Dental and optical plans may not offer intermediaries the same incentives as other strands of business. But they are still an important piece of the healthcare jigsaw, finds Sam Barrett
Whether cover is arranged through a standalone dental scheme or a healthcare cash plan, the size of premiums and of commission on dental and optical schemes is low. But while the financial incentive might not be there, there is a strong argument to say that intermediaries should not overlook these benefits.
“Advisers should be speaking to their clients about including these two areas within their benefits package,” says Mike Izzard, managing director of Premier Choice Group and chairman of the Association of Medical Insurance Intermediaries. “By adjusting benefit levels you can turn a relatively small medical insurance scheme for an organisation’s top management into a scheme that also delivers healthcare benefits
including dental and optical to all employees.
This can make your relationship with the employer much stronger.” To illustrate his point, Izzard uses an example of a medical insurance scheme. “By adding an excess you can cover the price of a healthcare cash plan. This covers everything the employer is legally required to do on eye tests as well as giving employees additional benefits such as dental and physiotherapy,” he explains. On top of this, because cash plans cover areas such as diagnostics it can often prefund the excess on the medical insurance scheme.
Visible benefits Because they can be used on a regular basis, optical and dental benefits are very popular among employees. Dental is the second most popular benefit on flex schemes according to research by Hewitt Associates (14th Flexible Benefits Survey) and together optical and dental account for 50 per cent and more of all claims on healthcare cash plans.
“Optical and dental are the most popular benefits on our healthcare cash plans,” says Jill Davies, chief executive at Westfield Health. “In 2009, dental claims made up 44 per cent of the overall number of claims made on our Advantage Plan, with optical accounting for a further 17 per cent. On our Foresight Plan, 52 per cent of claims were for dental and a further 30 per cent for optical.”
The popularity of standalone dental schemes can also be seen in recent sales figures with Cigna Health reporting record sales in 2009 and Denplan seeing healthy interest continuing in the corporate arena. Mike Blake, compliance director at PMI Health Group, comments: “Employees have been driving demand for dental plans, with employers often responding to this by putting a voluntary scheme in place.
Growth has eased off a little in the recession but there are still opportunities out there.” As well as proving popular among employees, optical benefits also ensure an employer is meeting its duty of care responsibilities. Under the Health and Safety (Display Screen Equipment) Regulations 1992, employers must provide an eye test to any employee who uses display screen equipment such as a computer or VDU.
Additionally, if glasses are required for use with display screen equipment, the employer must pay for a standard pair of glasses or make a contribution towards the cost of a more expensive model. Matching needs Different cash plans will often fit different situations too. For instance, where it is being put in place to complement medical insurance, a scheme with more optical and dental benefit can be better. Izzard says HealthShield is a favourite in this situation as it has good levels of cover and includes free cover for child dependants. But, where there is no medical insurance in place, Izzard favours a scheme such as Westfield’s Foresight which includes additional benefits such as diagnostics.
Where schemes are large enough cash plan providers can bespoke the benefits. Numbers required vary with most providers requiring at least 200 lives before they’d consider tweaking benefit levels. Others go lower with Westfield and BHSF prepared to tailor schemes around the 30 mark. “This can be good where benefits are already in place as it ensures you don’t duplicate cover,” adds Izzard.
Sometimes the optical and dental benefits can be provided by the medical insurer. Blake explains: “Several medical insurers including Standard Life and Aviva offer options to include dental and optical on the medical insurance. This can work but you need to be careful if the scheme doesn’t extend to all employees as you could end up with differences in cover if you later introduce benefits to those not included on
the medical insurance scheme.”
Optical opportunities Opportunities also arise where organisations already spend money on their optical benefits. Davies says that she has seen an increase in the number of intermediaries talking to employers about how they cover their legal responsibilities regarding eye tests.
“Most employers already provide and spend money on eye tests but this is often in a fairly arbitrary way through vouchers and coupons. By spending very little more, if at all, they are able to offer their employees more health benefits through a cash plan, with the added bonus of cutting down on administration time,” she explains.
Uplifting from a scheme that simply covers the cost of eye tests and any associated glasses to a healthcare cashplan doesn’t cost much extra. Blake estimates that for a basic cash plan an employer would probably pay an extra £25 to £30 a year for each employee. “It’s around twice the cost of optical alone but the employer will get extra value from all the additional benefits.” Dental decisions Although cash plans can be used to provide optical and dental benefits, where an employer’s key priority is to provide dental cover then a dedicated dental plan can be more appropriate.
“Cash plans are great for general maintenance but if you needed more work the benefit limits would soon be used up,” says Blake. “Depending on the level you select you can get cover for some of the more extensive treatments that can cost hundreds of pounds.” For example, while a cash plan costing £1 a week gives around £50 of dental benefit, Cigna Health’s Crystal plan, which has an annual maximum benefit of £800 including two checkups and two scale and polishes, costs £1.52 a week (£6.60 a month) for groups of 100 plus. Further, where trimming
costs is important, an accident and emergency dental plan can cost as little as £3.28 a month. “Dental plans do fit well in flex schemes,” adds lake.
“Dental health will vary across a group of employees so it makes sense to let them decide which level of cover fits their needs.” More growth in 2010? Although popular products, growth did slow in 2009, especially for dental plans. Laing & Buisson, which last ran statistics for 2008, reported a modest 1.2 per cent increase in the number of people covered by dental plans, significantly lower growth than the 10 per cent and 31 per cent seen in 2007 and 2006 respectively. Cash plans fared better with growth of 29 per cent in the corporate market in 2008, although few expect a repeat of this in 2009.
“We did see strong growth last year but some areas didn’t perform so well. There was less take-up in the flex market, as employees were keen to hold on to their money,” says Morag Peterson, product manager at Cigna Healthcare. Providers and intermediaries alike would like to see this change this year. “I would like to see some more growth in 2010 but with budgets already set there might not be the funds available,” says Pam Whelan, corporate dental sales manager at Denplan. “But, employers are aware that if they have to freeze pay, benefits that help employers with the cost of treatment are highly appreciated.” And, when the recession ends and retaining key employees becomes critical
to recovery, employers could find that this strategy pays off with improved employee loyalty
AN EVOLVING MARKET
As dental charges and rules governing NHS dentistry change and new procedures become available, the dental and cash plan products are adapting to reflect this.
Increasing cover is a common annual exercise among the dental plan providers. “We’re uplifting benefits this April on some of our plans,” says Morag Peterson, product manager at Cigna Healthcare. “Rates will stay the same but the performance of the portfolio allows up to increase cover.” This will include its Crystal and Diamond plans as well as its NHS plans.
Cash plan providers have also increased their benefit levels. For instance Westfield Health increased optical, dental and dental trauma benefits by an average of 5 per cent on its Advantage plan in 2009.
Products also evolve to suit the market. A prime example of this can be seen on Denplan’s NHS plan, as corporate dental sales manager, Pam Whelan explains: “When the rules changed last April to allow NHS dentists to carry out private work we changed our NHS plan in line with this so policyholders could take advantage of the types of treatment, for instance white fillings, that became available.”
New products are also expected. Denplan started the year with a new plan aimed at the voluntary market and Bupa is also rumoured to have a new dental plan waiting in the wings. The plan, which will complement the two it already offers, is expected to be launched in Spring 2010.