rising charges.
Engage employees
Health cash plans' ability to engage employees with their health also brings rewards. Whether it is keeping up the trips to the dentist or getting a spot of physiotherapy for a stiff back, the preventative nature of a cash plan means they can help to reduce sickness absence and drive up productivity.
Their increase in popularity has seen changes in product design over the last few years. Although it has always been possible to have a bespoke product if it is covering enough employees, more modular plans are coming onto the market.
As an example, at the beginning of 2017, Health Shield relaunched two of its plans, separating out the EAP and private medical insurance (PMI) excess cover as optional modules. This allows employers to select the cover they want, and by allowing them to remove the excess cover where it is not required, can make premiums more sustainable.
Another area where providers have moved with the times is on their claims services. Traditionally an employee wishing to claim would have needed to keep their receipt and send it with a claims form to the provider. Today, many have online claims functions or apps, enabling employees to submit their claim as soon as they receive their bill.
These apps also allow employees to monitor how much benefit they have used that year, find approved practitioners, and manage their account details.
Provider acquisitions
There has also been plenty of activity in the market on the acquisition front. Among those involved in acquisitions are Health Shield, which bought Prevent, a workplace health screening and occupational health specialist, and BHSF, which acquired Nexus Healthcare and Newhall Medical in the last year.
These acquisitions signal one of the ways the market is set to develop, with some providers looking to offer greater support around occupational health and employee wellbeing.
It is not all good news for the cash plan market though. Premiums are subject to insurance premium tax (IPT), which has been rising steadily over the last couple of years. At 6% back in 2015, it is seen three increases taking it to 12% in June 2017.
Although the size of cash plan premiums means these increases will have a minimal effect, providers are concerned the rising costs will put people off. Subsequently, some providers, including Health Shield, Westfield Health and Sovereign Health Care, have delayed passing on some of the rises while others, such as Medicash, have campaigned against the rise.
The Association of Medical Insurers and Intermediaries (AMII) has also launched a parliamentary petition calling for the government to make health insurance exempt from IPT. Although this was closed early when the general election was called, AMII plans to relaunch it in a bid to secure the 100,000 signatures required for a debate in parliament.
Statistics
- 12% of respondents value health cash plans the most (Source: Willis Towers Watson Employee benefits and wellbeing index, March 2017)
- £105m is the annual cost to the UK economy of sick days caused by oral health problems (Source: Oral Health Foundation, May 2017)
- 30.8m working days were lost in 2016 to musculoskeletal problems (Source: Labour force survey, Office for National Statistics, March 2017)
- 80% of annual contributions were repaid to members in benefits in 2016 (Source: Health Shield's 2016 results)
- 46% of people are worried about the cost of everyday health services (Source: Health cash plans report, Mintel, November 2016)
