The pros and cons of a health cash plan
The humble health cash plan has seen a surge in demand as companies look for cost-effective ways to support employee wellbeing amid rising healthcare costs.
More than 200,000 new employee members were added to health cash plans last year (a rise of 14.8%) bringing the total to more than1.6 million employees covered in the UK.
The Covid-19 pandemic highlighted the importance of accessible health benefits, fuelling interest in cash plans which are both affordable for employers and provide tangible benefits for employees.
Let's explore the advantages and disadvantages of implementing a health cash plan as part of your employee benefits package.
The pros
1. Promotes preventative healthcare
By covering routine health expenses like dental check-ups, eye tests, and health screenings, employees are more likely to maintain regular health appointments, reducing long-term absences and promoting overall wellbeing.
2. Immediate benefits with no medical requirements
Unlike private medical insurance, health cash plans typically offer immediate coverage without requiring medical examinations, so employees can start claiming straightaway and they tend to cover pre-existing conditions. However, do check the details before buying the policy in case there are exclusions.
3. Comprehensive mental health support
Modern health cash plans often include mental health provisions, such as 24/7 counselling helplines, face-to-face therapy sessions and stress management support, crucial in supporting employee mental wellbeing.
4. Cost-effectiveness
Compared to private medical insurance, health cash plans are typically more affordable and can be structured in various ways:- Fully company-paid
- Employee-paid through salary sacrifice
- Hybrid funding models
This flexibility allows organisations to choose a funding method that suits their budget while still delivering value to employees.
5. Additional lifestyle benefits
Many health cash plans now include supplementary benefits that extend beyond traditional healthcare, such as online GP services with 24/7 access, employee discount schemes for retail and leisure, and lifestyle assessments and coaching.
These extras help create a more rounded employee benefits package.
The cons
1. Annual benefit limits
Unlike private medical insurance, health cash plans typically have relatively modest annual limits. For example, specialist consultations might be limited to £300-£600 per year, which may not cover the full cost of multiple consultations. HR leaders should be clear about these limitations in their communications to staff.
2. Potential for under-utilisation
Some employees may not make full use of health cash plans because of a lack of awareness about available benefits, a reluctance to claim for small amounts and/or the effort required to submit claims. To combat this, organisations need to invest time in regular communication and education.
3. Administrative overhead
Implementing and managing a health cash plan involves ongoing admin such as processing new joiners and leavers, supporting employees with claims queries, managing communications, and reviewing usage data and return on investment. Although many providers offer online claiming systems, there is still an administrative burden to consider.
4. Limited coverage for comprehensive healthcare needs
Health cash plans are designed to support day-to-day healthcare costs rather than major medical expenses. They typically don't cover:- Complex surgical procedures
- Long-term conditions
- Intensive specialist treatment
This means they might need to be offered alongside other healthcare benefits.
5. Potential impact on other benefits
When introducing a health cash plan, HR leaders need to consider how it fits within their existing benefits package. For example, is there any duplication? Could the budget be better spent on other benefits? How does it align with the overall wellbeing strategy? HR leaders should evaluate these questions to ensure the cash plan adds value and supports the broader goals of employee health and satisfaction.
Making the right decision
When considering whether to implement a health cash plan, HR leaders should:- Analyse workforce demographics Consider your employee population's age, health needs, and preferences to ensure the benefit will be valued and utilised.
- Review current benefits Assess how a health cash plan would complement or potentially overlap with existing benefits.
- Calculate total cost of ownership Factor in not just the premium costs but also administration time and communication resources.
- Consider implementation approach Decide whether to offer the plan as a core benefit or voluntary option and determine the funding model.
While they have limitations, their preventative focus and immediate accessibility make them an attractive option for many organisations.
The key is to ensure they align with your overall benefits strategy and are effectively communicated to maximise their value to both the organisation and its employees.
In partnership with Avantus
Flexible Benefits & Technology specialist providing online, highly configurable platforms to Customers and Intermediaries worldwide.
