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Taking on the PMI myths

Many employers are still not exploring how health insurance could help their workforce. Maggie Williams looks at some of the reasons behind this reluctance

01 August 2017
Maggie Williams

Health insurance products – whether private medical insurance (PMI), critical illness cover or group income protection (GIP) – have evolved rapidly over the past few years, to meet changing employer needs. New features have been added by providers to help make their products more relevant and to incorporate features that offer day-to-day support, rather than simply waiting for the worst to happen.

 

But some long-standing myths still perpetuate…

 

It’s too expensive

 

“Cost is a barrier, especially for small businesses,” admits Patrick Watt, corporate director of Bupa. In Reward’s recent Wellbeing in the Workplace 2017 report, 57% of respondents said that justifying return on investment is the biggest barrier to introducing health and wellbeing strategies in their workplace.

 

Tax has been a major factor in rising health insurance costs with repeated increases in Insurance Premium Tax (IPT). IPT has risen from 6% in November 2015, to 12% for new policies booked after 1 June 2017.

 

The majority of health insurance is now provided via workplace benefit. At the end of 2015, according to Laing Buisson’s latest Health Cover report, corporate health insurance (i.e. employer pays) accounted for 76% of all PMI. The other 24% of the market is made up of policies funded by individuals – a significant drop from the 40% who bought their own policies in PMI’s 1990s’ heyday.

 

What can employers do to keep costs down? Negotiating hard with brokers is one obvious route. For larger businesses, Watt suggests that a health trust might prove to be a more tax-efficient alternative to traditional PMI. “However, health trusts are self-funded, and the cost can be unpredictable,” he cautions.

 

“Like any healthcare system, medical inflation is the biggest cost pressure,” adds Watt. “Some employers look to manage that with limits, or with an excess, but that can undermine the benefit. A £250 excess can be enough to dissuade people.”

 

An excess that deters staff from using the product can have knock-on effects further down the line. A musculoskeletal problem that goes unaddressed because an employee is loath to incur a £250 bill could translate into more absence and even a GIP claim in the future if the condition escalates.

 

Despite the costs, health insurance is hugely valued by those who receive it. Andrew Supple, senior benefits consultant at Standard Life, says: “For most employers, cost isn’t as important as value. If they see the benefits these products can bring to their employees, then the cost actually becomes an intelligent investment.”

 

It’s too confusing

 

“Complexity is being worked on all the time by the industry. Everyone wants to make things simpler to understand and easier to use,” says Supple.

 

However, making sure that the message is getting through would still appear to be a challenge. “We hear people say: ‘I don’t like GIP – it means you end up with sick employees stuck on your payroll’,” says Mark Witte, principal at Aon Employee Benefits.

 

“But the way the market’s evolved should change that. Modern IP benefit designs provide other options, including more of an emphasis on effective return to work. Some of the criticism of GIP is around trying to overlay an old product on current practices.”

 

Even the range of conditions covered by health insurance isn’t always clear. “There’s sometimes a belief that health insurance is an irrelevance in terms of today’s population,” says Watt. “But the most common causes of absence, such as musculoskeletal issues and mental illness are covered, as well as chronic conditions such as cancer and heart disease.”

 

Employers themselves also have a part to play. Making sure that health and insurance benefits are communicated effectively and that employees understand the full range of options available to them is every bit as important as the benefit itself. This is especially true of products such as group income protection, where there may be extra services that can be used without the need to make a claim.

 

It’s only for senior staff

 

PMI has traditionally been perceived as an ‘executive perk’. However, some employers have extended the offer of PMI, and also income protection, to all staff. For example, in 2015, HSBC and Lloyds Banking Group both rolled out PMI company-wide, including options for family coverage.

 

Some offerings also include additional services that are available to all employees, even if full insurance is only provided to some. For example, Canada Life’s GIP product provides an employee assistance programme, EmployeeCare, for all staff in a company, if some employees have GIP.

 

That’s what the NHS is there for

 

While the NHS is there to support everyone and remains an exemplar of good healthcare provision in many instances, the service is under considerable pressure.

 

According to a survey carried out in late 2016 by GP magazine Pulse, the average waiting time for a doctor’s appointment is 13 days. Of the 883 doctors surveyed, 41% said that the wait was more than two weeks, and 15% said it was more than three. The average waiting time had increased by three days from the previous year’s survey.

 

And according to figures released by Cancer Research UK in late 2016, more than 6,000 patients who should have had a first cancer treatment within 62 days had to wait 104 days or more.

 

Delays risk further deterioration of health conditions as employees wait to get an appointment. From a business perspective, that means lower productivity in the short term, and potentially the longer-term loss of key staff.

 

Other types of support, such as data on absence patterns to support employers, or emotional support and advice for affected staff and their families, are often included in health insurance products and go beyond the remit of the NHS.

 

It’ll never happen to me or my staff

 

It’s easy to convince yourself that the scenarios covered by medical insurance or group income protection will never happen to you.

 

However, as the recent 7Families project showed, losing your salary through sickness is a reality for some. 7Families provided money and support services similar to that offered by an income protection scheme for a year, to seven individuals.

 

One of the families supported by the project was that of former pharmacy technician Tracey Clarke, who began to lose her sight in 2011 for no diagnosed reason. She became unable to work and financial difficulties forced the family to sell their home and move to a houseboat.

 

“Before 7Families, I thought of myself as being on the scrap heap. I’d been advised to quit work and learn to accept the idea of living on benefits,” she says. “This was very uncomfortable to me, but it proved to be good advice. It showed me that the stress of trying so hard to hold down an unsuitable job while trying to learn to live with my sight loss, was making the whole situation a self-perpetuating downward spiral.”

 

The project provided Clarke with equipment and training, in addition to financial support, to help her begin to earn an income again. “The 7Families was a huge lesson in the cruelty of hindsight,” she adds. “The widely accepted understanding that ‘It won’t happen to me’ and ‘That is what the NHS and benefits system is for’ are the ones we fell foul of.”

 

It’s not just individuals that suffer as a result of serious illness. Legal & General’s recent State of the Nation’s SME report showed that 53% of small businesses say that they would close within a year if a key member of staff died or became critically ill – rising to 67% for new businesses.

 

While cost is undoubtedly a challenge when it comes to considering some kinds of health insurance, well-designed and well-communicated products can offer significant benefits. They can help those waiting for NHS treatment as well as often providing add-ons not available through other routes. It’s time for a reality check.


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