Need to know:
- Demand for private medical insurance (PMI) has increased by up to 50% amid growing concerns about NHS waiting lists.
- Large claims, due to delays in diagnosis and a potential insurance premium tax (IPT) increase, are putting affordability under pressure.
- Digital services, such as virtual GP and triage support, could help insurers address demand for lower-cost options.
One of the key lessons arising from the Covid-19 (Coronavirus) pandemic is the importance of looking after employee health. But, while this is pushing up demand for private medical insurance (PMI), affordability could be an issue.
Demand for PMI has certainly increased. Stuart Scullion, executive chairman of the Association of Medical Insurers and Intermediaries (AMII), says: “Insurers are reporting new business enquiries of between 25% and 50% since the UK went into lockdown. This is driven by concerns about the NHS, with waiting lists forecast to rise from 4.2 million before lockdown to around 10 million by the end of the year.”
While the ability to access treatment quickly makes PMI an attractive benefit for both employers and employees, it is not a cheap option. Depending on factors such as the age profile of the group, medical history and the benefits selected, an employer can pay anything from £500 to £1,000 plus to cover an employee, according to Richard Gould, director of commercial at Howden Employee Benefits and Wellbeing. This could rise further, he explains: “Covid-19 has resulted in around 2.1 million people missing out on cancer screening according to analysis from Cancer Research UK [published in June 2020]. That’s a significant backlog and it will mean that some people are diagnosed later, potentially needing more invasive and expensive treatment. These large claims could put further pressure on premiums.”
There are also concerns about an increase in insurance premium tax (IPT) as the government looks to cover its Covid-19 spending bill. Scullion fears it could rise from 12% to 20%, bringing it in line with VAT. “AMII is campaigning against this as PMI can help to take some of the pressure off the NHS,” he adds. “An increase, at a time when many employers are already under financial pressure, would see people leaving in droves.”
Lower-cost options are available, such as more limited cover, excesses and six-week wait policies, but there is room to evolve products further, says Gould. “During lockdown, while the private hospital sector passed its capacity to the NHS to fight Covid-19, insurers focused on their digital services, such as virtual GP, mental health support and triage services for physiotherapy,” he explains. “These virtual services offer good value.”
It is a concept that forms the core of the products offered by the latest provider to enter the market, Equipsme. Its plans start at £7 a month per employee, for a virtual GP, nurse helpline and five physiotherapy sessions, and rise to £37 a month for a diagnosis and treatment plan, excluding cancer treatment. Matthew Reed, managing director of Equipsme, says: “People want PMI but the traditional product is regarded as an executive perk. Covid-19 has changed the way people interact with medical services, making digital formats much more attractive. [They] can call a virtual GP and have a prescription or referral the same day.”
The more traditional insurers are also embracing this approach, with digital services expected to come to the fore. Steve Bridger, managing director of Aviva Health UK, says: “There will be challenges on affordability over the coming months,” he says. “There’s an onus on the market to offer more flexibility and create new products that incorporate these digital services. This will ensure businesses can continue to look after their key asset, employees.”
Innovation may also come in the healthcare trust sector, especially if the spectre of an IPT hike materialises. These enable an employer to replicate PMI benefits but, as the organisation manages the fund rather than taking out insurance, it is not subject to IPT. “These work well for larger [employers] but there could be room for a master trust arrangement for smaller groups,” says Scullion. “This could help employers manage costs.”
With so many pressures on employers, advice will become even more important. “It’s a heavily intermediated market,” says Bridger. “As new options are launched, consultants will be able to recommend the product that best suits an employer’s needs and budget.”
While the year ahead will still bring many challenges for employers in terms of supporting the health and wellbeing of employees, there is plenty of flexibility available for them.