Plan for the future
Cash plans need to work in greater harmony with other benefits such as PMI and group risk. Jenny Keefe finds out how
Providers must find synergies from running cash plans alongside PMI policies if the still-undeveloped cash plan market is to grow larger. Delegates at Corporate Adviser’s Cash Plan Forum, which took place in London last month, were unanimous in their opinion that cash plans and PMI policies are much more compatible than they were five years ago.
Increasing similarities between the two policy types should allow providers to cut costs, leading to either lower premiums or fatter profits. And in a poll of delegates at the forum, half said the two products were already much closer; the other half said the two types of insurance had grown a little closer.
Bluefin consultant Stephen Hackett suggested, employers will use cash plans more and more to cut PMI excesses. He said: “We are seeing a far greater interest from our mid-to-large corporate clients in cash plans. We have a number of larger clients, some of which run medical trusts, and are looking at cash plans to supplement [their cover] and divert some of the large claims away from the trust fund. They want things like scans, optical and dental, as well as an option to pay for any excess imposed by the PMI scheme design. So we are seeing a greater need for tailoring and innovation, which I don’t think has been there in the past.”
Paula Aitken, commercial manager at Private Health Partnership, echoed Hackett’s remarks. “There was a divide between traditional PMI policies and cash plans. Now those two are much closer. In fact, there’s an overlap and they are working in synergy. Our large corporates and even our SME clients are putting cash plans in place to complement their PMI, or even to replace it when they need to tighten their spend,” she said.
In the future, Aitken predicted, providers that cover the whole health insurance product range will flourish. She added that she thought cash plan specialists may have a harder job.
“Clients want things like scans, optical and dental, as well as an option to pay for any excess imposed by the PMI scheme design. So we are seeing a greater need for tailoring and innovation”
Mike Wagg, head of intermediary sales at Simplyhealth, told delegates that Simplyhealth plans to launch a hybrid PMI and cash plan scheme in the next six months. He said: “We are working very closely on the development of hybrid offerings: cash plan, PMI and dental, encompassed in one scheme. We have had a hybrid offering available to our staff for nearly a year and it’s gone down extremely well.”
Other predicted developments included more employers swapping PMI policies for catastrophe insurance with a cash plan. Andrew Tripp, chairman of Perfect Health Insurance, said employers might “do away with the frills” and cover only in-hospital treatment. He added: “By stripping out the full refunds for outpatient treatments and psychiatric cover, it almost becomes a self-funding mechanism.”
One innovative idea came from Mike Izzard, chief executive of Premier Choice Healthcare, who suggested that providers could bundle up cash plans with occupational health and rehabilitation services creating a product for a “genuinely untapped market”. He said: “The back-to-work part would be separate or integral in the plan, and the kick-off point would be if you’ve been off work for six months.”
On 6 April 2010, the government will launch ’fit notes’, in which GPs will say what patients are capable of doing, rather than simply excusing them from work. Jill Davies, chief executive at Westfield Health scents a potential source of new profits from the reformed system. “The fit note is going to have an impact on getting people back to work. We’ve always sold on early intervention,” she said.
However, Hackett argued that group income protection providers (GIP) have an advantage when it comes to rehabilitation because they are established players in the back-to-work market. “I don’t necessarily see rehabilitation sitting as easily within PMI cash plans,” he said.
Gary Smylie, consultancy manager at JLT Benefit Solutions, agreed that GIP providers are in the stronger position - with one exception. He said: “The advantage that cash plan and PMI providers have is full rostered membership details, which most GIP providers don’t have. Therefore, for GIPs to get their early intervention programme working, they need input from the employer, who has to get input from the employee. I don’t think that works as smoothly or as efficiently as it should.”
Hackett said: “I also think we’re going to have a huge hurdle to climb to get this rehabilitation working properly. We will have to help to achieve cultural change within our clients, because we can have all of these tools and flexibility, but if there isn’t HR line manager Izzard suggested providers told clients they had “’done their best professionally to cover all issues’. But just don’t say you’ve done it.”
Delegates also discussed advances in benefits technology and how cash plans were positioned currently. Hackett said: “With pension platforms now, people can join online and it’s paperless. Employers can provide employee education through the platform enabling employees to get access to other benefits. I do see that migrating down to all the other benefits.”
Izzard said: “The floor is moving on flexible benefit platforms. Vebnet are now talking 1,000 lives, which was unheard of a few years ago. I think that will produce a great number of opportunities for cash plan providers.”
“We’re going to have a huge hurdle to climb to get this rehabilitation working properly. We will have to help to achieve cultural change within our clients, because we can have all of these tools and flexibility, but if there isn’t HR line manager buy-in then I think it stalls”
Smylie added: “If you’ve got the right platform, you can turn parts on and turn parts off. You can show certain bits to employers and certain bits to employees.”
There was agreement on the need to improve communication to employees, so they would know how to claim and extract more value from their cash plans. Gary Smylie, consultancy manager, JLT Benefit Solutions said: “The big issue is does the employee know where to go to if they’ve got a problem? The communication to staff is as much as a challenge here.”
McAndrew conceded that providers do not sell cash plans to employees as well as they could. He said: “If employees don’t know how to claim or don’t know what the cash plan actually does, employers are not going to get the take up they want. I think we forget that the employees are
the ones who actually have to use the plans.”
Hackett said: “I think really there are two trends in the communication vein. One that started last year in education practice, mostly around pensions, but is now a broader practice that takes in all employee benefits. But also I think it’s vital to do the benefit fairs, especially for large employers. We did a couple recently and there is big interest on the ground for healthcare cash plans.”
Judging by the views of the advisers present at the round table event, the future for cash plans looks positive, but evolution will be necessary if they are to meet their full potential.
- 'Free, impartial, face-to-face advice': Can Osborne deliver on his Budget pension promise?
- HMRC: Savers will not face tax-free cash penalties following Budget reforms
- Nick Bamford: Why aren't advisers explaining their charges properly?
- Standard Life hits small firms with £1,200 fee following charge cap