Global value drive
Multi-national employers are looking to drive ever greater value from their international benefits schemes, says Debbie Lovewell
In the current economic climate, the need to obtain the best possible value for money remains vital, particularly when investing in big-ticket items. With businesses under pressure to manage costs effectively, it comes as no surprise many are looking at where savings can be made or ways to squeeze just that little extra value from their existing expenditure.
A key focus for many multi-national employers is how to deliver better value from their international benefits spend. Nicola Lonergan, corporate and bank proposition development manager at Friends Provident International, says: “There is a definite pressure on businesses to really keep their overhead costs in check and make sure they can get the maximum value from what they are spending.”
Rather than reducing benefits or cutting expenditure in this area, many multi-national employers are instead looking to control costs by obtaining better value from their existing offerings. The steeply rising cost of international healthcare benefits, for example, has made this a prime area for review. Alan Hewitt, international benefits director at JLT Benefit Solutions, says: “Healthcare premiums are increasing by about 8 per cent a year so organisations are looking at different ways of reducing them. Healthcare is very much a hot topic because we are seeing a consistent increase in premiums.”
Traditionally, the level of cover provided under international private medical insurance (PMI) schemes has often resulted in an open-ended benefit for staff. A greater focus on managing costs, however, means this has begun to change, with some employers now setting a cap on cover limits. Teresa Rogers, business lead for international at Aviva UK Health, says: “What employers are trying to do is not to have things too broad so people perhaps do not think about where they are going to go for their care. It is good that the individual takes a little bit of responsibility for thinking about how they are going to have treatment within that limit. If employers have an open-ended limit, people will naturally go to the most expensive facility because the benefit will never be exhausted. Employers are not looking to trim back benefits but they are certainly more cost-conscious.”
Multi-national employers are also making a number of other tweaks to their schemes’ design to help derive better value. One such option is to introduce an excess to the policy. Reviewing how excesses are applied can also drive value.
“When providers used to pitch for business, it used to be driven by HR. Now, procurement is a key decisionmaker as to which insurer to place expatriate PMI with. That is a fundamental change in the market”
Patrick Woodhead, specialist consultant at Lorica Employee Benefits, says: “A lot of the international plans we do seem to have a bit more flexibility in the way they administer excesses. Whereas in the UK, if you have got a £100 excess, it comes off whatever the first payment is that comes out or the first invoice the company receives. This is opposed to the international plan, which will say ’it is only on dental benefits or it is only on maternity benefits or it is only the outpatient benefits’. These are a bit more selective. We find they sometimes may add an outpatient excess because the outpatient benefits are more often used than inpatient benefits.”
Although multi-national employers are not typically looking to reduce the benefits offered under international healthcare schemes, many are looking to deliver greater value by streamlining what is covered to better meet the needs of their workforce. Woodhead adds: “Everybody is looking at trying to save some money so we are seeing more companies that will ask us to perform market reviews for them. Because of the nature of healthcare available in different countries, they are looking for relatively similar cover but they want to know they are getting the best price for the product for their employees. It is important to them that if they have an expatriate in another country they have the right tools and the right backing for them to perform the role properly.”
Stripping out cover for specific treatments or conditions can result in quite significant savings. For example, removing dental cover from an international healthcare policy can achieve savings of approximately 5 per cent, according to Sarah Dennis, international healthcare director at Jelf Employee Benefits. However, before doing so, employers must ensure that this does not infringe local laws and regulations.
“You cannot always do this,” explains Dennis. “Especially in the Middle East and Dubai in particular where it is a requirement to provide dental cover.”
How claims are handled or managed can also impact on premiums. JLT Benefit Solutions’ Hewitt explains that while this cannot eliminate increases altogether, managing claims effectively can help organisations to stabilise any rises and deliver better value.
Similarly, identifying locations in which claims are high and the conditions or treatments employees are claiming for enables employers to take a more proactive approach where possible, for example, by introducing measures to reduce the likelihood either of staff making claims in the first place or the value of claims when they do occur. Kevin Melton, sales and marketing director at Axa PPP International, says: “Employers are moving away from just being there to pick up the pieces after the event has occurred. Now, organisations are looking to pre-empt issues before they occur.”
Employers are also looking to obtain greater value from their insurer or provider. Melton adds: “Organisations are looking for their provider to tie everything up into one packaged bundle. They are looking for an international PMI provider to do more than just pay a claim. It is about giving that full service and giving value for money. Employers are expecting more now.”
Taking a more cohesive approach to international benefits provision, for example, by reducing the number of insurers and/or brokers used can reduce the level of commission and/or fees employers incur. According to JLT Benefit Solutions’ Hewitt, consolidating insurers can result in savings of up to 10 per cent.
