How inflation is hitting plans to introduce fairer health benefits
As businesses strive to create an inclusive and caring work environment, providing health and wellbeing related benefits has become essential.
However, the rising medical inflation in PMI schemes poses significant challenges to organisations attempting to introduce a fairer approach to health benefits.
The challenge – balancing cost vs benefits
Employers recognise the importance of providing comprehensive health and wellbeing benefits to attract and retain talent. But these benefits come at a cost and, with medical inflation rising, PMI premiums are rocketing. The continuous rise in medical costs has made it increasingly challenging to strike a balance between offering valuable health benefits – at a time when the NHS is struggling - and managing budget constraints.
Several factors are contributing to rising medical inflation.
- Advances in technology - Although medical advancements have significantly improved patient care and outcomes, these innovations are often expensive. Cutting-edge medical equipment, drugs and procedures contribute to escalating healthcare costs, making it harder for organisations to keep pace.
- Ageing population - With an ageing UK population, there is an increased demand for healthcare services. Chronic diseases and age-related conditions require ongoing medical attention, leading to higher medical expenditure and bigger impacts on claim funds overall.
- Increased use of healthcare - People are seeking medical support and interventions more frequently due to increased awareness, preventive care initiatives and improved diagnosis. This surge in the use of healthcare services drives up costs in the PMI sector.
These challenges are making it harder for all employers striving to introduce a fairer approach to health benefits within their organisations, causing the following issues:
- Budget constraints – Escalating costs from across every organisation strain the financial resources of reward, forcing difficult decisions. This can include the level of cover offered to employees, especially when premiums are increasing, resulting in benefits being ringfenced or increased employee excesses, which in turn negatively affects the objective of fairer health benefits.
- Limited cover - Rising medical inflation may limit the cover options, such as the removal of oncology or limiting mental health support within PMI schemes. Services such as employee assistance programmes are relied on more heavily, but can lead to gaps in cover or incomplete health cover.
- Difficulty in ensuring long-term sustainability - Employers want to offer sustainable health benefits that can adapt to changing market dynamics. However, rocketing premiums can compromise the long-term viability of these plans, making it difficult to ensure continuity and fairness in benefits.
Steps for employers
While the challenges posed by rising medical inflation in PMI schemes are significant, employers can adopt several strategies to mitigate the impact and design fairer health benefits:
- Cost containment - Employers can explore measures such as negotiating better rates with healthcare providers, by working with a broker to ensure terms offered are competitive. Promoting preventive interventions within benefits offerings such as gym membership and health assessments can be a great way of ensuring employees look after their health and wellbeing.
Employers should also encourage employees to make more informed healthcare choices by using the EAP or online GP in the first instance rather than just relying on the PMI scheme, helping to ease some financial burdens associated with increasing premiums.
- Work closer with insurers and providers - Employers can collaborate with insurance providers and healthcare providers to design customised health benefit plans that balance cost-effectiveness with comprehensive coverage. This collaboration can help employers make best use of the expertise of industry professionals to create fair and sustainable health benefits.
By understanding the driving factors and implementing strategic measures to mitigate rising premiums, employers can navigate challenges while offering valuable coverage to their employees in times of need. Finding a balance between cost control and comprehensive cover is essential to ensure the long-term sustainability of health benefit plans, fostering a healthier and more productive workforce.
To find out more, contact Barnett Waddingham.
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