How data and analytics are helping to cut the cost of medical insurance

Barnett Waddingham has been working with clients to find solutions that can help save money without reducing the level of employee care

While the global economic crisis is causing financial strain for millions, it is also affecting people’s health. Employers are struggling to keep up with the ever-increasing costs of healthcare and benefits packages, with a consequent having effect on the overall wellbeing of employees.

In the past, companies may have seen a reduction in their healthcare provision as a way to help cut spending during hard times. However, not only is providing a healthcare and benefits package now seen as right, it is also expected by employees too, making any cuts untenable for most businesses. That’s why Barnett Waddingham has been working with clients to find solutions that can help save money without reducing the level of employee care.

Most recently we have focused on creating and implementing an efficient IT support tool, to empower our consultants to provide detailed Private Medical Insurance (PMI) claims analysis to our clients and drive renewal conversations with providers.

Current PMI market issues

In an ever-contracting market, the feedback from clients is that administration charges and overall premiums are rising significantly, often without clear justification from the providers.

At the same time, claims activity still hasn’t returned to pre-pandemic levels. While the full extent of Covid-19 disruptions is still not fully known, claims activity has not been as high as the market had projected.
If current medical inflation levels are factored in (which can be anywhere between 6% and 12% and occasionally much higher), the claims costs clients are experiencing are generally lower than pre Covid-19.
While a return to pre-pandemic levels can’t be ruled out over the next 18 months or so, as society continues to return to ’normal’ our clients can only deal with what the stats are telling them right now – costs are rising, but claims are not.

Using data to cut PMI costs

So, if significant cuts aren’t an option, how can organisations lower the costs of their healthcare provision, without compromising the service provided? The answers lie in your data.

Historically, our consultancy team would review client data relating to workforce, claims incurred or paid, administration and subscription rates, to estimate the premium for the following policy year. Provider terms would be evaluated and, after negotiations, a renewal recommendation would be made to the client.

While projection calculation processes were robust and supported in-house by our actuarial team, we often found the process time consuming and cumbersome. It became clear we needed to enhance our calculation output visually and make better analytical use of the data.

To that end, we have now created and implemented an online data-led system that is able to run a broad range of scenario projections and can offer significantly more sophisticated opportunities to evaluate claims data in different ways. Non-obvious trends, historical fluctuations and areas of overspend can be quickly identified, opening up new avenues to explore for streamlining your provision, potentially reducing costs without compromising coverage.

The result is a system that can create wide-ranging projections that take into account all the data our clients provide to produce more accurate results. These can then be adapted into a report that suits our clients’ needs, including making adaptations to meet any neurodiverse requirements.

This all means that, when it is time to renew any healthcare provisions, it is easier to compare, contrast and challenge provider quotations – greatly improving clients’ chances of finding their ideal healthcare package, for both them and their employees.

Case study

An early case study saved a financial services client around £600,000. By using the IT support tool, we were able to visibly demonstrate to the long-standing incumbent provider that our analytical projections were both sustainable and conservative, and that there was clear scope to amend the proposed administration charges. The end result was an 11% decrease in total premium payable.

Ultimately, while PMI is still seen as a ‘must have’ by some employers, and a ‘nice to have’ by others, it needs to be provided at a sustainable cost. To achieve this, especially during the current economic challenges, the efficient but robust analysis of member and scheme data is crucial.