Providers and intermediaries need to work together to grow the private health insurance market says Wayne Pontin, chairman of AMII and sales development director at Jelf Employee Benefits
At the recent AMII Summit, the Right Honourable Stephen Dorrell MP, chair of the Health Select Committee said: “We are getting older, our expectations are rising, medicine can do more things – the demand for healthcare services in the UK has been rising by 4 per cent per annum and will continue to do so ad infinitum. It has been met by 3 per cent growth of tax payer resources and 1 per cent of tax payer efficiencies.”
But what happens when the efficiencies are no longer possible? A compound deficit of 1 per cent minimum year on year, in pure commercial business terms would mean going into administration or in personal terms declaring bankruptcy.
We need an affordable integrated public/private system in the UK. Key aspects of an integrated system must include efficient delivery of good quality healthcare services, equality in access to care and sustainable affordability of the system.
Private healthcare reduces the government’s fiscal burden, encourages better resource utilisation and can lead to more or better healthcare services. The Health and Social Care Act provides new charging powers for services currently provided free through the NHS. So herein lies the opportunity for insurance providers and intermediaries to ‘work together to grow the private health insurance market’.
Gaps in services can be plugged by product innovation by insurance providers. How better to ensure these products are widely distributed than to work with professional and experienced distribution channels such as AMII members?
Currently we pay for dental and optical treatment in this country – cash plans have been designed to plug this gap. In some parts of the UK we pay for prescription charges where again some providers have designed cover to plug this gap. It seems reasonable to surmise that we will pay for other primary care and diagnostic facilities going forward such as GP visits ; scans, X rays and possibly diagnostic pathology.
Potentially there could be rationing of drugs or services when budgets run dry; providers should be considering top up products for conditions such as cancer and rheumatology that will plug these possible gaps. However in their strategic planning and market research insurers must liaise with the main distribution channel for PMI and health related insurance, that is, specialist healthcare intermediaries. I urge the main providers to, via forums such as the AMII/BIBA PMI panel, consult with representatives of the bodies that distribute over 70 per cent of health insurance at present and who almost certainly will continue to do so.
The UK spends approximately 8.6 per cent of GDP on healthcare according to OECD Health Data 2010, France spends 11.3 per cent and the Netherlands spends nearly 10 per cent. Both France and the Netherlands have obligatory health insurance and hence have a dual system of financing healthcare. Australia has a tripartite system based on the state; the individual and the corporate employer. Providers need to work with distributors to design and implement similar systems and then to seek government acceptance through lobbying to deliver these types of systems.
I suggest separate public and private systems of short-term health insurance with the public insurance system financed by premiums taken directly out of wages (together with income taxes). Those earning below a certain threshold would qualify for the public insurance system – anyone with income over that threshold would be obliged to have private insurance instead. There could be levels of insurance cover to “plug the gaps” the public sector could not afford to provide.
Distribution of this typical “dual” system would sit entirely with independent advisers who via CII examination would be suitably qualified to provide this advice. The industry would be regulated by the Financial Conduct Authority (FCA) or an independent compliance authority concentrating solely on health insurance and not a jack of all trades compliance body.
Healthcare should be divided into three echelons; cure or short term; mental health care and social care or long term care.
Working with intermediated distributors the insurance providers could design insured products for all three echelons, capitalise on opportunity and grow the PMI market. Distribution costs would be the domain of the intermediary with joint marketing initiatives funded by the providers. Remuneration would be by level commission structures and cost control by clear medical underwriting and possible open referral options via the providers.