For over a decade employers have seen a steady increase in spend on healthcare with medical inflation varying between 6% to 12%, compounded. For many, this is an accepted cost to retaining a benefit. For others, the sustainability of funding such increases is being questioned.
Private medical insurance (PMI) has, in the main, innovated for market share and retention. Employers may not always have the option to redesign cover to suit their individual corporate needs, and the market has not always provided consultants with the tools to make a difference.
A lot of faith has been invested in bolt-on services, wearable technology, pathway development and so on, but with ageing workforces and advances in medical science likely to lead to more expensive claims in the future, the issue of high cost claims incidence needs to be addressed now.
Employers may subscribe to a 'vanilla' product and pricing based on the here and now and not the future. The absence of a high cost claim in the last two to three years, a malignancy for example, does not preclude occurrence. If anything, the odds may likely be stacked against the employer.
Over the same two- to three-year period, valued employees have also aged two to three years and in the last ten years, have become a decade older. No surprises! In short, just because a plan has not been subjected to a high cost claim does not mean it is not going to happen. All the while, the benefit design has not materially changed, if anything wordings may have become less clear and, in essence, employers could be subscribing to over-inflated benefits.
In an attempt to lead the charge on market share, some plans may be designed without consideration for future demographic change. At best, wordings could be said to be woolly and with the clear rules of treating customers fairly (TCF), insurers may be left with little choice but to continue to pay, pay, pay. After all, the premium set is linked to claims performance so it is no wonder that medical inflation is running way above the average hospital inflation.
High cost benefit wordings for conditions such as cancer could have little relevance to an ‘acute condition/return to work quickly plan’ that employers subscribed to years ago.
Mitigating costs for the long term
With the growing trend for employers to review spend, integrate benefits and subscribe to commercial requirements, the opportunity to review benefit design at its core, save for a rainy day, and gain confidence that they are moving towards sustainable spend is increasingly relevant.
Healthcare trusts are one way that employers could rip up the current rule book, start with a clean sheet and build a health benefit programme to suit their corporate needs by reviewing risk and cost tolerances and designing benefits to match this, and introducing clearly defined tiered benefit structures if their business model requires it. They can work with a third-party administrator (TPA) to agree clearly defined treatment pathways to meet absence targets and budget, and bespoke high-usage benefits to reduce diagnosis and treatment times and review rehab to ensure speedy return to work. Employers can also consider the long-term impact of cancer on their business in terms of 'exposure', absence and budget. They can then work with the TPA to define screening, diagnosis, treatment pathways and locations and end of life care to suit budget.
Bruce Eaton, managing director, Healix Health Services