Similarly, where organisations use multi-national pooling arrangements for their international healthcare or group risk benefits provision, actively managing the pools or reducing the number of pools in place can also result in savings. Hewitt estimates these to be in the region of 8 to 12 per cent of pooled premiums.
Employers are also increasingly expecting insurers or providers to supply additional benefits, such as employee assistance programmes (EAPs), health information lines or referral services, alongside core healthcare policies. Rogers explains: “In the last five years, the international market has become a lot more sophisticated so it is not just about having an international benefit plan staff use when they are ill. It is much more about all the ancillary services.
“Typically, an expat will be fit and healthy when they go overseas because an employer will make sure they are fit for assignment. They do not tend to be sickly people. The claims patterns tend to be quite different for that of a domestic programme, so all the ancillary services start to carry more value.”
Multi-national organisations’ growth strategies are just one of the drivers behind this trend, particularly where they are moving into emerging markets where the cost of business may be lower.
“International PMI business has increased in the last couple of years because people are finding slightly cheaper places to run an operation or they want to open their operation up in different countries,” says Woodhead. “A lot of countries, such as the Far East, are experiencing increases in their healthcare costs because it is getting very expensive over there, so what employers are doing now is branching out to some of the less populated and slightly cheaper countries.”
Such growth has led to certain benefits, such as dental cover and EAPs or support counselling, becoming increasing important in some markets. “All sorts of things can happen overseas,” explains Dennis. “World events can impact on employees worldwide, therefore, employers want to provide the same EAP to international employees as they do in the UK.”
Employers’ heightened expectation of insurers and providers has also driven changes in the way benefits are procured. “When providers used to pitch for business, it used to be driven by HR,” explains Melton. “Now, procurement is a key decision-maker as to which insurer to place expatriate PMI with. That is a fundamental change in the market.”
But international healthcare provision is not the only area in which employers are looking to deliver better value. The offshore or international pension market is also growing. Mark Price, principal - international consulting group at Mercer, says: “For expatriates that are going to more far-flung places, employers are tending now to introduce an offshore pension plan. They are very popular.”
Although offshore pension schemes are not as tax-efficient for employees as participating in a local plan, where available, offshore schemes have a lower administrative burden for employers.
Elsewhere, many multi-national employers have taken steps to obtain value from government-mandated benefits, such as the Middle East’s end-of-service gratuity payments. Friends Provident International’s Lonergan explains: “We are seeing an interest for employers to fund for that liability. It is always going to be a cost that they have got, but if they fund for it, they are able to show the employee what they are entitled to, and the accumulation of the cash benefit as it grows. So they are getting that benefit back on themselves as an employer. The alternative is somebody leaves, is given a lump sum and the employer gets no value on that return at all. That is a very good example of how communication can help employers to get that benefit back.”
“Healthcare premiums are increasing by about 8 per cent a year so organisations are looking at different ways of reducing them. Healthcare is very much a hot topic because we are seeing a consistent increase in premiums”
Communicating their international benefits provision effectively is vital if employers are to get the best return. If organisations do not have the budget to increase their package for staff, shouting about what they already have in place can boost employees’ awareness and perceived value of the benefits they receive.
Price says: “People are using a whole lot of media to do all sorts of things and getting far more funky with their benefits. I have seen companies promoting access to online platforms via iPhones and iPads, using Twitter and social media to engage with employees.
“The main reason they are doing all this employee engagement is to make employees aware of the benefits and therefore value them more, but without actually spending more on the benefits themselves. Obviously, they need to engage on the communications side and depending on what they want to do some investment is needed, but it is not specifically on the benefits. One of my recent clients was saying it wanted to roll out an online total reward statements for all of its European countries, for example.”
Ensuring benefits are tailored to suit employees’ needs, as well as what they would like to receive as far as is practicable, therefore, can be a key factor in getting more from an international benefits spend. “It means the employer can offer a targeted solution and that the benefits spend is going in the right direction,” explains Lonergan.
But what employers are looking for and aiming to achieve through their international benefits provision is unlikely to remain static for long. As Woodhead concludes: “I have only been looking at it for two years and it has changed in that time, so what happens in the next two or three years could be quite interesting.”
Key ways to deliver better value on an international benefits spend
- Ensure benefits are tailored to meet employees’ needs and what they are likely to value.
- Communicate benefits well to ensure employees are fully aware of, and value, what they receive.
- Review what conditions or treatments are covered under international healthcare schemes.
- Consider adding in caps on cover limits and excesses on international private medical insurance schemes.
- Reduce the number of insurers and/or brokers used in order to save on commission and/or fees.
- Track and manage claims effectively.