Understanding claims drivers and the wider healthcare landscape can make PMI more affordable
As companies try to address the challenges facing the NHS challenge, there has been a significant increase in the number of employees being provided with healthcare in the workplace.
However, this has created a “perfect storm” of increased incidence (the number of members making claims), and spiralling healthcare costs.
Needless to say, if employees need access to healthcare and you are facilitating it as their employer, you’re likely going to see some form of return on investment, but usage has made it very hard for HR and Benefits professionals to manage budgets and expectations.
The over-reliance on PMI
Sickness absence in the UK continues to rise, with the latest figures showing an estimated 131.2 million working days lost in 2023, the highest in over a decade.
Some of the most common reasons for absence (particularly longer term) are linked to musculoskeletal (MSK) and mental health issues.
Claims for these everyday conditions under PMI policies are on the rise, with employees increasingly using these policies as their first line of defence (we can see this due to higher incidence rates, but lower average claims costs per claim).
In fact, according to a report from AXA Health, claims incidence in 2024 was 13% higher than in previous years, further highlighting the growing strain on PMI policies and employer budgets.
Often, this reliance on PMI is not because they need immediate, extensive care, but because the benefits are well-promoted and easy to access.
However, this usage is leading to a rise in claims and financial pressures on employers, who are struggling to control and justify their healthcare spend.
The question becomes one of whether PMI would be both sustainable and generate ROI in the form of improving absence rates and productivity, if used in the right way and if other services/interventions should be used for lower-level health concerns, positively impacting outcomes, while not inflating healthcare costs.
Healthcare benefits for SMEs
Recent research from Howden Employee Benefits, in partnership with YouGov, among 901 UK SME business owners also highlighted an expansion in the provision of PMI, mental health support, and critical illness insurance as businesses respond to rising employee demand for comprehensive healthcare benefits.
However, this expansion has also led to a sharp increase in claims, which, in turn, is driving up costs and tightening employers' budgets.
Balance between costs and driving good outcomes
Focus on prevention
Employers should invest in preventative health measures to reduce the risk of sickness-related absences and PMI claims.
Educating employees on the importance of both physical and mental wellbeing can help mitigate health issues before they escalate into costly claims.
This can be done via a number of outlets, including line managers, employee wellbeing champions (such as mental health first aiders) and using (often free) provider resources.
Understand claims data
Businesses need a clear understanding of their claims data to manage their healthcare costs effectively.
They need to understand what conditions are driving claims, and how can these be addressed before they require treatment under PMI.
By identifying patterns in claims - such as which demographics are most affected or which conditions are most common - businesses can implement targeted strategies to reduce future claims.
For instance, a rise in physiotherapy claims related to MSK issues can prompt proactive interventions such as ergonomics training or lifestyle changes.
Implement alternative pathways
Often, employees turn to PMI as their first choice for care because of its accessibility.
However, they can reduce unnecessary claims by offering alternative care pathways.
For example, businesses could look to introduce structured processes for managing MSK and mental health issues.
Often, within group risk benefits, such as life assurance and income protection, there are a number of value-add services which can give employees a free or cheap alternative solution for their health needs.
For physical wellbeing this could start with desk assessments, advice being given to employees around posture, moving more, offering sit/stand desks, then leading onto self-help exercise and virtual physiotherapy.
Only if these measures fail would employees be directed to PMI, ensuring they receive the appropriate support at the right time while preserving the value of the company’s healthcare benefits and keeping them sustainable.
Promote proactive mental health support
Mental health-related claims and absences are rising, and it’s crucial for employers to be proactive in offering support.
Providing access to mental health services that are designed to maintain good employee mental health, resilience training, digital wellbeing platforms and coaching can help reduce absenteeism due to mental health issues and, in turn, lower claims under PMI and income protection policies.
Ask your employees what would work for them and use solutions they are likely to embrace and use, not just the next fad.
Conclusion
With the demand for PMI increasing, businesses need to act decisively to manage rising healthcare costs.
Howden’s latest research underscores the critical role that comprehensive healthcare benefits play in meeting employee needs but also reveals the financial strain these benefits can place on businesses.
By focusing on prevention, analysing claims data, implementing alternative care pathways, and expanding mental health support, employers can reduce unnecessary claims, streamline their healthcare spending, and ultimately build a more sustainable healthcare strategy.
Supplied by REBA Associate Member, Howden Employee Benefits
Howden provides insurance broking, risk management and claims consulting services, globally. We work with clients of all sizes to provide dedicated employee benefits & wellbeing consultancy.
