The number of people covered by private medical insurance fell by 3.8 per cent in 2010, according to the latest figures from Laing & Buisson.
But employer paid contributors to cash plans bucked the downward trend across the healthcare market, growing by 11.2 per cent to reach 0.45m, confirming that demand for cash plans from employers retains strong scope for growth.
The proportion of UK residents covered by PMI has now fallen from 12.4 per cent in 2008 to just 11.1 per cent at the start of 2011, with last year’s fall compounding the 4.7 per cent decline in individuals covered in 2009.
The number of people covered in corporate schemes fell 3.3 per cent to 2.95m, while individual policies fell 5.1 per cent to 1.01m, according to Laing & Buisson’s Health Cover UK Market Report 2011.
Spending on insured and self-insured private medical cover contracted by 3 per cent in real terms, taking into account economy inflation RPI during 2010, to reach £4.15bn. This followed a real spending decline of 1.6 per cent in 2009.
But a real rise in the average price paid for medical cover in 2010, up 1.4 per cent, buffered this, alongside the fact that medical insurer margins were in better shape in 2010 as claims costs fell more sharply, down 4.3 per cent in real terms, and margins improved from a low level in 2009.
Philip Blackburn, economist at Laing & Buisson, is predicting stronger economic growth and fiscal challenges to the NHS to encourage a gradual recovery over the next three to four years, although he warns that providers need to innovate to find ways to offer affordable cover to more people for this to happen.
The total number of contributors to health cash plans in the UK, both corporate and individual, fell by 2.9 per cent in 2010 to reach 2.65m at the start of 2011. The individual sector contracted 5.3 per cent in the period. While this was a lesser blow that the fall of 5.4 per cent seen in 2009, the 2.8 per cent decline in 2008 means it was the third consecutive annual fall.
Spending on health cash plans fell sharply by 7.1 per cent in real terms during 2010, as the average price paid for cash plans by a decreased contributor base fell by just over 3 per cent in real terms. However, as benefits paid slumped by 8.2 per cent in 2010, which likely reflected weak everyday healthcare spending, margins for cash plan providers edged to a new high.
Demand for dental cover appeared least affected by the recent downturn, as the number of subscribers to ’stand alone’ dental benefit plans fell only marginally by 0.6 per cent in 2010 to reach 3.23m at the start of 2011, following a fall of 2 per cent a year earlier during 2009.
Dental insurance increased in popularity, particularly with employers, as subscriber demand grew strongly by 7.3 per cent. Spending on stand alone dental cover reached £567m in 2010, with £488m spent on private capitation fees and £78.7m spent on dental insurance premiums.
Blackburn says: “Reduced real spending on UK private medical cover in the last two years mirrors the sharp contraction of the UK economy during 2009 with a lag of at least six months. However, volume demand shrunk further than spending, as average prices for medical cover continued to edge upwards, pushed by significant real claims cost inflation in 2008 and 2009. What this illustrates is the clear vulnerability of the health cover market during the economic downturn.”