Advisers want more transparency around cash plan claims - providers say there are good reasons why they cannot give it. Jenny Keefe weighs up the arguments
Cash plan providers should disclose full claims information to their clients, as such greater transparency would improve intermediaries’ ability to market the plans.
This was the challenge laid down by several leading intermediaries at last month’s Corporate Adviser Cash Plan Forum in London.
But providers argued that products would become more expensive and more complex if they provided too much detail about claims.
Paula Aitken, commercial manager at Private Health Partnership said: “One of the ways providers could help us to sell is to be a bit more
transparent. Employers want the transparency of understanding how what they are buying is being used. That’s hard to tell with PMI, but with a
cash plan, the data is much more readily available. We all need to go to the dentist and we all need specs, so it’s more tangible.”
Aitken urged providers to produce graphs, breaking down how much money employees get from their cash back plans by category. She added that if cash plans were flexible, employers could change categories in subsequent years.
She was supported by Mike Izzard, chief executive of Premier Choice Healthcare, who said cash plan management information should be “beefed up”. He added: “The bit intermediaries don’t like about cash plans is that once you’ve set it up and it’s on the books, it doesn’t technically renew, so employers don’t get any further information at all. You lose all identity with the client.”
“I think the transparency issue is absolutely important, but the key thing for me here is to ensure that the products are being used”
But Health Shield sales director Peter McAndrew warned that publishing detailed management information(MI) could drive cash plan prices higher for employers. He said: “You can’t have price stability and also give really analysed data. If we start to give really detailed information on each individual scheme, and each employer says ’that’s not being used, we’ll take that out’, we’ll move into a market like PMI, where there won’t be price stability.”
He added: “I’m happy to give general information, and I can understand why you need it. But giving employers really analysed MI will encourage them to take out the bits that we make a bit of profit on, while we’re losing on the other side, so you couldn’t expect the price to stay the same.” “I think the transparency issue is absolutely important, but the key thing for me here is to ensure that the products are being used”
Jill Davies, chief executive of Westfield Health, put forward a similar argument. She said: “If you’ve got a pooled risk, there are winners and losers. But if you rated every scheme against its claim, that’s a different kettle of fish. When you’ve got a pooled risk, you can say to one company ’you’re not getting enough use’, and then try and escalate their use to get value.”
Mike Wagg, head of intermediary sales at Simplyhealth, said: “I think the transparency issue is absolutely important, but the key thing for me here is to ensure that the products are being used. This is completely different to the PMI market, where actually you want fewer claims. If the product’s not being used, it hasn’t got a value. So it’s striking that balance and making the returns as Jill highlighted. It’s ensuring that the cash plan is being used, but being used in a manageable way which keeps the premiums sustainable in the longer term.”
Davies pointed out that a list of claims made doesn’t always show the true return on investment. “When you start to go into transparency, if someone has a scan, the savings are not just the cost of a scan or consultant appointment. What you’ve actually saved is through early intervention. So there’s a bigger implication to the costing model. We try to communicate if we can, usage is key, plus we’ll add in the prevention elements. We also have case studies where we have people who’ve gone on record to say this is what they’ve enjoyed and saved as a result of implementing the cash plan.”
But Bluefin consultant Stephen Hackett insisted providers should disclose information for larger employers. “We need some generic information
about how the benefits are used. I don’t know your books well enough, but once you get to a certain point, say 1,000 members, I think you could justify providing tailored information. You could justify linking usage to price, because that market’s already pretty mature. A little bit of segmentation would be a good differentiator.”
He also said employers would like data on broader trends. He said: “This whole debate around cancer in the market - it was only 5 per cent of claims spend a few years ago and now it’s projected to be 16 or 17 per cent - employers are concerned about that and I think they would quite like to be educated. We need to say ’this is a trend within your business, so this is what you could do about it’.”
“Giving employers really analysed MI will encourage them to take out the bits that we make a bit of profit on, while we’re losing on the other side, so you couldn’t expect the price to stay the same”
Aitken accepted that providers did not need to know how many people claimed for each category, but she suggested that providers “make a
fuss at the end of the year”. She said: “Once an employer has bought a cash plan, the key is demonstrating it is still the right thing, instead of just allowing it to run. This could just be ’yeah, you’ve had this benefit for a year, it’s doing a fantastic job and members are using it, we’ve had this number of claims’, and giving a generic number. I’m not suggesting for one second that we understand three of those employees claimed for this and these are their names. But I do concur that the larger the scheme, perhaps more management information is appropriate.”
She echoed remarks by Izzard, who proposed that providers put in dummy renewal programmes.
