With the cost of care increasing, ever more expensive new treatments coming down the line and some employers unable to absorb the premium hike a single big claim can bring, the corporate healthcare sector faces some tough decisions.
Blending public and private healthcare or taking the product back insurance basics could form part of the solution, said delegates at last month’s Future of the Corporate Healthcare Sector round table held by Corporate Adviser, in association with Aviva.
In an effort to help ensure the sustainability of private medical insurance (PMI), the industry has introduced various ways and means to contain costs. These include adding preventative services
– such as access to 24/7 virtual GPs and mental health counselling – into the product offering, as well as establishing networks, offering open referrals, introducing excesses or simply resorting to switching provider year on year.
Yet year after year we read that the market is challenged thanks to the
knock-on effect of steep rises in insurance premium tax (IPT) and claims costs.
Yet it is not as though there is a lack of market demand and need. More than half of employees (56 per cent) say that managing their health is a top priority in life, according to research from Willis Towers Watson.
Cost remains key
All consultants at the event agreed that cost still represents the number one issue for many employers. And when you consider the huge impact on scheme premiums that one cancer claim can have these days it’s hardly surprising.
“Cost is still an issue, but so too is service,” says Willis Towers Watson, director, health and benefits GB, Mike Blake. “Employers don’t want to pay too little and end up with poor service.”
Whether cost is the overriding determinant varies by company sector and location. “In the South East, we find that companies are very focused on aspects such as Brexit, talent acquisition and quality of healthcare,” said Mercer partner Chris Bailey. “But for industries like manufacturing and engineering it’s all about cost.
“The one constant is that clients want to derive more value from the benefits they provide: particularly in terms of the employer brand. Mental health, diversity and inclusion are key. You can’t address these aspects by only providing private healthcare to a small subsection of your workforce.”
Of course, this requires employers to start looking at PMI from a different perspective.
Extending the covered population? Aviva UK Health PMI sales director Nick Reynolds suggested employers are mainly focused on covering the top tier of management. “As part of the product design discussions, aren’t clients looking at stripping out some costs – perhaps benefits that aren’t needed – to allow cover to be extended to more?” he said.
Aon principal Rachel Western said that rather than looking to extend, clients are asking about cost mitigation, but the kind of long-term solutions required simply aren’t there.
She adds that employers need to start by asking “what do I need?” rather than buying a benefit first and then trying to make it fit for purpose.
Flex was intended to help ensure employee choice, offering more benefits to entire workforces. But with choice comes reluctance to spend on certain things: especially those things employees think they’ll never need.
“People typically leave themselves unprotected as they’re optimistic about their health and future,” said Bailey. “This was the unintended consequence of flex.
“Also, tiering plans introduces complexity. People want simplicity and ease. I don’t see complex flex arrangements having a future. It’s all about streamlining these days.”
Blake argued that it is only larger companies and those for whom benefits are seen as a competitive need with regards to talent attraction, that are focused on trying to extend private healthcare benefits to more people.
“The smaller company end of the market tend to provide PMI simply because they think they should. It’s these companies that are much more likely to ditch the scheme if they get a big cancer hit,” he adds.
Whether clients take a long-term strategic or short-term tactical view also determines interest in extending benefits.
Western said: “Some clients are only looking 12 months ahead. It’s those who take a longer-term strategic view that are more interested in a broader discussion around extending benefits – if they’re looking to keep staff happy, to improve recruitment and retention, it’s much harder for them to take benefits away.”
Back to insurance basics
Delegates painted a bleak picture of some cost-pressured employers living from renewal to renewal in the hope that they do not experience a big and expensive cancer claim. With HR professionals, like other employees, moving employer every few years, rather than face up to dealing with the fact that a single cancer claim could make the scheme unaffordable and taking steps to address the issue, some are crossing their fingers and hoping nothing happens as long as they are in post.
Blake said: “At the moment, some clients are effectively just living in hope that a big claim won’t catch them out.”
Consultants argued that part of the problem is that corporate healthcare has ceased to be a form of insurance in the traditional sense.
Bailey floated the idea of completely rethinking the product and making it work along the lines of traditional insurance: underwrite the risk and apply a claims cap.
“If you think about oncology – and the fact that claims for cancer treatment of circa £30,000 are not unknown – the flat or experience-rated structure simply doesn’t support these claims. It was never designed to do so,” he added.
This represents the crux of the issue. Medical treatment and technology have moved on and, in spite of the various structural tweaks mentioned earlier, the PMI model hasn’t.
“We need a true insurance model rather than experience-rated,” suggested Bailey. “Clients don’t want the big swings. They want budget security and sustainability.”
Public and private
It is also time, according to the experts at the round table, to start viewing private healthcare as sitting alongside public healthcare, an approach Reynolds said Aviva was exploring.
The structure of PMI ensures there’s a very clear dividing line. Six week plans aside, claimants are immediately ushered down the private treatment route instead of encouraging people to consider the NHS option first, bringing in some people who might have been perfectly happy with the NHS.
“There’s a growing onus on insurers to provide more support along this pathway and process, to structure the proposition appropriately and manage the route,” said Western. “The NHS needs to override sometimes.”
This also relies on employee benefits consultants being prepared to have that discussion with clients – a discussion that could be fraught if people don’t think they aren’t getting what they paid for. The private room, the en-suite, the TV, etcetera.
Bailey said: “The reason we have such high benefit-in-kind is that people expect to be able to claim. Introducing the NHS at the point of claim is therefore a challenge. If you’ve been paying your P11d for X number of years, you obviously feel it’s your right to go private.
“We make a lot of the UK healthcare market being a centre of excellence for Europe – we have the best oncologists, surgery by robotics, access to trials – we’re a bit spoilt. And yet we still have two a tier system.
“There’s room in the market for a plan that has a clear purpose to support the NHS. When PMI was first introduced around 40 years ago, it was designed to support a largely white, male, exec population.”
Times and needs have changed. As Reynolds pointed out, if you want a more productive workforce, “you need to get those at the sharp end covered”.
“The key would be to get the pathways to work so that the outcome is good regardless of whether the individual goes down the public or private route. This involves ensuring a joined-up journey and that’s where insurers need to do more,” said Reynolds.
Working with the NHS
The type or extent of cover within such a plan would look quite different to the current all-singing, all-dancing PMI. A slimmed down proposition that only provided private cover for those treatments and diagnostics that have long NHS wait times and availability issues attached would make sense.
“Insurers have put in place PMI benefits that meet members’ needs but they don’t necessarily meet the corporate need. We have very fat benefits right now,” said Western. “We need to shift the focus.”
Aviva Health & Protection associate medical director Subashini M said: “Does it really make a difference at the end of the day? The environment is different in the private sector that’s all. The consultants are the same.”
Western said: “The treatment doesn’t make a difference for the one who’s ill. For them, value is derived from having someone at the end of the phone to help them and their families through the process: to explain diagnoses and test results and signpost to relevant support. There’s more value in this than there is in whether the treatment is public or private.”
