Affordable alternatives to PMI

Willis Towers Watson director Mike Blake looks at the latest affordable alternatives to private medical insurance as an employee benefit.

The much-reported age of austerity has ushered in with it a new era of pay freezes. Employees accept that in a recession, or during the recovery period afterwards, pay increases or bonuses are unlikely.

But if an employer makes the commitment of giving something tangible back, it can be extremely well received. In the wake of spiralling health insurance premiums, the focus has turned to a number of alternatives to traditional PMI which both cut costs for employers and provide employees with more tangible benefits that can be used every day, as opposed to only in a medical crisis.

These include cash plans, ‘shared-risk’ policies and ‘cashback’ healthcare schemes.

Cash plans… but not as we know them?

Cash plans are still viewed by many as a benefit for blue-collar workers – after all, it was traditionally always thus. Over recent years, however, they have evolved and as competition in the market has increased, providers have looked to offer a wider range of benefits. They have become increasingly flexible, with sophisticated pricing models, and can be customised to meet business needs like never before.

Defying traditionally-held perceptions, cash plans, while not a replacement for medical insurance schemes, are increasingly being offered as a white collar benefit. Moreover, they are also delivering business benefits over and above recruitment and retention and present an opportunity to reward all staff, not just a few.

A cash plan can complement your private medical scheme by offering services that may not be covered, or by covering excess payments on your private medical scheme. They can be introduced to enhance your benefits package without any additional cost to the business. 

What characterises a cash plan?

A cash plan is a low cost policy that pre-dates medical insurance and provides an easy way to pay for essential healthcare – when employees are ill, and when they're not. It will pay individuals cash benefits for time spent in hospital or for pre-defined treatments such as:

  • dental
  • optical
  • private consultations
  • physiotherapy
  • chiropractic
  • osteopathy

How does it differ to private medical insurance?

A cash plan offers individuals reimbursement to a pre-defined benefit level – cash back rather than insurance. In most cases cash plans cover diagnostic treatment, and for some benefits there is no need for a GP referral.

They can also provide cover that standard PMI plans do not, for dental, optical and chiropody for example. Medical insurance policies tend to pay out for more complex treatment. A cash plan may pay an individual a cash benefit if they’re in hospital; medical insurance, in contrast, will pay for the treatment they have while they are in hospital.

Employees who are covered by cash plans can enjoy benefits for their everyday healthcare needs. By contrast, a healthy employee can be a member of a PMI schemes for years but not benefit directly from it.

From dental cover to Cognitive Behavioural Therapy – why firms should offer the benefit to staff

Cash plans, which can cost from as little as £1 per employee per week, offer employees a perceived high value benefit for a low premium cost to employers. On the face of it, employees can claim more in benefit than the employer is paying in premium. Consequently, they can act as a valuable tool for staff recruitment and retention.

Cash plans can also reduce absenteeism and related costs. With fewer dentists offering NHS examinations and treatment, a dental benefit, for example, encourages people to see the dentist regularly. This in turn reduces the risks of dental problems that could develop into absence issues at a later date.

Basic plans will cover healthcare such as dental, optical and payments for time spent in hospital, either as an inpatient or for consultations. Stepping up to the next level, a range of other benefits become available from physiotherapy to alternative medicines and osteopathy, often covering chronic conditions that are not pre-existing.

High end cash plan benefits are the ones that can really play a key role in absence management, from high-tech scans and Cognitive Behavioural Therapy, to access to wellbeing websites and discounts for gym memberships. One plan even enables businesses to bolt on a medical insurance scheme that pays out for specific conditions that are likely to keep people off work.

Moreover they have a role to play in helping companies comply with HSE best practice. With new legislation concerning employee eye tests due to come into force this year, a health cash plan could help remove the administrative headache and provide peace of mind for employers.

For a relatively low cost, individuals can also usually choose to upgrade to cover their families.

Cash plans and PMI – an affordable and effective healthcare double act

Health cash plans can also complement PMI by saving time and money. An organisation with 1,500 plus staff, but PMI in place for less than 50, is likely to be already spending money on the rest of their workforce in areas covered by a health cash plan, such as eye tests, consultations, scans and counselling.

Cash plans bring all of these benefits together at no extra cost. In some instances, a company can actually save money and time on staffing because of the reduction in administration, as well as offer their staff a better all-round employee benefits package.

The introduction of cash plans for some companies has even proved cost neutral, with an excess increase bringing sufficient savings on their PMI scheme to pay for the premium. In certain circumstances, employees can then use their cash plans to offset the cost of the PMI policy excess, for time spent in hospital for example.

How would an HR department go about buying this in?

The question businesses should ask themselves is: “what do we hope a cash plan is going to achieve for us?”

Do businesses want it to offer an employee benefit that will make them more competitive in the employment market? Do they want it to give their employees a sense of wellbeing? Do they want it to contribute to part of an absence, or healthcare, strategy?

Businesses should then ask themselves how much they want to spend and which cash plan benefits are important to them to help achieve their goals.

There are a number of key providers and each one has a number of corporate policies with different qualifying terms.

Specialist intermediaries can help businesses to find and structure the most appropriate and cost effective plan, and advise on how this plan might best integrate with other benefits or a company’s overall healthcare strategy.

A suitable intermediary should have a wealth of information on the cash plans market and the possible products available.

Click here to find out how The Football League has scored a winning combination with a cash plan.

To find out how affordable a cash plan could be for your company, please call the healthcare insurance team on 01606 352 035.

Flexible ‘shared risk’ plans

If you still want the peace of mind that comes with private medical insurance, you may want to look at a flexible ‘shared risk’ plan. 

Instead of reducing cost by limiting cover, you cut costs by sharing a limited element of the risk with the insurer.

Your policy excess is paid into an interest-paying bank account and only used if you make a claim. If you don’t make a claim, you keep your excess. If you do make a claim, your insurance policy will pay for everything above this limit.

Shared risk plans offer three main benefits:

  1. You still maintain comprehensive cover for your employees
  2. Because you pay for the small bills, your insurance premiums are much lower than they would be under a traditional company PMI plan.
  3. You build an interest-earning fund to contribute to the cost of treatment if you make a claim, which you keep if you don’t claim.

To find out more about shared risk plans, call the healthcare insurance team on 01606 352 035.

‘Cashback’ health insurance

A new kind of health insurance policy, called a hospital treatment plan, has been developed recently to give everyone access to the benefits of private healthcare at a very low cost base.

The procedures that such a plan covers are divided into 12 separate bands, each with their own private hospital budget and NHS budget.  If your employee decides to receive treatment in a private hospital, then they can spend up to the budget in private hospital benefits and any amount left over will be returned to them as cash.

If they choose to receive their medical treatment from the NHS, a cash benefit appropriate for that procedure will be paid to them to spend as they wish.

To find out more about cashback health plans, call the healthcare insurance team on 01606 350 035.