What can we do about the rising costs of PMI?
The NHS is under significant strain due to increased demand, staffing shortages and financial constraints.
These pressures are impacting the private medical insurance (PMI) sector, making it crucial for HR professionals to understand these dynamics to support employees’ health and wellbeing.
Current state of the NHS
According to the British Medical Association (BMA), 7.57 million patients are waiting for elective procedures.
The Health Foundation reports a shortfall of around 112,000 full-time equivalent staff, and NHS trusts face a deficit of £5 billion.
Impact on PMI usage
As the NHS struggles, more individuals and employers are turning to PMI.
The Association of British Insurers (ABI) noted a 7% rise in new PMI policies in the past year.
This increased need for access to private care is leading to higher premiums, as insurers face rising costs due to more claims and expensive treatments.
Rising costs and employer strategies
The rising cost of PMI is a growing concern for both employers and employees.
For businesses, especially small and medium-sized enterprises (SMEs), the increased premiums can be a significant financial burden.
With the NHS under strain, more individuals and companies are turning to PMI to fund medical care and avoid waiting lists, which is driving up premium costs.
This trend is likely to continue as NHS pressures persist, making it crucial for employers to find effective strategies to manage these rising expenses.
Government pledges and potential reforms
The UK government has announced a £25.7 billion funding boost to address the NHS crisis.
However, there is debate about whether the extra funding will be sufficient.
Some experts have suggested adopting a model similar to the US, where healthcare is predominantly funded through private insurance.
The role of GPs
GPs, traditionally the gatekeepers of the NHS, are under immense pressure.
The Royal College of General Practitioners (RCGP) reports that GPs are seeing up to 70 patients per day, significantly higher than the recommended safe limit of 25.
With only two-thirds of NHS GP appointments taking place face to face, it is increasingly difficult for GPs to detect and treat the early signs of ill health.
Exploring solutions
To tackle the pressures on the NHS and their impact on PMI, a collaborative approach involving the government, healthcare providers, and employers is essential.
As more people turn to PMI to avoid NHS waiting lists, the costs rise, driven by increased claims and Insurance Premium Tax (IPT).
Companies who fund healthcare benefits for employees play a crucial role in reducing pressures on the NHS, and it's vital that government recognises this.
Double taxation in the form of IPT on premiums paid by employers and then P11d tax on premiums for employees is unfair, especially when PMI benefits reduce pressures on the NHS.
Larger corporations might find tax-efficient ways to offer health benefits, but smaller businesses need government intervention to address these tax issues.
By taking a longer-term view of tax policy government could reduce financial barriers and incentivise healthcare benefits instead, encouraging businesses to expand the provision of such benefits, ultimately supporting employee health and wellbeing.
Innovative approaches to cost management
Internationally, co-payment or shared responsibility are features that have been adopted, giving clients greater control over their health insurance premiums.
While standard flat excesses remain popular among corporates, the majority have not adjusted these to reflect the recent inflationary environment.
Broadstone’s most recent Employee Benefit Survey revealed that £100 remains the common level of excess applied to company PMI policies (36%), yet the ‘real terms’ value of a £100 excess has fallen significantly in recent years.
With rising premiums, there is a need to consider higher excesses or alternative risk-sharing responsibilities.
Providers must explore creative plan design solutions to ensure budgets can accommodate these costs.
Adapting to medical advancements
The rapid development of sophisticated medical treatments and procedures is transforming the private healthcare landscape.
These advancements, though beneficial, can significantly impact claims experience due to their high costs.
Insurers must balance the need to cover advanced treatments with the financial sustainability of their plans.
Corporates may need to reassess the inclusion of high-cost treatments and reevaluate their original business reasons for funding healthcare benefits.
Although these discussions can be uncomfortable and emotive, understanding and agreeing on where corporate responsibility begins and ends may be crucial for the sustainable funding of private healthcare schemes.
The Importance of quality healthcare pathways
For HR leaders, ensuring access to high-quality healthcare pathways is crucial.
Proactive prevention and early, effective intervention can significantly control healthcare costs.
Without these measures, we risk facing spiralling healthcare expenses similar to those in the US.
Effective healthcare pathways not only improve employee wellbeing but also contribute to a sustainable healthcare system.
By prioritising these pathways and clearly communicating them to employees, HR professionals can help manage costs and support the overall health of their workforce.
Five takeaway actions for HR professionals:
1. Evaluate current benefits packages: Regularly review health benefits to ensure cost-effectiveness and appropriate coverage.
2. Promote preventative health measures: Encourage wellness programmes, regular health screenings, and a healthy work-life balance.
3. Communicate healthcare pathways: Invest time in fully understanding, and promoting, the most effective ways for employees to engage with their healthcare benefits.
4. Flexible working arrangements: Offer flexible working options to help employees manage their health.
5. Stay informed and advocate: Keep abreast of healthcare changes and advocate for policies that support the NHS by incentivising greater provision of health benefits.
Conclusion
The pressures on the NHS are profoundly impacting PMI usage and costs.
HR professionals must understand these dynamics to develop strategies that support employee health and manage costs effectively.
By taking proactive steps, HR leaders can help mitigate the impact of NHS pressures on their organisations and ensure employees receive the care they need.
In partnership with Broadstone
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