The desire to provide health benefits to those who do not qualify for PMI is driving growth in health cash plans, therefore, the trend to offer new elements to cash plans is continuing. But it is unlikely cash plans will replace PMI in the near future.
Cash plans remain a popular benefit offering for employers. But what are the reasons behind this popularity and how the market is evolving?
Cash plans are often seen as an easy and cost-effective way for employers to provide health benefits to their employees. For many, it is a great introduction into the world of private medical insurance (PMI).
Health cash plans offer access to a range of healthcare services from diagnostics such as scans and tests, treatments such as physiotherapy or optical care, through to everyday wellness benefits such as gym membership.
The main advantage of a cash plan is that there are no complicated underwriting processes so employers can get their employees covered quickly and easily. In contrast to PMI, where premiums can vary significantly based on the individual’s pre-existing medical conditions or lifestyle choices.
In a world where employee benefits are under constant review against the backdrop of rising employment costs as a result of auto-enrolment, inflation and increases in the National Living Wage, cash plans have proved remarkably resilient.
In June 2022, LaingBuisson released data that revealed that 3.3 million people in the UK had health cash plan policies at the end of 2020 – an increase from 2,531,000 policyholders in 2019. Of these 3.3 million plans, 42% of these were employee paid.
A separate report by Willis Towers Watson, meanwhile, gives an idea of why cash plans remain a benefit a lot of employers feel they need to provide. The survey found 12% of employees rate them as their most valued benefit, behind only contributory company pensions.
“The great value of cash plans, unlike most other insurance products, is that they’re designed to be used regularly to recover essential, everyday healthcare expenses such as optical costs or dental treatment,” says Willis Towers Watson health & benefits director Mike Blake.
There are, says Aon Employee Benefits principal Rachel Western, essentially three types of companies which make use of such plans:
- Public sector organisations which use them as a cost-effective alternative to other medical benefits such as private medical insurance (PMI)
- Large FTSE firms looking to complement other health and wellbeing offerings which would typically offer cash plans on a voluntary basis
- Businesses with blue-collar workers who may otherwise receive relatively little in the way of benefits.
Thomsons Online Benefits practice lead for health and wellbeing Luke Prankard says the desire to provide those who do not qualify for PMI with some kind of health benefit is a driving factor in the continued popularity of cash plans.
“We are seeing a lot of employers looking at how they bridge the gap from their senior population who are entitled to PMI compared with their other staff… With the NHS under extreme stress to deliver within the resources available to it, employers have an increasing vested interest in providing a solution to this problem.”
In recent years, there has been a trend to offer new elements to cash plans, in addition to the traditional dental and optical benefits, including access to employee assistance programmes (EAPs), health screening and maternity benefits. As the range of services on offer has increased, so too has the ability for employers to build their own plan, tailored to their requirements or budget.
Health Shield, for instance, now offers a range of additional services including mental health provision, cancer screening and physiotherapy triage, and recently acquired workplace health screening provider Prevent with the aim of further extending its screening capabilities. “Health cash plans are flexible enough to allow us to introduce products quickly as market need and demand dictates,” says chief executive Jonathan Burton.
“We still offer the core benefits that cover everyday aspects of healthcare such as optical, dental, chiropody and physiotherapy treatments, but we also reach out to members who need support in addressing stress, depression and anxiety and many other issues associated with a busy lifestyle.” Many of these benefits are delivered through its online portal, he adds, including providing access to a virtual GP surgery, a counselling and support helpline and online health assessments.
In time, add-ons such as this should mean that more employees have access to a greater range of services, believes Burton. “This is driven by various aspects such as duty of care, the growing awareness of the importance of wellbeing and absence management, together with the need for companies to attract and retain staff.”
The move into new areas is likely to make cash plans more compelling as organisations start to understand the value in keeping staff healthy in the first place rather than helping them once they become ill. “We see cash plans evolving into more wellbeing services and starting to provide wider wellbeing initiatives rather than just cash for treatment,” says Punter Southall Health and Protection managing director John Dean. “The addition of EAPs, health screening and wider wellbeing initiatives might be a whole window of opportunity for cash plan companies.”
Some are even going beyond offering access to health services. “A few of the cash plan providers are moving from the medical interventions into the lifestyle interventions,” says Barnett Waddingham workplace wellbeing consultant Laura Matthews.
