Plan with care

Cash plans are establishing a reputation as a recession-friendly healthcare solution. Sam Barrett looks at how to pick the right one for your client

While fears of recession mean sales are slowing throughout the employee benefits arena, one product is bucking the trend. As employers look for a low-cost reward that delivers solid benefits, healthcare cash plan providers are reporting solid growth.

“The market is steady. If a company goes under, we’ll lose members but we’re ahead of where we were last year,” says Jill Davies, chief executive of Westfield Health.

Indeed, research recently conducted by Westfield Health found that even in a recession, employee health remains a top priority. It found that 88 per cent of corporate customers intended to maintain employee benefits to protect morale, despite the fact that over 50 per cent were implementing cost-cutting measures in other areas.

“Healthcare is a real priority,” adds Davies. “We found that the vast majority of corporate customers aren’t planning reductions to their current health-related benefits and a few are even planning to increase their spend on healthcare cash plans. Cash plans do have a lot going for them, especially in the current economic climate.”

Price is particularly appealing, with company paid plans starting at less than £1 a week per employee. In return for this you get a decent level of benefits, for example, for £1 a week Healthsure offers £550 of benefits each year plus £5,000 of personal accident cover and a 24 hour confidential helpline.

As well as being low cost, the cap on benefits means premiums rarely change.

“None of the cash plans we’ve put in place have increased in price since they were introduced, which, in some cases, is a good 10 years. This stability makes it easy for employers to budget,” says Paula Aitken, managing director of healthcare intermediaries the Advo Group. “Additionally, unlike medical insurance, premiums aren’t affected by the age of the policyholders or the number of claims they make so an employer has a good idea of future premiums.”

The appeal of cash plans is demonstrated by the retention figures. Aitken adds: “Customers like the benefits cash plans give them. None of the plans we’ve set up have been cancelled or reduced. Employers like the fact they’ve put a benefit in place that is used and that covers all aspects of health, not just acute health problems.”

For these reasons, sales are expected to remain buoyant. For instance, Stuart Scullion, sales and marketing director at the Private Health Partnership, has been running in-house training sessions on writing business in an economic downturn, with cash plans featuring heavily. “Employers will want to see they’re getting a return on their investment and cash plans do offer this,” he explains. “I’m not sure we’ll see loads of employers rushing out to invest in new cash plans but there will be new sales as employers consider downgrading their medical insurance to a budget plan with a cash plan running alongside.”

Certainly this is a move that Brian Hall, sales and marketing director at BHSF, is expecting. “We’re seeing instances of brokers adding an excess to a company medical insurance scheme and using a cash plan to pick up the small claims for items such as specialist consultations and diagnostics,” he explains.

This can be particularly cost-effective. As an example, BHSF recently sold a cash plan to a firm with 1,500 employees that had added a £150 excess to its medical insurance scheme. The cash plan cost £50 per employee a year and the overall saving was approximately £100 per employee a year.

He also expects to see cash plans being introduced as a means to reward and motivate employees. “Money is tight but employers need to motivate their staff, especially when they might be making cutbacks elsewhere,” he says. “Rather than award a 5 per cent pay rise they might prefer to offer a 2 per cent pay rise and a cash plan. This gives the employee access to a significant level of benefits at a low cost to the employer.”

With demand set to grow for healthcare cash plans, it’s important to be able to recommend the most appropriate plan to an employer. Unsurprisingly, benefits are central to the decision.

“Around 80 per cent of claims are for optical and dental so you need to be sure you have good benefit levels in these areas,” says Richard Halley, head of sales at HSA.

Next on his benefit hit list is physiotherapy and other associated therapies such as osteopathy, acupuncture and chiropractic. These can often reach parts of the workforce that medical insurance simply doesn’t touch. “This is popular with younger employees who might suffer from sports injuries. There’s no need to get a GP referral for treatment so it’s easy for someone to use if they pull a muscle and need some physiotherapy,” Halley explains.

While these three benefits make up the bulk of claims and are standard across all plans, other benefits are also worth considering. Specialist consultations are available on a number of plans including those from Healthsure, Healthshield HSA and Westfield Health. Additionally Westfield and HSA offer benefit for diagnostic testing including MRI, CT and PET scans. The inclusion of these benefits makes it easier to dovetail a cash plan with a medical insurance policy with an excess.

Other differences in terms of benefits include the ability to include children and partners, either automatically or for an additional premium, hospital benefit and maternity payments. Peter Lauris, sales and marketing director at Medicash, adds: “It’s also important to check how benefits are paid. Although most providers now make a full reimbursement, some benefits might only qualify for a partial refund. Similarly some benefits will apply to a two year rather than a one year period.”

As well as benefits for employees, cash plan providers have also added in a number of employer-focused benefits. Stress helplines, sometimes with access to face-to-face counselling which effectively upgrades them to a full employee assistance programme (EAPs), are common now and a growing number of providers including Healthsure and HSA have added occupational health services too.

Because of these benefits Halley believes brokers may already be sitting on potential cash plan sales. “We find that a lot of employers will pay for an EAP and occupational health services individually. Add in the cost of providing eye tests if they have staff using VDUs and it soon becomes more cost effective to offer a cash plan,” he explains.

Flexibility is another important criterion. An element of choice is already built into most cash plans in terms of the level of benefits that can be selected. For example Westfield Health’s Foresight plan has three benefit levels starting at £1 a week, which gives benefits including £45 towards dental and £45 for optical, and rising to £3.75 a week, for which the employee would receive up to £180 for dental and £180 for optical. Additionally, employers can add cover for kids, at an extra 15p a week; fitness and wellbeing, also at 15p a week; and, for an additional £1.24 a week, they can add Surgery Choices to give employees access to private treatment for 60 non-urgent surgical procedures such as hernias, varicose veins and hip replacements.

Further tailoring is also possible, although this will often depend on the size of the scheme with most providers requiring at least 200 employees before they’ll bespoke benefits.

Some cash plan providers will entertain tailoring at much lower levels though. Scullion says: “Westfield Health and BHSF are very flexible and will work with us to design plans that suit the needs of the employer. This is very useful, especially where employers already have other benefits in place or they have particular requirements.”

In terms of numbers, Westfield, through its Mosaic scheme, will go as low as 30 members while BHSF will consider tailoring for groups with 35 or more member. Hall adds: “We are looking at going lower and expect to be able to offer tailoring to groups with 12 or more members in 2009.”

Customer service is another key factor when it comes to selecting the right cash plan. To keep costs down, cash plan providers are set up to pay claims quickly and most will settle claims within a couple of days. “We pay the vast majority of claims within 48 hours directly into the policyholder’s bank account,” says James Glover, member services director at Healthsure. “This ensures they’re not out of pocket and encourages them to use the policy to look after their health.”

In addition to looking after the policyholder, the service provided to the employer is also important. Cash plan providers are happy to help with promotional activity, supplying literature and copy for intranet pages as well as going into the workplace to promote the benefits. For example Healthsure has consultants who will go into the workplace to talk to employees. “We can arrange just about anything the employer wants,” says Glover. “With some employers we’ll speak to employees when they launch the scheme, others have a high turnover so we attend inductions on a regular basis. We’ll also monitor claims on schemes and if they are on the low side we’ll speak to the adviser about how this can be addressed.”

Cash plan providers are also keen to court the adviser. Most now offer some form of commission and many of them have developed broker teams to help support advisers keen to promote cash plans. The product already looks attractive to employers in a downturn – they may not need too much promoting.