Healthcare cash plans are enjoying burgeoning popularity, and with a string of add-ons are becoming ever more bespoke, says Sam Barrett
Article in full
Once a benefit that was rarely seen outside of the manufacturing and public sectors, healthcare cash plans are gaining broader appeal as schemes are now being taken out by all types of employers for staff.
Jim Jackson, operations director at specialist healthcare intermediaries The Private Health Partnership, says: "Cash plans have successfully reinvented themselves as a significant benefit for both employers and employees. Traditional plans that offered money back for a range of medical expenses have been replaced by more innovative benefits and features."
While this new generation of healthcare cash plans retains the ever-popular optical, dental and physiotherapy benefits, other options that are more focused on corporate requirements are being introduced. In particular, the majority of products now include a stress helpline, while some plans, such as those from HSA, Westfield Health and Bupa, incorporate a full employee assistance programme (EAP) with face-to-face counselling available.
Raman Sankaran, director of strategic development at Healthsure, says: "Employers are coming under increasing pressure with regard to sickness absence, duty-of-care requirements and employee litigation. A cash plan incorporating an EAP can provide a cost-effective solution to these concerns."
Sometimes stress counselling benefits are included automatically, although some providers leave them as optional extras, allowing them to be built in for a small additional premium. For example, Bupa charges 25p a week for every employee when face-to-face stress counselling is added.
Cost-wise, a cash plan with an EAP can be pretty attractive. Steve Merron, client management executive at intermediaries Towergate Healthcare, says: "An EAP costs between £10 and £20 a year per employee depending on the size of the organisation. A cash plan will give you a lot more benefits for not much more in premiums, although you do have to bear in mind that it could be treated as a benefit in kind."
Providers aren’t stopping at EAPs either. Health screening is the latest must-have benefit and is available in plans from Bupa, Medicash and Westfield Health among others. Maria Parker, head of marketing at Medicash, explains: "Health screening can be delivered onsite or employees can download a voucher that can be taken to a pharmacist who can carry out the tests. We launched this benefit in 2005 and it’s proving very popular."
HSA is also set to add health screening to its plans this month, along with a suite of occupational health benefits. These will include an online pre-employment questionnaire that can be followed up by telephone and face-to-face interviews where necessary and a telephone-based absence management referral system, which kicks in after two weeks’ absence.
Both occupational health and medical screening are available as optional extras at £2 a month per employee. Suzanne Clarkson, head of corporate marketing at HSA, adds: "Our research has shown that there’s huge demand for these services, especially among small and medium-sized employers where traditional occupational health services can be prohibitively expensive."
As well as adding new benefits, providers are also developing plans that can complement private medical insurance (PMI). Emma Exelby, cash plan sales manager at Bupa, says: "Cash plans can provide very tangible benefits to employees so our Health Additions plan is designed to ensure there is no crossover with medical insurance."
As well as complementing existing medical cover, in some cases, it is possible to use the benefits included in a cash plan to obtain a preferential deal on PMI. Westfield Health’s Advantage plan, for example, includes up to £575 a year towards the cost of consultations, while Healthsure’s Futures product offers up to £450 a year. "This would be sufficient to provide four or five specialist consultations and, as these are covered on the cash plan, you could consider an excess on your medical insurance, which would make premiums much cheaper, " Jackson explains.
And, where a cash plan doesn’t perfectly fit an employer’s requirements, providers are now more prepared to supply bespoke benefits. "It’s been possible to bespoke benefits for several years, providing the group size is large enough," says Merron. Minimum numbers vary but organisations would need to be able to guarantee at least 250 members before they could consider commissioning a bespoke plan.
However, this is changing with the development of menu-based products and modular options offering an element of flexibility. "Westfield Health has recently launched a product called Mosaic, which is available through intermediaries and allows groups as small as 30 [lives] to pick and choose the benefits they want," says Merron.
Payment options are now also much more flexible on healthcare cash plans. Jackson explains that it is now a lot easier to combine employer-paid and voluntary payment options within one scheme. "This might be worth considering if you wanted to extend cover to dependants but didn’t want the additional cost," he explains.
He adds that minimum group sizes have also dropped, with many providers happy to accept groups as little as 10 lives for employer-paid schemes or five lives for voluntary employee-paid schemes.
As well as wooing a new customer base with innovative benefits and greater flexibility, cash plan providers are also pushing the tax issue. Corporate-paid schemes are generally seen as benefits in kind but some organisations have successfully agreed exemptions on the basis that once the benefits that meet employers’ duty-of-care requirements have been excluded, it is then uneconomical to collect the tax on the remaining premiums.
"Interpretation of the rules varies between local tax offices so it’s down to employers to check what the position is. This isn’t ideal so we’re working with the tax offices to reach a common approach on this," says Sankaran.
Focus on facts
What are healthcare cash plans?
Healthcare cash plans provide cash back for a range of medical expenses. The most popular benefits are optical, dental and physiotherapy but plans can also include cover for stress helplines, complementary therapies and specialist consultations.
What are the origins of healthcare cash plans?
Healthcare cash plans can trace their roots back to the 1800s when they were set up to help people meet the cost of medical treatment. Plans were often set up through employers or churches, with contributions collected on pay day on Saturday or at the Sunday service, hence the names hospital Saturday funds and hospital Sunday funds.
Where can employers get more information and advice on cash plans?
The British Healthcare Association is a trade body that represents many of the cash plan providers. It can be contacted on 0153 651 9960.
A health insurance intermediary can also recommend the most appropriate healthcare cash plan. The Association of Medical Insurance Intermediaries has a service on its website (www.amii.co.uk) to help employers find a member or call it on 0870 112 0431.
Nuts and bolts
What are the costs involved?
Cash plans cost from as little as £1 a week for each employee to £10 a week or more if employers offer a bespoke plan with additional benefits.
What are the tax issues?
If employers pay the premium, healthcare cash plans are usually treated as a benefit in kind and therefore subject to tax and national insurance. If employees are paying for a plan, the premium is not taxed because they are paying out of taxed earnings. Lump sum cash payments are tax free to individuals. As some of the benefits included cover duty-of-care requirements, some organisations have successfully argued these are exempt. Some elements such as optical cover and employee assistance programmes may attract a P11D dispensation.
What are the legal implications?
A cash plan can help employers meet their duty-of-care requirements. Optical benefits can cover eye test requirements and, if there is a helpline with access to face-to-face counselling, this could help meet employers’ obligations around stress.
In practice
What is the annual spend on healthcare cash plans?
The latest figures from healthcare market analysts Laing & Buisson show £440m was spent on cash plans in 2005, at an average premium of £156 per person.
Which healthcare cash plan providers have the biggest market share?
As a brand, HSA has the largest share of the cash plan market with Westfield Health in second place. Other large providers include LHF, Healthsure, Medicash and BHSF. As a group, Simplyhealth owns the lion’s share of the market after acquiring providers such as HSA, LHF and Healthsure, although all continue to operate under their individual brands.
Which healthcare cash plan providers increased their share the most over the past year?
The findings of Datamonitor’s report UK Healthcare cash plans 2005, suggest the two largest providers have increased their market share the most.