“The services available are classed as nice-to-haves rather than health necessities. Some of the bigger providers have moved into the occupational health space, providing one-off services to employers who needed medical advice around occupational issues within the workplace, and most cash plans have a discounted portal which allows staff to access discounts on restaurants, shopping and gym membership.”
Paycare, for instance, has recently created an online discount platform, Paycare Perks, following conversations with corporate customers who were seeking to develop such a product for their employees themselves, says its commercial director Anthony Burns.
An alternative to PMI?
As cash plans become more complex and move into additional areas, it’s possible some organisations may see them as an alternative to PMI, particularly as the higher rate of insurance premium tax kicks in. Health Shield’s Burton, though, thinks this is unlikely. “Health cash plans complement PMI and are often sold side by side,” he says. “Although the cost of PMI might become a barrier to some companies continuing to provide such cover, it is unlikely that cash plans would be introduced as a replacement as they provide very different benefits.”
Punter Southall’s Dean also believes the two are distinct products, serving different segments of the workforce. “Companies tend to provide cash plans for employees who don’t have PMI,” he says. “One important distinction is that you don’t have to be ill to use a cash plan whereas medical insurance focuses on treating an illness. PMI, given its current tax status in the UK, will only ever be for a certain proportion of the workforce.” He does, however express concern over the trend for cash plans to fund PMI excesses. “While some companies do it, it’s not in my view an appropriate use of a cash plan,” he says.
Aon Employee Benefits’s Western believes the two products can work in a complementary manner, either to offer uninsured staff a health-related benefit or as an add-on to PMI policies to cover conditions that are often not included, rather than as an alternative to PMI.
“To become strong enough in the benefit offering to compete with PMI the cost of provision would have to rise and it’s the low cost of cover that remains a cash plan’s strength,” she points out. “The popularity of cash plans has always focused on the cost-effectiveness of the benefit and this will need to remain to ensure their longevity.” She also stresses the need for plans to evolve, however, including moving to embrace digital healthcare.
Another area where improvement is needed is around how effectively cash plans are communicated to employees. “The real issue is that the product itself is often little understood or communicated poorly to employees,” says Thomsons Online Benefits’ Prankard. “A cash plan that is well promoted and used can really have an impact by keeping employees well and productive.”
Barnett Waddingham’s Matthews also believes more needs to be done to promote the benefit. “Take-up and usage rates are still not as good as they could be, which is more than likely due to communication and employees not understanding the benefit as well as they could,” she says. “This can be increased by educating employees about the services and benefit embedded within the plan, through roadshows, real examples and employee communications.”
In the short to medium term, though, the wider market for cash plans looks healthy, with the prospect of further growth to come, largely on the back of the push among employers to encourage and promote health and wellbeing at work rather than simply mitigate illness. “We expect the number of companies offering cash plans to grow in the years ahead, as more employers seek to improve the health of their employees and understand the role of cash plans in this,” adds Thomsons Online Benefits’ Prankard. “Employee wellbeing and health is rising up the agenda as employers look to influence and improve employee productivity, and this will increase cash plan uptake.”
Petaurum HR’s Comment
This a fascinating article on movements in the PMI / Cash Plan market and the most significant element for us is the quite from Thomsons Online Benefits practice lead for health and wellbeing Luke Prankard who says “A cash plan that is well promoted and used can really have an impact by keeping employees well and productive”.
This further supports the results of research carried out by Investors in People back in 2014, which found that organisations could reduce sickness absence by boosting access to wellbeing benefits.
As an employer, what do you need to consider about your approach to managing employees’ wellbeing and sickness absence? Do you look to invest in preventative measures (a proactive approach) or in dealing with the consequences (reactive) all of which will have key implications in your organisation?
At Petaurum HR we can support your decision in a variety of ways. Whether you’re looking for help in fully assessing your current trends through a wide range of organisation wellbeing reports, or want to test your thinking and approach on tactical interventions such as a Health Cash Plan – we pride ourselves on delivering real ROI through our range of creative solutions, which will help positively impact on employee health and wellbeing – enhancing engagement, increasing employee loyalty and retention and reducing the costs of sickness absence at the same time.
Doing nothing is the expensive option as it will cost you in lost performance and profit!
Call us and we will help you invest in the right solution for you.