A company medical plan is a good device to retain employees and keep them healthy, says John Hancock
?Being unwell is no fun at all. Not only do you not feel good, but there is also the worry of what might be the cause of your ill health, a worry that increases in proportion to the length of time between the various tests and examinations, and
the not always pleasant experience of visiting a hospital.
And even with the largest workforce in Europe and a budget equalling that of many reasonably sized countries, the NHS still manages to add further infections to many of those in its care.
But there is a way to avoid the vagaries of health-related stress. A growing number of people are now opting to deal with health care issues through private medicine. And most in this group get their private healthcare through a corporate PMI scheme.
Latest figures from the ABI show that in 2006 there were 2,345,000 subscribers to corporate PMI schemes, up 4.1% on the previous year and covering 4,188,000 people. So, what’s the big attraction?
For an employer, corporate PMI offers many advantages. Most obviously, decent medical care can reduce the time that an employee might be unable to work through ill health. Also, with private schemes it is possible to schedule non-emergency examinations and procedures, at least to some extent, to fit with an individual’s other responsibilities.
ABI spokesman John French comments: “A healthy employee is an economically active employee, so it is in the company’s interest to speed treatment and recovery.” Also, even at work, a healthy employee is a more productive employee. This will be particularly true of key personnel.
But it isn’t just the hard facts that might motivate employers to offer corporate PMI schemes. These days employee retention is a critical element in the business calculation. ‘ ‘ And to express concern for an employee’s well being through private medical insurance is seen as a productive use of a company’s resources.
For an employee, perhaps, the motivation to join a corporate PMI scheme may seem even more obvious, although it must be remembered that this is not an entirely free benefit. It creates a taxable value in an employee’s overall benefits package.
Employees value the benefits of speed and peace of mind that scheme membership offers. Some suggest that people increasingly appreciate the value of corporate PMI as they pass through the various phases of life – marriage, starting a family, growing older and therefore more vulnerable to ill health.
“People who most value corporate PMI are the same people who would buy individual plans
Mike Williams, Watson Wyatt
Mike Williams, a senior consultant in the insurance and financial services practice at Watson Wyatt, says: “People who most value [corporate PMI] are the same people who would buy individual plans.”
As with everything these days, price is important. Because a group can offer a greater spread of risk and a more predictable claims rate than an individual, premiums in the corporate PMI
market are roughly half those that individual PMI customers pay.
There are various ways of adjusting the premium, although there is a feeling in the market that too much cost driven adjustment could end up negating the employee loyalty value of the scheme. Nevertheless there are a few ways in which prices can be managed.
As few people these days live in the heart of London it is probably not necessary to use the most expensive London hospitals in a corporate scheme. Limiting treatment to hospitals outside of the most expensive band does not reduce the quality of care, but may significantly reduce the cost.
Equally the inclusion of a reasonable excess with the scheme may remind those drawing the benefits that there is a cost involved. Companies ask the benefit recipient to pay only a proportion of the costs up to a low threshold.
In this way it is clear that the company is sharing the cost right from the outset.
Charlie MacEwan, head of communications at WPA, says: “Since 2003 we have been using intelligent excess, branded as ‘shared responsibility’ so that employees drawing benefits are aware of the cost.”
Given the predictability of claims rates in this market, another route to cost saving might be for the company to self insure, securing the necessary funds in a trust.
With a self insured scheme there is no insurance premium tax (although there may be VAT) and any unused funds at the end of the year can be retained.
“We are using intelligent excess, branded as shared responsibility, so that employees drawing benefits are aware of the cost
Charles MacEwan, WPA
But this is a market where brokers really should thrive and the reality is that most corporate PMI schemes have been intermediated in some way, either through a broker or through an employee benefits consultancy. The larger corporate schemes will almost certainly need the expertise and resources of a specialist intermediary.
Small businesses have always relied on their brokers for advice on a whole range of commercial matters. They feel more comfortable using this relationship for any corporate PMI they may take on.
Increasingly PMI is being viewed not as a stand-alone policy to foot the bill when an employee falls ill but as part of a more holistic approach which aims, in the first place, to reduce the chances of that illness.
Such an approach would include health and safety, fitness, smoking policy, flexible working and the whole gamut of modern human resources approaches that might be considered to contribute to better health.
And where a claim does arise, careful claims management can further reinforce the sense of care towards an employee.
As employers increasingly compete among themselves for the best staff, employee benefits will grow in importance.
Very few SMEs are large enough to be able to handle these matters on their own and even those that are will usually prefer to outsource the work to an expert.
For the broker who wishes to become an expert in employee benefits and in particular medical cover, the opportunity to occupy a profitable niche is clear.
Corporate PMI and the overall employee welfare context in which it is set make this market right for the traditional skills and values that brokers have always bought to client relationships.