Once seen as a perk to help senior management get their hernias and dodgy knees fixed quickly in the private sector, workplace healthcare benefits have undergone a major transformation over the past
few years.
But, while today’s propositions are designed to give all employees access to healthcare, this democratisation of the benefit is not without its issues. “It’s an opportunity and a challenge,” says Sarah Goodwin, head of strategy at Axa Health. “There’s much more appetite for the product now, which is great, but we do have to think about access and sustainability.”
Changing attitudes
Helping to drive demand is a shift in both employee and employer attitude to workplace healthcare. Research by the Association of British Insurers found that 57 per cent of jobseekers will check whether health insurance is part of the package before choosing a job.
Employers also expect to offer health and wellbeing benefits. Aon’s UK Benefits and Trends Survey 2022 found that 95 per cent of companies believe they have a responsibility for the health and wellbeing of their employees.
This may be a moral duty of care but it’s good for business too. As well as helping with attraction and retention, it can boost productivity. “If someone’s struggling with a health problem, they’re not productive,” says Ed Watling, head of health and wellbeing benefits at Mattioli Woods. “These benefits can help to keep employees fit, healthy and working.”
External pressures
These shifts in expectations are driven by other factors too. Working through the pandemic helped to foster a more paternalistic approach to employee health and wellbeing.
It also put the NHS under pressure. Waiting lists stood at 4.6 million in December 2019 but had risen to 7.5 million by March 2024, having peaked at 7.8 million in September 2023. “NHS waiting lists and access to NHS GPs and dentists are the biggest drivers of growth in corporate health insurance,” says Paul Shires, commercial director at Health Shield. “We’ve seen consistent growth of around 10 per cent a year for the last decade, with more large corporates adding cash plans recently.”
The public’s health is ailing too. More than 2.5 million people are economically inactive because of long-term sickness, with this number boosted by 400,000 over the course of the pandemic. For employers keen to retain talent, investing in their health and wellbeing can help to keep people in the workforce.
Benefit shift
Benefits are evolving too. Jumping the waiting lists with a private room and a post-op glass of Merlot is no longer the draw for employers purchasing health insurance. The addition of benefits such as virtual GPs and physiotherapy, menopause support and wellbeing programmes has changed its purpose. “Medical insurance was structured to work alongside the NHS but it’s now taking on parts of it, especially around access to primary care,” says Rachel Western, principal at Aon.
Benefits must also meet the needs of a broader workforce. Hugh Bennett, head of corporate healthcare at Howden Employee Benefits & Wellbeing, says there’s an extra dimension to this as the workforce ages. “Products must consider the needs of older workers but also the younger demographics entering the workplace. By next year Gen Z will make up 27 per cent of the workforce and they’re more switched on to mental health, DEI and the work life balance. Programmes need to be relevant to everyone.”
Digital delivery helps to meet these increasingly diverse needs. A digital service can be added quickly and, as innovation continues apace in this space, insurers can cater for emerging needs. Shires says this evolution has changed what employers look for in a health insurance benefit. “It used to be how cheap can we do it but now, employers want the most comprehensive cover.”
Claims explosion
Broadening cover means an uptick in claims too. Watling says that when medical insurance was a perk, it was much more unusual to claim but this has changed. “The majority of claims we see on health insurance are for musculoskeletal and mental health conditions. There might be an occasional cancer or heart claim but some clients can see as much as 50 per cent of claims go on musculoskeletal,” he explains.
The wider demographic is driving this, with medical insurance now appealing to younger employees. Western says that this younger cohort would have been put off by the P11d charge in the past but the importance of being able to access treatment has made the tax more palatable.
As well as an increase in the number of claims, digital services have proved particularly popular. As the pandemic made people comfortable with video consultations, usage rocketed, for example Axa Health saw digital GP appointments jump from around 17,000 a month pre-pandemic to more than 55,000.
Financial consequences
More usage inevitably means higher premiums, which can become particularly chunky once medical and general inflation are factored in. Western has seen increases on medical insurance of between 15 per cent and 25 per cent depending on the insurer. “It is levelling out a bit now but costs aren’t coming down,” she adds.
Cash plans are also experiencing price hikes. Watling says where employees have engaged with the benefits, employers are seeing some dramatic price increases. “Premiums might increase by 50 per cent. A rise from £5 to £7.50 a month is easier to swallow than some of the increases on medical insurance but it still hurts,” he says.
As spiralling costs are unpalatable long-term, insurers are looking at how they can keep benefits sustainable. Due to their increase in popularity, virtual GP services have received close attention.
Managing access
While large corporate schemes are addressing the issue by covering costs through the claims fund, the application of caps and excesses have also been considered. Some insurers have brought their virtual GP services in-house. “This allows them to manage the service better and provide more triage around it,” explains Bennett. “Mandated triage used to be seen as a barrier to selecting an insurer: now companies see how it reduces spend and they want to go down this route. It should also be a better experience for the employee.”
Goodwin agrees and advocates a ‘right care first time’ approach wherever possible. “We can use pharmacists and advanced nurses where a GP isn’t necessary and we’ve also created pathways such as direct access to
mental health and physiotherapy. Patient feedback shows they recognise they access care faster,” she explains.
Adviser role
Advisers have a key role to play in keeping cover sustainable. Ensuring employers have the right products can control costs, whether that’s stripping out surplus services or matching cover to the workforce.
Bennett recommends using data to do this. “Look at the demographics of the workforce but also what the employer wants to achieve,” he says. “An organisation that wants to reduce absence will require a very different proposition to one that wants to offer the most competitive package in its sector.”
The appropriateness of a scheme can be further enhanced through a robust communications programme. Goodwin says employees need to be encouraged to use the benefits, but in the most effective way. “It’s all about education,” she explains. “We’re all used to going straight to the GP to access healthcare but it can be faster and more cost-effective to use a pathway or speak to a different medical professional.”
Conversations about cost are also inevitable, although Bennett prefers to reframe this as a discussion of the scheme’s value. “Increased usage may mean higher costs but if it’s achieving the employer’s objectives, that’s positive. Reducing absence or attracting talent is a saving rather than a cost.”