Private Medical Insurance: The right fit for your business and your employees
Tony Haire is Wren Sterling’s private medical insurance (PMI) expert. Widely regarded as a cornerstone of a comprehensive employee benefits package, Tony believes there isn’t an employer or employee that wouldn’t gain from a policy in the workplace, but there’s many ways to make sure you’re getting the right policy for your people for the right price.
There’s no doubt that any organisation’s principle strength is its workforce. It is always advantageous to have a fully fit and healthy workforce and PMI is central to helping employers achieve this.
As well as medical and mental wellbeing, PMI can act as a retention tool for businesses and as a replacement for salary at times when paying cash is difficult, something I saw used extensively in the aftermath of the most recent financial crisis.
From the employees point of view, retiring from a company doesn’t necessarily need to mean they have to relinquish their PMI. ‘Individual continuity’ is available to those that have been a member of a group policy and wish to continue cover on an individual basis.
Wren Sterling can also arrange private medical insurance for clients without a group policy so they can enjoy the benefits of knowing they and their loved ones have access to specialist medical services when they require them. I’ll cover this in more detail at the end of the article.
The case for PMI
Statistics from the Office of National Statistics (ONS) show just how prevalent sickness and injury are in the workplace. Recent ONS reports show how the most common causes of absence affect the workforce as a whole.
- Latest estimates show that annually over 600,000 workers are injured in workplace accidents and a further 500,000 workers suffer a new case of ill health which they believe is caused or made worse by their work.
- The construction industry has the largest estimate of occupational cancer cases, with 3,500 cancer deaths and 5,500 cancer registrations each year from this industry.
- The total number of cases of work related stress, depression or anxiety in 2014/15 was 440,000 cases, a prevalence rate of 1,380 per 100,000 workers. The total number of working days lost due to this condition in 2014/15 was 9.9 million days. This equated to an average of 23 days lost per case.
- The ONS estimates the cost of workplace illness and injury in 2013/14 to be over £14bn of which employers shouldered £4.9bn of that cost.
These statistics show that employers simply can’t ignore illness and injury in the workplace.
The important thing is to get the right policy for your business, investing in that policy and making sure your people understand the benefits available to them. Illness and injury are a fact of life, but covering for them as an employer can help you out a lot in other areas of your business, like staff retention and productivity.
Understanding what employees value
I often find PMI policies in a state of neglect and no longer appropriate for the workforce they were initially designed to cover.
When I’m asked to review an existing policy, I’m usually focusing on three key areas; cost, service and benefits. Without regular reviews, all three of these areas tend to slide.
As with almost any other insurance, if you just leave it as it is to renew each year, you won’t be able to take advantage of other new or improved products on the market.
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Organisations that don’t review their policies probably don’t take the time to understand its effectiveness or take-up. Without this, they will not know how popular their policy is with staff, increasing the chances of them paying for benefits that are neither used or appreciated.
Without meaningful management information (MI) organisations can’t make a value judgement on their PMI commitment. They have good intentions but the policy isn’t optimised so there will be waste that can be eliminated.
Furthermore, understanding what your employees value can help focus your attention and derive greater reward for your investment for you and your employees.
Tailoring PMI and reducing your premiums
Where MI does exist and employers can analyse the take-up of PMI and the cost of the policy, there are several areas to look at that will make the policy more effective.
Reducing the cost of the premium by introducing an excess for employees is a popular move now. In cases like a round of physio, most people realise that they will get seen much faster by a private practician and that will alleviate pain, so a small excess could be seen as worth paying for their private as well as their working lives. I don’t think it devalues the provision of PMI for the workforce as a whole and makes sense for all parties.
Sometimes the vagaries of PMI premiums open up opportunities for employers too, like the cost of providing hospital care to employees in London.
Ask yourself whether you really need to include some London hospitals as options for your employees. Some of them are incredibly expensive in comparison to the rest of the UK, so if you’ve recently shut or downsized a London office, or your people mainly commute to London from outside, you could save on your premium there.
If your business has a low record of claims, you could also ask to be assessed on a claims-related basis. It is common practice for policies to be underwritten based on age, but this may not be good value for all companies. Note, a corporate claims-related basis, is dependent on group size and is usually for a minimum of 50 employees.
Finally, companies can split out the benefits available to their workforce, restricting benefits for some people who may not need it as much or using it as an attraction and retention tool for top talent.
