A number of factors are driving this interest. Media coverage of problems within the NHS is helping to fuel demand with tales of growing waiting lists raising questions about the government’s promises of greater efficiency in the NHS.
The economic environment is also having a significant effect on employee reward, with tight budgets resulting in pay freezes.
Much of this growth is coming from the company-paid market. For instance, Simplyhealth expects to see growth of around 30 per cent this year and Westfield Health is reporting strong growth in this area. Jill Davies, chief executive of Westfield Health, adds: “There’s been a 70 per cent increase in corporate paid cash plan business in the last year with a growing proportion of these sales coming through advisers. We expect to see this continue this year too.”
Nick Boyton, principal for health and risk at Alexander Forbes, says that, in these times, cash plans can be attractive. “If an employer is struggling to give a pay rise, a cash plan can be a low cost way to give employees help with their everyday healthcare costs,” he says.
Most employees will be able to claim at least once a year, even if this is only for a trip to the dentist. Further, with most cash plans now including employee assistance programmes as well as optical benefits, they go a long way to cover some of the employer’s duty of care responsibilities.
In addition to being a very visible benefit, the stable pricing of cash plans also makes them a hit with employers. Premiums rarely increase and, with providers keen to hang on to the £1 a week price tag, this is unlikely to change. For instance, Davies says that when insurance premium tax increased in January, it absorbed the increase so premiums could remain unchanged.
But while sales are on the up, Jack Briggs, sales and marketing director, intermediary at Simplyhealth, says he still comes across advisers that are reluctant to recommend cash plans. “There are still too many advisers doing straightforward broking,” he says. “There’s much more competition for every client now and advisers need to demonstrate value by talking about additional benefits and products. If they’re not bothered to do this, someone else will.”
This view is echoed by Peter McAndrew, sales director at Health Shield. He says that many advisers have ignored cash plans because they believe that low premium equals low commission but adds that this is no longer a good enough reason to dismiss the product. “Cash plans sales tend to be sticky,” he says. “We see a lot of advisers that sell cash plans alongside medical insurance and while the employer will chop and change the medical insurance, the cash plan tends to stay the same. This helps to cement the relationship between the adviser and the employer.”
A voluntary scheme will drive commission but it also creates a commitment from the employer
Sales strategies
The flexibility and low cost of cash plans means they can suit a number of client requirements. One strategy that has become common over the last few years is to run a cash plan alongside a medical insurance scheme. With this, an excess is added or increased on the medical insurance with the cash plan introduced to absorb the costs employees incur funding the excess. “In some cases the saving realised by the excess is sufficient to fund the cash plan so it doesn’t cost the employer a penny. Additionally, because fewer claims are going through the medical insurance scheme it helps to stabilise the premium,” says Davies.
For instance, with no need to obtain a GP referral to access benefits on the cash plan, employees can quickly get treatment such as physiotherapy for musculoskeletal problems. This could prevent these niggles becoming long-term conditions that require major surgery through the medical insurance.
Cash plans can also be sold on a stand-alone basis, with Boyton saying the financial benefit to the employer can often make the sale relatively simple.
“If an employer has office based staff they will have a duty of care to provide them with an annual eye test. It doesn’t cost much more to give them a cash plan instead and this will give them lots of additional benefits as well as covering the eye test,” he says.
While this approach might only secure the sale of a basic £1 a week plan, Boyton adds that sales volumes can often be increased by allowing employees to upgrade their cover or extend it to dependants. “The employer can authorise the provider to contact employees directly. It won’t cost them any extra but it gives employees access to a valuable benefit,” he adds.
Benefits have also developed, making sales easier to secure by offering employers much more than the core dental, optical and physiotherapy cover. For instance McAndrew says Health Shield’s Business Care range is popular with SMEs. This gives employers access to online information and telephone support on employment, health and safety and HR issues. “Advisers need to be aware of these additional benefits as they can help secure sales,” he adds.
While the focus has been on company-paid cash plans, possibly because the guaranteed premium equals guaranteed commission, there are also opportunities in the voluntary market.
McAndrew says advisers tend to underestimate the revenue a voluntary scheme can generate. “A voluntary scheme will drive commission but it also creates a commitment from the employer, which can have additional benefits,” he explains.
Additionally, as the voluntary market is where providers have traditionally generated sales, many are happy to offer worksite marketing support to advisers recommending these schemes.
There are still too many advisers doing straightforward broking
Product development
More opportunities lie ahead too. With cash plans positioned to fill the gaps in NHS provision, as more of these open up, further product development is expected. Although there’s a lack of certainty around the direction the NHS will take, the providers are watching closely where standards are slipping. Davies says: “The scale of the cuts being proposed by the government will create more gaps in NHS provision. We’ll be looking to fill these.”
Already cash plans have demonstrated their ability to fill the NHS void. The inclusion of employee assistance programmes, often with access to face-to-face counselling, reflects the patchy service provided by the NHS for mental health problems. Further, the addition of Surgery Choices by Westfield Health in 2007, as well as its recent acquisition of PatientChoice, which was administering Surgery Choices, is a strong signal of demand for a low cost option for accessing surgical procedures without waiting on the NHS.
Mike Izzard, chief executive of Premier Choice Group, believes more of the everyday costs of healthcare should be added to cash plans. “It would be great to add cover for prescription charges. In England it costs £7.40 for a prescription, but cover for two or three of these a year could easily be added to a cash plan,” he says.
Other areas of cover that are often mooted for inclusion on cash plans include cover for car parking fees, private GP services and, if a charge is introduced, hospital meals.
Izzard would also like to see cash plans beefing up their benefits in other areas. “We often find that the level of dental benefit is too low on cash plans so we have to run a dental plan alongside it. Adding in a higher level of dental cover would really excite the market.”
Whether plans look to keep pace with the cost of healthcare or to add in additional benefits as a safety net to NHS provision, modular products are likely to lead the way when it comes to product development. “We’ve offered modular products for eight years now and they do give more flexibility. Employers can pick the benefits they want rather than settling for a set list,” says Davies.
This modular approach also supports product development. For example, if the NHS introduced a charge for hospital meals, this could be quickly added as a benefit option to a cash plan. It’s also a relatively simple and low cost process to add in a new area of cover, especially when compared to launching a brand new product.
Cash plan providers must continue to innovate. It’s not enough to attract sales on the back of the tough economic climate and fears over the NHS
Additionally, as each extra module will come with its own price tag, the providers can cover their costs while still being perceived as offering benefits for the magical £1 a week or less.
Not everyone is convinced that modular is always best though. Briggs says there’s a risk that the flexibility is ignored. “We do find with some intermediaries that they’ll bundle together their ideal mix and then only sell this although other benefits might suit the employer,” he says.
But Izzard disagrees. He says that the modular approach is perfect as one size no longer fits all. “Cash plan providers must continue to innovate,” he says. “It’s not enough to attract sales on the back of the tough economic climate and fears over the NHS. Providers must keep their products relevant by reflecting the changes in the NHS, the workplace and people’s lifestyles.”
