Employer-paid PMI on the increase

The use of employer-paid private medical insurance (PMI) policies in the UK increased by 2% to 2.98 million in 2012, according to research by healthcare intelligence provider Laing and Buisson.

Its Health cover UK market report 2013 found that, of the 58,500 additional company-paid policies, 35,700 were self-insured by employers and 22,800 were insured.

The research also found:

  • Overall penetration of the UK population by PMI remained at an estimated 10.8% at the start of 2013, the lowest rate in more than 20 years.
  • Spending on (insured and self-insured) PMI increased during 2012 by 0.3% in real terms to reach £4.4 billion.
  • The average price paid for private medical cover, estimated at £1,100 in 2012, was little changed in real terms over the year.
  • Claims paid on PMI policies increased by 0.7% in real terms in 2012, driven upwards by a strong increase of 7.8% in the value of claims paid by employers that self-insure their medical expenses.
  • As a result, insurer underwriting margins in 2012 were pushed down to an average of 21.5%, from 22% a year earlier.

Health cash plans

  • Demand for employer-funded health cash plans increased by 15.4% to reach 588,000 contributors.
  • Employee-paid and individual contributors to health cash plans fell by 3.7%, to a historic low of 2.01 million.
  • Spending on health cash plans fell by 2.6% in real terms during 2012, though a sharp deceleration from 2011 and 2010, when spending fell by 7.5% in each year, as the average price paid for cash plans, at an estimated £180, was more robust than in previous years.
  • As benefits paid out decreased by more than cash plan spending in 2012, down 3.9% in real terms, margins for cash plan providers moved up to 30% from 29% in 2011.

Dental cover

  • The number of subscribers to standalone dental benefit plans decreased marginally by 0.9% in 2012 to reach 3.24 million at the start of 2013, following a small increase of 0.6% a year earlier in 2011.
  • Dental insurance subscribers rose by 2.2%, confirming its continued popularity as an employee benefit.

Philip Blackburn (pictured), author of the report and economist at Laing and Buisson, said: “The strength of employer-funded private medical cover is a positive, and a more modest decrease in individual demand provides optimism that the ‘worm could be turned’ by insurers in this market area.

“Certainly, a recent spate of new products from insurers, which strip down medical cover to suit a wider distribution of healthcare needs and healthcare budgets, with examples, such as standalone diagnostics and therapy care, provide a raised platform for medical cover to penetrate further across all ages as more cracks in NHS performance are expected under its financial constraints.”

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But he added that upward pressure on claims costs continues to shadow prospects of wider penetration for the sector. He says that claims costs ran ahead of premiums in 2012, in a year when there was a cranking up of cost-containment initiatives by leading insurers, such as open referral and direct insurer to specialist referral within primary care, and as such ongoing initiatives are expected to feature with similar puissance going forward.

“Results of the Competition Commission’s investigation into private healthcare next year may provide some further answers for insurers, though significant and sustainable efficiencies are likely to be a long-term challenge,” he said.