What are health cash plans?
Health cash plans are designed to cover everyday healthcare costs such as a trip to the dentist; a new pair of glasses; or a session with a physiotherapist. Once a policyholder has received treatment covered by their plan they claim back the money from the cash plan provider.
What are the origins of health cash plans?
Cash plans date back to the 1870s when people paid 1p in every pound to enable them to access healthcare. While these early plans settled the bills directly with the hospitals, when the NHS was created, the cash plan providers changed their constitutions to enable them to reimburse the individual directly.
Where can employers get more information and advice?
The British Health Care Association is a trade body representing not-for-profit healthcare organisations, including most of the UK’s cash plan providers. Its website (bhca.org.uk) has information on the plans available and it can be contacted on 01343 830148.
What are the costs involved?
The cost to employers start at £1 or less a week per employee, going up to £6 plus a week for a plan with richer benefits.
What are the legal implications?
There are no legal implications associated with a cash plan, although an employer can use one to help fulfil its duty-of-care requirements to employees’ health and wellbeing.
What are the tax issues?
Employer-paid cash plans are treated as a benefit in kind for tax purposes.
What is the annual spend?
Figures from Laing and Buisson show that £58m was spent on corporate cash plans in 2012, up from £48m in 2011.
Which providers have the biggest market share?
Simplyhealth is the largest provider of cash plans with a market share of around 45%. Other dominant players include BHSF Group, Bupa, Engage Mutual, Health Shield, HSF Health Plan, Medicash, Paycare, Sovereign Health Care, UK Healthcare, Westfield Health, and WPA
Which have increased their market share the most?
Westfield Health posted the most significant increase in market share in 2012 according to Laing and Buisson.
In return for a premium of £1 or less a week for each employee, they can enjoy money back on everything from a trip to the dentist to an aromatherapy massage.
The plans enable members to claim back a refund for a range of healthcare treatments. While optical and dental are the two most popular benefits, accounting for 58% of claims by value according to SimplyHealth, other popular benefits include physiotherapy, health screening, employee assistance programmes (EAPs) and hospital stays.
What makes them more appealing is that even at £1 a week the amount of cover is fairly generous and a savvy employee could easily claim back more than the annual premium. For example, on Medicash’s Proactive plan, £1 a week will bag a member a range of annual benefits including £55 of dental cover with a further £200 for a dental accident or injury; £55 of optical cover; £100 towards health screening; £150 of complementary therapies such as physiotherapy and sports massage; and £20 towards prescriptions, inoculations and flu jabs.
Increase the premium to its top-of-the-range plan at £5 a week and benefit levels balloon. For example, as well as £170 of dental benefit, there is £200 of optical cover and £400 towards physiotherapy and other complementary therapies.
On top of being a popular employee benefit, a cash plan can deliver benefits to the employer. In particular, because they take some of the financial pain out of trips to the dentist or optician, this can lead to improvements in employee health and sickness absence rates.
Health cash plans can also support an employer’s duty-of-care requirements. Many include an EAP which, along with other measures, can help them safeguard employee’s mental health and reduce stress-related absence.
Additionally, although an employer may need to pay for further tests if an employee has already used up the optical benefit on their cash plan, it is designed to enable employers to meet their responsibilities towards employees using visual display units (VDUs).
Another key selling point for employers is the pricing stability. While many providers have enhanced their benefits over the years, most have stuck with the same price for the last five years or more.
But, while this price freeze has been welcomed by many employers, it could be about to change. Given the increase in costs of many everyday healthcare items, for instance an NHS dental check-up has increased from £16.50 in 2009 to £18 in 2013, many cash plan providers would like to move away from the £1-a-week model. This, they argue, would allow them to increase the benefits and make them more suitable to today’s healthcare costs.
In spite of the price freeze, the last few years have seen a number of product innovations that have delivered extra benefits to employees and employers alike.
Many have added health services such as GP helplines and EAPs to increase the value of the products. In a similar vein, a couple of providers, Westfield Health and Medicash, have also added Best Doctors to their plans. This allows employees to obtain a second opinion if they are concerned with the treatment or diagnosis they have received.
Providers have also given the nod to employee wellbeing. For example, Health Shield offers a health and wellbeing benefit, which can be used towards any related treatment including Indian head massage, nutritional therapy and Reiki, providing it is delivered by a recognised practitioner.
Gym bunnies are also well catered for with several providers including Aviva, Simplyhealth and WPA offering them discounts on membership plans.
Another significant trend is the introduction of a benefit to cover the excess on a private medical insurance (PMI) policy. Using a cash plan to mop up the PMI scheme excess under the specialist consultation benefit has been recommended by benefits advisers for a number of years but, although allowed, it was a clumsy process involving the employee submitting the excess statement letter from their insurer to claim the money back. Further, if the excess was triggered on treatment rather than a specialist consultation, the employee was stymied.
To make the process smoother, both Medicash and Simplyhealth now offer cover specifically for PMI excesses. As examples, on its £1-a-week Proactive plan, members get £200 of benefit that can be used to cover excesses or towards specialist consultation and diagnostic tests, while Simplyhealth allows employers to add excess cover at an additional premium, starting at £1.08 a month for £100 of cover.
While cash plans and medical insurance are poles apart in terms of both cost and cover, some providers are looking to bring the two products closer together. This is the case with Westfield Health, which introduced its Hospital Treatment Insurance in April 2012.
This can be bolted on to its cash plans and gives access to more than 1,300 non-urgent surgical and medical procedures such as hip and knee replacements, slipped discs, hernias and gynaecological problems. Two levels of cover are available. To include more than 60 different operations costs from £5.37 a month per employee, while to extend cover to more than 1,300 costs from £16 a month.
Although there is some crossover with medical insurance, Westfield keeps the prices down by having a cap on the cost of treatment: £10,000 and £25,000 for the two cover levels, as well as a lifetime limit of £100,000 and £250,000. Additionally, as treatment is sourced by Westfield’s case managers, this also helps to keep costs down.
Other cash plan providers are also eyeing up this middle ground between traditional cash plans and medical insurance. For example Perfect Health has a Surgical Cash Plan, which provides access to more than 1,500 surgical procedures, also using caps on treatment costs and lifetime claims to keep the premium affordable.
70% of total premium is paid out to customers (Laing and Buisson, Health Cover UK Market Report 2013)
15% increase in employer-paid sales (Laing and Buisson, Health Cover UK Market Report 2013)
40% of employers reported an increase in stress related absence over the previous year (Chartered Institute of Personnel and Development, Absence Management survey 2012)
One in three drivers fail to meet the minimum eyesight requirements for driving (Specsavers, based on survey at 2012 Drive Safe Road Show)
52% of consumers are worried about being able to afford future dental care (Simplyhealth Dental Survey, April 2013)
£180 is the average price paid for a cash plan in 2012 (Laing and Buisson, Health Cover UK Market Report 2013)