There will probably be people that need looking after more from an operational perspective (if they’re field sales and need to be able to drive you would want to have them treated immediately, for example), so it makes sense for companies to look pragmatically at their people. One size rarely fits all in life and this is certainly true of PMI.
Tips for reducing your premium:
- Could your employees pay an excess?
- Could dental and optical be offered as separate benefits that are paid for by employees? A low-cost cash plan for example.
- Has your company recently moved to or away from London? The cost of hospital beds in the capital is markedly more expensive than the rest of the UK so this could affect your premium.
- Could you reduce outpatient benefits?
- Introduce a 6 week option where the insurer will not pay for inpatient/day patient treatment, if the treatment is available on the NHS within 6 weeks of when the treatment should take place.
- Do you have a low claims record? Ask to be assessed on claims rather than by age.
- Tailor benefits to particular groups of employees, because not all benefits are appropriate for all employees.
Making sure your people use and appreciate their benefits
Where employees are confident they have selected the right policy for their workforce and are happy with the premium, an often overlooked aspect of implementation is financial education – making employees aware of the benefits they are entitled to.
Many employees don’t read the small print on their benefits packages. A simple presentation or workshop on the range of benefits on offer can help organisations gain value from their commitment. When I deliver these workshops I invariably hear “I didn’t realise my company offered that” or “how do I go about proceeding with private medical treatment? Do I need to go through my GP?”. There’s not only the time out of the workforce that is costing the employer, but the employer is missing out on good will and sentiment towards them for looking after the wellbeing of its employees.
Retaining your group PMI policy when you retire
When retiring from work, it can be advantageous to retain the terms of your group policy and take them on an individual basis. Naturally, there may be an increased premium as you’re no longer part of a group containing younger people, but typical advantages include no additional underwriting if there has been no break in cover.
No company PMI but interested in PMI cover?
PMI offers many benefits. Typically waiting lists are much shorter, hospitals are cleaner, diagnostic tests are quicker, there’s a choice of hospitals and consultants, more privacy and a wider range of drugs and treatments. If you don’t have PMI or if you are dissatisfied with the level of cover provided by your employer and would like to arrange policy for you and your family, please speak to your adviser.
These are recent examples of where Wren Sterling has advised on PMI cases for an existing client and a new client with a focus on providing affordable cover
Case Study 1 (new client)
A small precision engineering company, based in the West Midlands was looking to offer PMI to their directors and staff (14 employees) as a result of reviewing their company’s overall employee benefit packages.
Some of the main reasons the company selected a group plan included relatively low cost, the fact that the company pays for its employees while giving employees the option to cover their eligible dependants at their own cost (with the advantage of benefiting from group rates).
For the employer, its primary motivation included attracting and retaining good quality staff. The management consider a full benefits package to be essential for being recognised as an employer of choice. It is their belief that in the current economic climate, with salary increases either capped or below inflation, a healthcare package would have a high perceived value for employees.
PROPOSAL: A comprehensive age-rated PMI plan with a reduced yet realistic outpatient limit was recommended. A relatively small excess per person and suitable hospital access based on location was agreed, achieving an affordable total premium.
Case Study 2 (existing client)
An existing client, a London-based ‘trader’ with 85 employees had made a recent acquisition of a further 45 staff, all un-insured.
The client is currently assessed using age rated formulas and subject to full medical underwriting. The company recorded two high claims in the previous year for cancer and heart problems and although both claims are now complete they are still showing in their recent claim history. This resulted in substantial premium increase at renewal, even though claims in the current year are reasonably low, due to age increases and the insurance premium tax rise.
The client also has a relatively high number of employees with benefit restriction (exclusions) due to past, or existing medical conditions.
PROPOSAL: The recommendation was for the client to stay with the same insurer, but switch to a claims/experienced rated corporate plan, giving enhanced benefits by transferring to a ‘medical history disregarded’ contract. The corporate pricing eliminated the past two completed high claims resulting in a lower premium compared to the age rated renewal terms.
The group size increased from 85 to 130, and with further expansion expected due to future planned acquisitions, a simplified enrolment process was required. Only two age brackets remain, under 65 and over 65, therefore employees ‘flat’ rated. As part of the arrangement, the insurer is providing monthly MI in order to monitor claims and the plan performance.