Employers have been combining health insurance and cash plans for years. Sam Barrett discovers providers are making integration easier
Financial pressure means every penny of the healthcare spend is under scrutiny. But, while it can seem sensible to focus on getting the cheapest price possible for each product, there is a list of ways that combining healthcare products can deliver greater cost efficiencies.
“We’re starting to see more organisations introduce a cash plan to complement their existing medical insurance policy,” says Sue Weir, chief executive of Medicash. “Although budgets are under pressure, a cash plan offers a number of benefits that we think outweigh the costs.”
For starters, a cash plan can be used to offset the loss in benefits when an excess is introduced on medical insurance. “Introducing an excess helps to reduce the cost of medical insurance but it can send out negative messages to employees. By using some of the savings to put a cash plan in place, employees get a broader range of benefits and it can help to pick up some of the shortfall,” Weir explains.
As an example, many cash plans include benefit for specialist consultations. This means that if an employee is concerned there is something wrong with them they can use the consultation benefit on the cash plan to see a specialist without having to use the medical insurance and pay the excess. Then, if there are health issues that require further treatment, the medical insurance can be used to fund this.
While there are savings to be made through a reduced overall spend on healthcare when an excess is used, Jill Davies, chief executive of Westfield Health, says the savings can go beyond this when cash plans are combined with medical insurance. “Using the benefits on a cash plan helps to keep claims down on the medical insurance plan, which can lead to more stable pricing,” she explains. For example, specialist consultation and physiotherapy can both be easily accessed on cash plans.
Further, the way a cash plan is priced means you’re not pushing the premium inflation from one product to the other. “Cash plan pricing isn’t claims led and, although we do monitor claims levels closely, they are priced to pay claims without having to increase the premium each year,” adds Davies.
Indeed, cash plan prices tend to remain the same for four to five years, often only rising when new benefits are added or benefit levels increased in line with demand or increases in healthcare costs.
Another important benefit of combining cash plans and medical insurance is that it enables a company to extend healthcare benefits to all employees. “In many companies medical insurance is only provided for the more senior employees,” says James Glover, corporate sales and marketing director at Simply Health. “It’s much more equitable to offer something to everyone but at as much as £1,000 per employee a year this can be prohibitively expensive. A cash plan can cost as little as £52 a year but giving this benefit will bring rewards in terms of employee morale and retention.”
Further, whether a cash plan is given to all employees or just those who don’t receive medical insurance, it’s a very visible benefit. “Medical insurance is there for the unexpected health problems, cash plans are used for day to day healthcare such as a trip to the opticians or to the dentist,” says Weir. “This means it’s highly appreciated by employees as they are able to claim on it regularly.”
In spite of the benefits a company can realise by combining cash plans and medical insurance, there can be potential pitfalls. As cash plans have extended their range of benefits in the last few years, there can be overlap with those offered on medical insurance. For instance, employee assistance programmes are now common on each and could also be included with other healthcare benefits such as group income protection. This benefit duplication can make it difficult to get recommendations past meticulous finance directors.
Cash plan providers are moving to address this. While most will bespoke benefits for groups of 200 or more employees, some will consider this for much smaller numbers. For instance Westfield Health can tailor benefits for groups as small as 30 with its Mosaic plan and BHSF will consider groups as small as 35 but is looking to go down to groups as small as 12 later this year. “We are seeing a lot of demand for bespoking plans alongside medical insurance,” says Brian Hall, sales and marketing director at BHSF. “In particular we’re being asked to put together plans that incorporate the front end consultation element and the back end physiotherapy, leaving the medical insurance element to pick up the treatment in the middle.”
Another development that Hall is working on involves cancer cover. “We’ve been talking to brokers about putting together a plan that would insure the cancer diagnosis piece. Treatment for cancer can result in huge claims bills on medical insurance and it’s not always necessary to go private as the NHS does provide excellent cancer care. Our plan could give a payout on diagnosis, giving the employee some money for care or some treatment while keeping the claim off the medical insurance,” he explains.
But Philip Wood, executive director of Healthshield, is not convinced that advisers, employers and employees will necessarily warm to the trend of some providers offering cover for an increasing yet limited number of conditions traditionally covered by PMI. He says: “While innovation is of course welcome, I am not sure that products such as Westfield’s Surgery Choices meet the differing needs of corporates, intermediaries and end users. PMI and cash plans are two different products serving different audiences and I am not convinced that muddying the water between the two is a good idea.”
Product development from the insurers is also reflecting the growth in demand for cash plans as a complement to medical insurance. A handful of medical insurers including Aviva, Standard Life Healthcare and WPA, have added cash plan or dental and optical modules to some of their plans.
This not only allows companies to add this benefit through the medical insurance, so there is less administration, but it also means they can also flex the cover so different groups of employees receive different benefits. For example, WPA includes a cash plan module on its small corporate plan and allows the benefit level to be varied across the organisation. “Large companies can tailor their benefits to their needs but this extends that flexibility to smaller employers,” says Jane Willcox, general manager for the corporate business division at WPA. “They could give directors full cover, managers could receive essential cover and a cash plan and all the other employees could have a cash plan. Or they could give medical insurance to those employees they can’t afford to have away from the business.”
Further advances are expected in this area too. Simplyhealth, with its expertise in both the traditional cash plan arena as well as in medical insurance, is looking at how it can develop products that combine both benefits. Glover explains: “We’re looking at integrating medical insurance and cash plans so a company could provide some level of benefit to every employee but allow them to upgrade their cover if they wanted.”
As an example if an employee received a cash plan through his employer he could choose to pay extra to upgrade this to medical insurance. “At the moment they’d have to go and get their own medical insurance,” adds Glover. “This would enable them to get better rates as they’d be able to take advantage of the group pricing.”
Discussions for this type of initiative have been with larger companies so far but Glover says it could be extended into the smaller company market. “It would need to be a pre-packaged product but I don’t see any reason why smaller companies wouldn’t want this type of option,” he says.
The move towards more integrated healthcare benefits is certainly one that is welcomed by the industry and will ultimately lead to more innovation from both the insurers and the cash plan providers. Westfield Health’s Davies adds: “It’s not a question of having a cash plan or medical insurance. Employers want to know how to sort their healthcare requirements and this can mean a combination of the two products.”
CASE STUDY: THE FOOTBALL LEAGUE
Based in Preston in Lancashire, The Football League oversees 72 football clubs across the country as well as looking after the League Cup, the Championship and Leagues One and Two. It recently introduced a cash plan, Westfield Health Foresight, to its 50 employees as part of its healthcare strategy.
“We decided to do this after we increased the excess on our medical insurance,” says Stephanie Wroe, HR and pensions manager for The Football League. “Increasing the excess helps to control the increasing costs of providing medical insurance but we were adamant that our employees shouldn’t have to foot the bill. Giving them a cash plan that allows them to claim back the excess seemed like the ideal solution.” The plan, which was recommended by Kimberley Beesley, a healthcare intermediary at PMI Health Group, gives employees access to a range of benefits including dental, optical, physiotherapy, scans and consultations. As well as providing cover for staff, The Football League also pays for additional cover for dependent children and allows employees to upgrade cover or include their partners if they want.