Flexible healthcare plans to replace historic defined structure

Employers are predicting a more flexible future for employee healthcare plans, according to new research we have recently carried out. Taking an analogy from the world of pensions, 55 per cent of employers believe that today’s structured and fully-funded comprehensive, defined benefit-style of health plans will be replaced by a more flexible style of health benefits – more akin to the mixed employer and employee-funded defined contribution-style pensions.

Flexible healthcare plans are likely to include a core level of cover and services with extra benefits being funded by the employee and/or as optional extras by the employer. This offers employers the opportunity to place an emphasis on education, prevention, lifestyle support and screening to help manage employee health risks and the increasing costs of insured treatment-based products. Consequently the market for tools and technology in this area is growing significantly, including wearables, apps, education and screening services.

Indeed over half (55%) of employers say they need to make changes within three years to their current PMI plan to meet future cost pressures; a further 13% will make changes within five years, and this could offer them the opportunity for transformation.

However, we’re warning employers and employees of the need to make informed decisions about their future healthcare plans to ensure they consider the need for long-term planning when making decisions that can easily and inadvertently be undermined by short-term pressures.

Iain Laws, MD healthcare and group risk explains: “A flexible healthcare plan in which employers provide a more focused, core healthcare, which can be topped up by the employer or employee, is undoubtedly an appealing option for companies. However, the benefits of any immediate cost saving, no matter how attractive, can create problems in the longer-term in relation to the value, attractiveness and sustainability of this important protection and productivity benefit.”

Ninety-four per cent of employees also feel that the Government’s current health strategy (including welfare reform, the NHS, eldercare, mental health etc.) is putting increased pressures on employers to provide a wider range of health and wellbeing support to employees. While the vast majority (94%) of employers agree that they should be promoting healthy practices and providing workplace healthcare advice, less than half this number (45%) are currently doing so.

Iain Laws concludes: “It’s healthcare but not as we know it: any HR or EB practitioner who has been used to managing a fully comprehensive PMI scheme will undoubtedly be feeling fairly uncomfortable right now. But with financial pressures coming, not only from within healthcare but other areas of benefits too, most companies will want to make substantial cost savings, even if that means suffering the consequences of not having access to informative data.”

The research was conducted among a panel of SME employers at a Jelf Employee Benefits seminar on 8 October 2015.

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