Companies are facing increasing demands for private medical insurance from their staff. But providing healthcare does not have to be expensive, says Amanda Swinburn.

As novelist James Thompson once said: "Health is the vital principle of bliss", and it is certainly an emotive issue in the UK.

The NHS is under increasing pressure and more and more workers are adopting the attitude of those in the US and demanding private healthcare in the workplace. As part of this trend, companies are using benefits as a way of recruiting and retaining staff.

Recent research by Western Provident Association (WPA) shows that health insurance is one of the key motivators for employees to leave a small company and move to a larger one.

And the number of companies offering private medical insurance (PMI) is growing steadily, according to figures from the Association of British Insurers (ABI). In 1989, 1,837 companies bought PMI for their employees - by 1999, this had reached 2,207.

According to Mandy Blanks, PR officer for Standard Life Healthcare (formerly Prime Health), companies are starting to see PMI as a way to save money.

She says: "Providing PMI for employees can help to cut costs, as companies are able to reduce employee absence and get people treated. People nowadays want to take good care of themselves and want to get good treatment quickly."

Blanks adds that recent research into the PMI market has shown that, in terms of recruitment, the second most valued employee benefit is private healthcare - second only to a company car.

All sizes catered for
Healthcare provider WPA Communications director David Ashdown agrees: "PMI is in demand, particularly from smaller companies, as they want to make sure that if a key employee needs hospital treatment, they can get seen to and get back to work as soon as possible."

But Ashdown says companies still want to keep costs down when providing PMI. "Historically, however, small companies have only had the option of blanket cover for all employees, regardless of their individual needs. It's understandable for them to be reluctant to spend money on this kind of policy, parts of which may be totally irrelevant to the needs of some employees," he says.

Under its Enterprise Flexible Benefits plan, WPA offers basic in-patient cover, which can be added to by employees if they wish. Other services include out-patient treatments such as osteopaths, acupuncturists and chiropractors.

For companies that want to pay less, healthcare cash plans are a cheaper alternative.

These schemes have enjoyed a revival - sales have increased by 40% from £269m to £379m in the past five years, according to figures from analysts Laing and Buisson.

One of the reasons is that the number of days off work has risen by 90% in the past 25 years to more than 650 million per annum and prompt treatment is becoming more and more important.

Ashdown says: "Cashback from the cashplan is partly co-payment, which means that the premiums are kept very low and companies can provide these benefits right across the workforce. Employees can claim back many medical costs such as optical and dental."

As cashplans are lower in benefits than PMI, premiums are cheaper - they cost from as little as £5 a month.

Pick and mix
Ashdown adds: "We help employees to be able to mix and match. This is a very popular product from an employee's point of view because it is geared to a premium they can afford."

Raman Sankaran, marketing communication manager of non-profit cash plan provider Healthsure, says: "PMI cover is relevant to people, but is there for the unexpected. Cash plans cover the expected and, under our policy, customers get 100% of the cost back for dental and optical treatments."

Some cashplans offer cover for other extras, such as nights in hospital, x-rays, physiotherapy and maternity and paternity leave.

Cash plans also work well when bought with a high-excess PMI policy, as the cash plan pays towards everyday medical costs and the PMI covers major treatment.

Attractive benefits
Currently, adults pay 80% of NHS dental charges. That means root canal treatment can cost £800 and a bridge £1,100.

Therefore, it is not surprising that well over two million people now have cover through stand-alone dental cash plans.

These are undoubtedly an attractive employee benefit. Corporate schemes and cash plans cover NHS charges as well as private schemes.

Denplan, which holds 68% of the corporate market, has seen massive growth in recent years. Whereas in 1993 it had 200,000 policyholders, by 2000 this figure had risen to one million.

The company has a high profile in the individual market. Staff can link direct with Denplan via email, removing the company's stress of administering the plan.

It is clear that having private health cover is high on employees' agendas when it comes to choosing an employer.

And with the raft of inexpensive products on the market, employers can only gain by adding healthcare benefits.

Case study
Dixons Group is a UK-based group, which includes Dixons, Currys, PC World, The Link and Mastercare.

The company offered a range of voluntary benefits to all 29,000 employees but had identified key benefits that it wished to add.

PMI was already provided for a number of employees. Heathcare cash plans, one of the fastest growing and relevant employee benefit schemes, were the answer for those that did not receive the benefit.

These plans complement PMI by helping towards the costs of everyday healthcare needs and not just the more serious procedures.

The next step for Dixons was to find a heathcare cash plan provider. The company was looking for a flexible benefit scheme and chose Healthsure as its sole provider.

A spokesman from Dixons group says: "We were looking for a product that offered value and range. It was important to provide maximum benefit on the most widely-used treatments, such as dental and optical care. We also looked at the returns on the more serious aspects like overnight hospital stays."

He adds that a benefit of Healthsure's policy is that Dixons does not have to deal with any of the administration. Healthsure mailed out leaflets to all of the employees and also manages all premiums by direct debit.

"Employees have been amazed at the low cost of the cash plans and the benefits that they receive in return - this probably explains why we have had such a good take-up," says the spokesman.