Evolving PMI market could lead to better deal

The private medical insurance (PMI) market is rapidly evolving with an ever-greater emphasis on offering health and wellbeing perks, either as part of policy or as add-ons. So employers may find that reviewing their policy could result in a better deal, says Vicki Taylor.

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The private medical insurance (PMI) market is changing, with some insurers starting to place a greater emphasis on offering health and wellbeing elements, either as part of a policy or as low-cost add-ons. So it may be a good time for employers to review their scheme to check they are getting the best deal.

There is some debate as to what is driving this focus on health and wellbeing in the PMI market. Although industry experts deny that the market is saturated and that insurers are being forced to innovate to attract new business, figures highlighted in Laing & Buisson’s Health and care cover: UK market report 2006 suggest the market has experienced fairly slow growth of late. The total corporate spend on PMI in 2005 was £1.6bn, only 3.6% higher than in 2004.

However, Angus MacDonald, director at corporate health consultancy SPS Wellbeing, believes some parts of the market are more saturated than others, with employer-paid cover for all staff widespread in certain sectors, such as finance and the law. "There is a lot of competition for those contracts," he adds.

For this reason, Paul Roberts, strategic director at health insurance consultancy IHC, explains it is a good time for employers to shop around to see what deals they can get. "There are not necessarily huge cost savings to be had, [but] the value of the packages can be much more readily tailored than in the past. If you are after a health and wellbeing product as well as PMI you can get it. If you want insurance cover, like critical illness and personal accident cover, you can get that too," he says.

The most common add-ons offered by insurers include counselling helplines, health screening and employee assistance programmes (EAPs). Optical and dental options are also being increasingly offered, but at an additional cost.

While cynics might say that add-ons such as EAPs and health screening are designed to cut the incidence of claims made, they can still be useful for employers that wish to heighten awareness of employee health and wellbeing, and boost the perceived value of a PMI scheme.

Dave Priestley, sales director at provider PruHealth, points out that with a standard plan only the 20% of employees who claim each year receive a tangible benefit. "The other 80% get a tax liability and the knowledge that if they needed to claim they could," he adds.

PruHealth’s plan, which launched to the corporate market in 2005, offers a number of additional health and wellbeing benefits. It allows members to take advantage of discounted gym membership, health screening and online healthy meal planners. The more of these activities members undertake, the more points they gain. These points, combined with whether the member has made a claim during the year, means they might be eligible to claim some cash back.

For example, Priestley explains that a scheme member with family registration who reaches the highest status of platinum could receive a cheque for up to £700 at the end of the year, which should more than cover their tax liability on the benefit.

He adds that elements such as discounted gym memberships help staff to get value from a PMI scheme all year round, rather than just on the rare occasion when they make a claim. This increased focus on health and wellbeing can also boost morale and cut sickness absence. A report published by business advisory firm Deloitte and research company TARP entitled Health of the nation found that by increasing the number of people in the UK who exercise for the recommended 150 minutes per week, sickness absence could be cut by 2,783,808 days per year.

Julian Ross, head of policy communication at Standard Life, explains that the shift towards incorporating health and wellbeing initiatives into PMI schemes has happened in response to employer demand. "There is much more focus on health and wellbeing generally at the moment across the nation," he says.

Standard Life offers an online health and wellbeing service to employees who are signed up to its group PMI schemes. This allows users to assess their nutrition, physical activity, sleep and stress levels, before helping them set up a programme for improvement. It also offers access to a free 24-hour GP advice line and a 24-hour telephone counselling service.

While not all insurers currently offer such extras as standard, MacDonald foresees a time when they will. "[What] could start to happen is that those [insurers] who haven’t got much to give will have to start looking for things they can add on because they are going to look out of place against the remainder of the market."

Of course, employers will also want to know whether taking up a PMI plan with health and wellbeing benefits tagged on will increase the cost of their policy.

Priestley believes the cover offered by PruHealth is comparable cost wise to other traditional PMI providers, while Standard Life’s Ross also explains the additional benefits it provides are part of its package.

IHC’s Roberts, meanwhile, agrees that employers are unlikely to find much cost variation across the market. "You can have a (price of) £1.5m and there will be a variant of about 1.5% across the market. (The difference) has got to come to the value add and how the proposition fits with the (client’s) needs."

However, Elliott Hurst, senior consultant in healthcare and risk consulting at Watson Wyatt, warns that even if significant savings are available, employers should be wary about changing provider for this reason alone. "How sustainable is that saving? Is the insurer simply buying that business on a one-year basis to win that new contract? Where would that leave the pricing of it in years one, two, three and four?" he says.

So while a deal that sounds to good to be true on cost alone probably is, it could still be a good time to negotiate additional benefits with insurers, especially if these will have the double bonus of increasing employees’ perceived value of PMI, while also boosting their health and wellbeing.

Case study: Norton Rose

Law firm Norton Rose swapped its private medical insurance scheme to a provider offering additional benefits in June 2006. Although it had no qualms about the service or premiums of its previous insurer, Mandy Campbell, pensions and benefits manager, believes that the additional benefits offered by PruHealth will make the scheme more attractive for staff.

Even though the company pays for single cover, with employees paying for dependants, Campbell says many staff opted out of the old scheme because of the tax they had to pay on the benefit.

"We were looking for employee engagement in the healthcare plan because the people who used it valued it, but lots of people didn’t go into it because they didn’t see any benefit to them," she says.

The new plan includes benefits such as discounts on gym membership and products such as smoking cessation programmes. Staff can also get money back from the policy at the end of the year if they lead a healthy lifestyle.

"Even if you don’t think you are going to make a claim, there are still lots of perks (staff can take advantage of)," explains Campbell.

Although it is currently too soon to tell whether more staff will eventually join the scheme, Campbell believes it has been well received.

Case Study: Consensus

London-based recruitment consultancy Consensus automatically provides staff with access to a private medical insurance (PMI) scheme after six months’ service. Two years ago, its premium increased sharply. After looking around, managing director Martin Tyrrell, found a cheaper premium with extra health and wellbeing benefits added in. "Most PMI (policies) are similar in terms of hospitals and treatment, and their exclusions but in terms of the pure costs, we saved a lot of money and we got the wellbeing (elements) to boot," he explains.

Under the Standard Life policy that Consensus now offers, staff receive regular e-newsletters focusing on issues such as sleep, stress and nutrition. They can also fill in online questionnaires and receive individual feedback about how they can improve their health and wellbeing.

"You also get access to expert medical advice so if you are worried about a child, yourself or a partner you can ring up 24-7. We also got a masseuse for a year [once a month in the office] which we have kept on at our own cost."

Tyrrell believes the company’s low incidence of stress and sickness, and below-average staff turnover are partially due to the healthcare benefits that the policy provides. "I’m not saying that it is the only reason, but I think it is part of the package that helps us retain people," he adds.