There are around 4.25 million people now covered by private health insurance through their employers, an increase of 2.8 per cent over the last two years, according to the recent Laing & Buisson report. Yet the majority of staff in UK plc still do not get healthcare benefits. Coverage is particularly thin among smaller businesses and one of the main reasons for this is the burdensome nature of taking on board PMI solutions, say providers and advisers.
To tax those employers and employees who look after their own health and well-being seems not only to run contrary to the Government’s stated idea of fostering a healthier workforce but also against its broader philosophy of encouraging self-help.
The benefits to the Treasury of a healthy workforce are well known. The Black report, commissioned by the Department for Work and Pensions, put the cost to the NHS, employers and the social security system of sick workers at over £100bn a year. On top of this is the potential saving to the NHS of all the treatments that could be carried out in the private sector through group PMI plans. Shaving even a fraction off these costs would surely pay for the revenue that would be lost through taxation.
But rather than make life easy for employers who are offering a benefit that takes financial strain off the state system, the Treasury makes it harder. Workplace PMI is taxed three times – the employer pays National Insurance contributions on the premiums, the employee pays a P11D charge through their tax bill and if the solution is taken through an insurance company, there is also insurance premium tax to be paid. On the one occasion where I worked for an employer that offered PMI, I seriously considered opting out to cut my tax bill.
Even Dame Carol Black, whose report for the DWP was specifically kept away from issues of funding, taxation and financial incentives, was unable to stop herself from pointing out the contradictory way that the tax system affects employee benefits designed to improve productivity. She highlighted in her report how a big employer can attempt to improve the health of its staff by offering a gym inside its premises but if a smaller firm offers staff free membership of a gym, employees will be penalised with a P11D charge.
Surely, if the Government is serious about health and well-being, it should adopt financial incentives to encourage employers to take out private-sector solutions rather than penalise them.
Healthcare funding issues will be hitting the headlines in October when Professor Mike Richards publishes his report into NHS top-ups. One of the high profile cases that prompted his urgent review of the current system was Linda O’Boyle, a 64-year-old NHS patient with bowel cancer who initially received NHS treatment but was denied further treatment when she paid £11,000 for an eight-week course of Cetuximab to prolong her life. She died last March but her husband and several MPs are campaigning for changes to the rules.
If Richards goes in favour of top-ups, we can expect rapid product development to meet the new system. Ironically, if he decides against top-ups, those voices calling for even broader change to the funding of healthcare in this country could find even greater support from the public.
The healthcare debate to date has taken a noticeably different tack to that around pensions where the message is clearly one of self-provision. Yet many of the problems faced in the world of pensions have close parallels in the healthcare sector – a shrinking workforce paying for an ageing population with spiralling care costs. Bupa has identified what it describes as an NHS funding gap of £11bn by 2015 that it not surprisingly feels can be best met by private provision.
Healthcare costs are only going to increase but the political sensitivity of talking about encouraging private medicine means few politicians want to touch it. The private sector has already offered valuable support to an NHS that has served this country well. Why not give it more encouragement to do so?
John Greenwood is editor of Corporate AdviserMoney Marketing
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