Gary Smylie, consultancy manager at JLT Benefit Solutions said: “The market has changed very significantly in a short period of time. It’s trying to be perceived more now as an employer benefit, as well as an employee benefit and I think that’s where the need for management information and data comes from. But also, I think as a market, you’re trying to move away from being a traditional direct sell to being sold by intermediaries and there’s a learning curve on both sides there.”
“If you’ve got a pooled risk, there are winners and losers. But if you rated every scheme against its claim, that’s a different kettle of fish”
Smylie also said that return on investment is top of employers’ wish lists. “Once you get over the initial purchase, what’s actually an issue for most employers is return on investment. Price is quite low down the pecking order once they’ve bought the product. Once it’s been bought, very few organisations take it out. What they are saying is ’I want best value for money’.”
When asked whether PMI or healthcare cash plans delivered a better return on investment for employers, 67 per cent of delegates said cash plans offered a superior return. The same percentage (67 per cent) said cash plans delivered the return on investment finance directors expected.
Hackett argued that cash plans are more visible than PMI policies. There are far more claims as everyone goes to the dentist or has an eye test. He said: “A lot of energy has been expended to get employees engaged with their benefits. From that point of view, you need to encourage claims rather than discourage them. If an employer is driving for employee engagement, a cash plan is the obvious choice because they get more claims.”
Jill Davies, chief executive of Westfield Health, revealed that for every 100,000 members the insurer has, it gets 200,000 claims a year. “On our book of customers, it’s two-to-one claims. Different organisations will have to excite the employee to use it; really it’s just an education process. We want that two-toone ratio. Now if you look at PMI claims, you wouldn’t want two-to-one.”
Izzard said: “A cash plan is a well perceived benefit for employees and they do value it. If you look at a flexible benefits scheme, a cash plan comes well up the pecking order, so you know it’s popular. It’s obvious that there’s better value for money, both for clients and for employees because the churn rate on cash plans is minimal compared with the PMI market as a whole, so I think the cash plan market’s got it right.”
Aitken agreed. “I think so too, because I can’t tell you when I’ve ever reviewed a cash plan. If you do your job right in the first place, you select
the right cash plan for the company then there’s no need to do a review. How good is that as a sale? That’s a far better sale than any PMI policy.”
“The bit intermediaries don’t like about cash plans is that once you’ve set it up and it’s on the books, it doesn’t technically renew, so employers don’t get any further information at all. You lose all identity with the client”
But Hackett pointed out that cash plan’s ultimate return on investment for shareholders can be difficult to quantify. “It depends on why you introduce those benefits in the first place. If you’re in a competitive recruitment market, you’re forced to have medical insurance as a benefit to attract the people you want. So the return on investment argument shifts a bit, because if they don’t have medical insurance, they lose what that individual could have brought to the business. It’s a very difficult question.”
Lynn Pearce, account director at Jelf Employee Benefits, said cash plans can deliver a high return when used in conjunction with PMI. She said: “We worked with a group that had horrendous PMI claims year-on-year, where the policy was becoming unaffordable. We introduced a cash plan last year and I got the PMI provider to work with the company. I’m pleased to say its claims/loss ratio is nowhere near what it was before - that’s where the strength of a cash plan lies.”
McAndrew said: “The return on investment comes from creative use of all the products. So you can’t say either cash plan or PMI is better. I don’t think the market is there anymore. It’s a case of how do you use those products and how you can tailor them. Employers take bits out of cash plans to help them with particular issues and bits out of PMI to help them with others. That mix then starts to provide a return on investment.”
While cash plans and PMI policies can generate savings when used together, delegates discussed the worry of duplicating perks. Aitken said: “We’ve got to stop this overlap and duplicating products, because if you’re talking about a large corporate where they’ve got PMI, a cash plan and income protection, you potentially have three EAPs there.”
“Healthcare providers have to realise that they’ve got to be flexible with their benefits”
Aitken said that a cash plan EAP would suit a small business with five or 10 employees. “The cash plan with the EAP is probably more appropriate for small SMEs, who would not want to buy a standalone EAP. But the big corporates are definitely going to have a very good quality one, so is it any use offering it in a cash plan?”
Hackett said: “This issue of duplication of benefits needs to be really carefully addressed both by providers and advisers. It comes down to ability to tailor plans and I know that’s difficult, but as an adviser, ideally you need to fight for the best value for the client and strip out the bits that duplicate.” Smylie said: “Healthcare providers have got to realise that they’ve got to be flexible with their benefits.”
But Davies argued that it is already possible to tailor cash plans. “The market has flexible solutions. You don’t have to have an EAP in a cash plan. It’s up to the intermediary to say ’what do you want from us?’ and we can flex the product accordingly. We always have done individual deals for larger employers.”
She also said overlap can be a good thing. For example, if physiotherapy was included in both a cash plan and PMI, employees could get money towards costs from the cash plan and it wouldn’t inflate the PMI premiums.