A cash plan for 
all seasons?

Cash plans have been described as recession-proof benefits. Sam Barrett examines how they have evolved since the financial crisis and how they may develop in more benign economic conditions

Defying gravity in difficult economic times, corporate cash plans have in recent years proved to be one of the few success stories of the health insurance market.
While many other employee benefits have seen their sales flat-line or slide over the last five years, the number of employees with a company paid cash plan has risen steadily.
According to figures from Laing & Buisson, while there were 293,000 people with employer paid cash plans at the end of 2007, this number had more than doubled by the beginning of 2013 to 588,000.
“Cash plans have certainly done well over the last few years,” says Westfield Health sales and marketing director Paul Shires. “With budgets tight, employers liked the fact that a cash plan could be used in salary negotiations. A lot of employee benefits are really valuable but you’ll probably never use them. Conversely an employee can claim at least once a year with a cash plan so it’s like putting cash in their pocket.”

Sparking adviser interest
But as well as appealing to employers, advisers have also played a significant part in buoying sales. The concept of selling a company paid plan first hit advisers’ radars back in 2006, with many reluctant to consider them, but sales through this channel only really took off in the last year or so with it now accounting for more than 80 per cent of distribution.
Private Health Partnership managing director Stuart Scullion is among those who initially shied away from cash plans. “Intermediaries have been slow to adopt cash plans as they were seen as low value and low revenue,” he says. “But we sold more cash plans in 2013 than any other year. If you’re doing your job properly you do need to consider them as part of the healthcare benefits mix.”
As well as sitting well alongside other benefits, cash plans can also be used in a more strategic way as Health Shield director of sales and marketing Phillip Wood explains: “The ability to use a cash plan to cover the excess on a medical insurance scheme really caught advisers’ imaginations. Some firms can use the money they save by adding an excess to pay for a cash plan, sometimes for all employees rather than just the select few.”     
Although this strategy may be short-lived as insurers start to reduce the level of discount an excess secures if a cash plan is in place, advisers are still fairly smitten. “We’ve introduced cash plans to all sorts of firms, not just the traditional blue collar market,” says Healthcare Partners healthcare manager Tim Smithers. “Once you explain how they work, companies love them.”

Recession evolution
With this newfound attention, the cash plan providers’ product development departments have been in overdrive with plenty of new benefits being added to plans.  
One key focus has been health and wellbeing. Common additions in the last few years include GP helplines, discounts on gym membership and online health risk assessments. “Cash plans are great for promoting health and wellbeing, whether through these specific benefits or just by enabling people to see their dentist, optician or physiotherapist,” says Simplyhealth head of employer marketing Howard Hughes. “This helps the employee but can also be a powerful tool for the employer.”
One provider, Westfield Health, also took a step towards bridging the gap between cash plans and medical insurance with the launch of its Hospital Treatment Insurance. This provides cover for surgical procedures such as hernias, hip replacement and carpal tunnel release, with more than 60 operations on its Surgery Choices 1 options and more than 1300 on its Surgery Choices 2 option.
Although a step closer to medical insurance, Shires is keen to keep it affordable and in keeping with the cash plan model, with premiums starting from as little as £5.37 a month. Further cost containment comes in by restricting the number of procedures to three in any 12 month period and capping the total cost of an individual course of treatment and the total lifetime cover.   
Many providers have also built on the value for money proposition. For example Westfield Health added its Rewards package while Medicash launched Extras, both of which offer discounts on everyday shopping.
But, although the product has been beefed up, with these extra benefits often added for free, average premiums have headed in the opposite direction during the recession. Back in 2008 the average annual premium per employee was £123 according to Laing & Buisson but, by 2011, this had fallen to just £101.
Some of this downward pressure is likely to be a result of employers scaling back on the cost of cover but fierce competition between providers, with some going below the £1 a week price mark, has also played a part. “The market’s been very competitive but I do question whether providers can keep selling products that deliver value at less than £1 a week,” says Hughes. “I was pleased to see the latest figures showed a slight increase to £106 a year and hope it will continue.”  

Coming out of recession
As the first signs of economic recovery start to come through, many are asking how cash plans will perform. With more money to spend, both the employer and the employee may fall out of love with a £1 a week bargain basement product.
But providers and advisers alike believe this is unlikely, with many predicting stronger sales. “Cash plans are more on the map than they’ve ever been,” says Scullion. “I think advisers and employers are much more aware of them now and value them as part of a healthcare strategy.”
It’s also anticipated that the amount employers spend on cash plans will continue to increase. Advo Group commercial director Colin Boxall says: “As the economy gets back on track more employers will put policies in place but we’ll also see many of those who introduced the low cost £1 a week style scheme increasing the cover they provide.”
A bit more cash in the system could also help the cash plan providers move away from the cheap and cheerful model. Shires is keen to encourage this: “The market hit a low with premiums at £1 or less a week and it’s good to see that they’re finally beginning to increase. You can get meaningful cover for £1 a week but the value of the product increases significantly as the premium gets higher.”
A good example of the provider’s desire to shake off the £1 label is Simplyhealth’s move from £1 a week products to to talking about £5 a month products.
Product design is also making it easier to pump up the premium. For instance, Westfield Health’s customers can add its Hospital Treatment Insurance to a cash plan while Simplyhealth includes a range of options that can be added to its Simply Cash Plan. These include an employee assistance programme at 65p a month; excess cover at between £1.08 and £3.25 a month per employee; and a primary care option including a GP consultation helpline, vaccinations and prescriptions at £1.50 a month.   
Additionally Scullion says that, once employees understand how a plan works and see the benefits of using it, they often upgrade. “We provide our staff with a cash plan at £1.10 a week but it’s really common for them to upgrade or add their dependants,” he explains.

Design for recovery
Product development is also likely to capture employer imagination in the next few years. While the providers have been responding to employer demand with occupational health and employee wellbeing benefits, as reform continues in the NHS, more gaps in service are likely to emerge.
“We’re keeping an eye on the way the NHS develops,” says Hughes. “Cash plans have a fantastic future covering the areas of healthcare that people will be expected to pay for themselves.”
Advisers are also keen to see providers develop their plans to further their appeal. For example Boxall has seen an increase in requests for winter healthcare support for employees. “Many companies now provide flu jabs for employees but this is only included on a small number of cash plans,” he says. “If the providers included this it would enable more employers to spend their HR budgets on cash plans to cover this type of need, which would only be good news for the market.”
Another trend that is likely to continue is the bespoke product. Already popular as a means to differentiate the plan or add a benefit not commonly available, Wood thinks this will become even more common as the economy picks up. “As companies start recruiting more, it will be increasingly important to be seen as a good employer. Offering a particularly generous product or one that offers an employee something they can’t get elsewhere will help them attract and retain key staff,” he says.
But while adding new benefits will help win new business, many see 
the future growth of cash plans resulting from a change in attitude to employee healthcare. Smithers explains: “We’re seeing companies looking at their overall health and wellbeing strategy rather than each of the products in isolation. The spread of benefits on a cash plan makes them a versatile benefit, supporting all sorts of different strategies.” n