Health cash plans and private medical insurance each have their strengths, which employers must weigh up when deciding the best match for their workforce.
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- Health cash plans can be offered to employees for as little as £1 a week.
- Private medical insurance (PMI) is usually more expensive than a health cash plan.
- PMI and health cash plans can be run alongside each other.
The health cash plan market has grown phenomenally over the past five years as staff health has become more of a priority for cost-conscious employers.
Laing and Buisson’s Health cover UK market report 2012, published in August 2012, shows the cash plan sector grew by 120% between 2007 and 2011. Health cash plans funded by employers made up one-fifth of total market demand, representing 510,000 employees at the end of 2011, according to the survey.
Affordability and flexibility make cash plans appealing. They can be offered for as little as £1 a week per employee and cover anything from dentist and optical check-ups to alternative therapies such as homeopathy and acupuncture. Employees can tailor the level of cover they require through the plan and extend this to include partners and family members.
Simplyhealth, for example, offers an employee assistance programme (EAP) with face-to-face counselling from 15p a week per employee, and hospital and accident cover, including up to 20 nights in hospital, from 30p a week. A payment at the birth or adoption of a child is also available from 20p a week.
By comparison, private medical insurance (PMI) is typically used to cover major medical procedures and serious illnesses, and therefore can be considerably more expensive.
PMI premiums are about £400 a year per employee for larger group schemes, with costs usually reimbursed after treatments. Philip Wood, executive director, sales and marketing at Health Shield, says: “As with most insurance policies, the more you use PMI, the more it can impact on premiums.”
Nevertheless, PMI remains popular with many employers which see it as a precautionary measure, giving employees peace of mind and a way to bypass long NHS waiting lists.
Brian Hall, sales and marketing director at BHSF, says: “Health cash plans are lower cost than PMI and are typically bought by average earners. The cover is very different and operates differently. PMI covers high-level in-patient [with] treatment costs being settled, in the main, directly with the provider.”
Another attraction of PMI is the way employers can use it to help manage sickness absence. Paul Moulton, sales director at Axa PPP Healthcare, says: “PMI, which offers fast access to the diagnosis and treatment of medical conditions, is a much more powerful tool for management of long-term sickness absence, especially treatment of medical conditions such as musculoskeletal conditions and mental health, including stress, anxiety and depression, that the NHS struggles to deal with in a timely fashion.”
Some PMI plans now also include elements of primary care, such as optical and dental care, which are often associated with cash plans. “Conversely, some cash plans will reimburse for treatments such as out-patient diagnostic tests, which are typically covered by PMI,” Moulton adds.
A number of providers, such as Simplyhealth, offer PMI with employers excess cover ranging from £100 at 25p per employee per week, £200 at 50p and £300 at 75p.
Take-up of PMI excess cover is a growing trend in organisations that run a cash plan alongside a PMI scheme, which recognises the fact that the two benefits are not mutually exclusive.
Howard Hughes, head of employer marketing at Simplyhealth, says: “They complement each other perfectly. PMI is there to treat health issues quickly, should they occur, whereas health cash plans aim to act as a preventative measure to help people stay healthy. They are designed to encourage people to attend regular health appointments, such as dental, optical or physiotherapy, and take a proactive approach to looking after themselves.”
Health Shield’s Wood says about half of all health cash plan providers also offer PMI or another protection product. But BHSF’s Hall says most major players tend to focus on one core product, even in those that offer both PMI and health cash plans.
But whatever an employer’s health benefits choice, employee suitability is key, as is effective communication of the perks on offer to help maximise take-up.
CASE STUDY: Dennis Publishing
Health cover is an open book at Dennis Publishing
Two-thirds of Dennis Publishing’s 370 UK-based staff have taken up the organisation’s health cash plan since it launched in May 2010. Some employees have also opted for additional partner cover at their own cost.
The cash plan was launched to run alongside a private medical insurance (PMI) scheme. HR director Alison Hunter says: “When the Health Shield cash plan was introduced, we saw a 30% drop in PMI take-up, but only about one-third of staff have both.”
Hunter says the cash plan suits the organisation’s workforce, which has an average age of 32. “It works for the company and staff because of its flexibility and suitability for the lifestyles of the majority of staff . Most say they can’t believe how good the scheme is.”
By comparison, Hunter has found PMI schemes can be expensive to run and administer. “PMI schemes normally have very fixed excess levels, out-patient limits and certain restrictive conditions attached to certain illnesses or conditions,” she says.
Nevertheless, Dennis Publishing still feels staff should be offered a choice of healthcare cover. To do this most cost-effectively, it has introduced an employee subsidy, which involves subsidising any PMI cover or PMI benefit an employee chooses.
Hunter says: “The cash plan is all about the here and now, with instant refunds available and a flexible choice of options or upgrades and areas of claim, while PMI is the longer-term option, which could protect you as an employer if faced with long-term absences due to waiting times.”