Private Medical Insurance cost containment
If you want to reduce soaring PMI renewal costs for your organisation, there are three ways to reduce costs and improve the employee experience.
Once the gold-standard of employee benefits, many employers are now questioning the viability of Private Medical Insurance (PMI), with renewal premiums set to soar by 20-40%.
As rising inflation drives up treatment costs, and NHS delays cause more employees to turn to employer funded solutions, many employers are understandably keen to contain costs. At the same time, pressure to offer more inclusive benefits, that impact positively on the health of your workforce, means employers need to be clearer of the intended purpose for PMI.
Given the pace of change in this area, we have identified three ways to review your benefits strategy to not only reduce soaring PMI premiums, but also ensure it is fit for the future.
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Identify cost efficiencies
The market has evolved significantly over the past few years. Insurers have broadened their service proposition, to provide more flexibility, choice, and tools for early intervention. It’s therefore important to assess your current package and identify where services might have started to overlap. For example, you might be paying for a virtual GP service, when this is also included for free with your group income protection proposition.
As we are experiencing a volatile pricing landscape, with unprecedented increases in costs, it’s also important to apply pressure to your incumbent insurers. Undertaking a market review to test the competitiveness of pricing and proposition, can be advantageous, especially if a review hasn’t been undertaken for some time.
The potential savings that can be achieved from client to client will differ, but a simple market-review can have the potential of significantly reducing renewal premiums and remove overlapping services to reduce costs and free up funding for other initiatives. We recently helped a client services company to save over £160,000 (see box below).
Action: Create a benefits inventory to understand all your current services and conduct a market review to identify any duplication of services and cost savings.
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Support more people for less
A trend we have witnessed in recent months is a desire for clients to take a more equitable approach to their benefits strategy, moving away from providing rich benefits to a few, towards supporting the health and wellbeing needs of all employees. The challenge is budget constraints so it’s important to look at opportunities for redirecting PMI costs to invest in the uninsured population. By taking a more preventative approach, budgets can be stretched further, and more people given access to support.
For example, when it comes to supporting employees with a something as significant as a cancer diagnosis, a traditional PMI scheme can cover the cost of the required cancer treatment. However, only a limited few will potentially benefit and yet the increased costs impact all those covered, impacting on future premiums and affordability. Instead, the same spend could provide cancer education and lifestyle workshops for all employees, with cancer screening for those most at risk. Not only would this make everyone feel supported, but by detecting cancer at an earlier stage, treatment costs could also be reduced.
Similarly, Mercer (or MMB) are witnessing a steady increase in PMI claims relating to mental health issues. Although accessing a PMI policy will ensure the employee receives the required support, better signposting to counselling (typically via an Employee Assistance Programme) can give people strategies for reducing stress and anxiety to drive claims away from a PMI plan.
Action: Think about how a more preventative approach to helping more employees stay healthy could reduce PMI claims and boost wellbeing.
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Redesign your benefits offering
Most employers would put something very different in place if they were redesigning their benefits offering from scratch today. So, it’s important to ensure your scheme is still fit for purpose by looking at your data and demographics to see what’s driving claims.
Consider if there are more effective ways of helping employees. For example, most plans witnessing high volumes of musculoskeletal claims offer reactive treatment to an injury. Instead, could supporting employees from a preventative, health management perspective, reduce the number of claims? Or perhaps there is a better way of directing treatment as and when required.
Also, who is the scheme designed to support? Many employers included dependents in their schemes, as they wanted employees distracted by family members becoming ill to be supported. However, with the cost of PMI soaring, does the cost-benefit rationale for this still make sense? Or are there other ways to support the employee, such as more paid compassionate leave? Or better signposting to the EAP or free of charge services?
Action: Look at your data to see what’s driving claims and think about ways to be more inventive about supporting those affected.
Case Study: Client services company saves £210,000
We recently helped a client services company, providing full PMI to 1,000 employees, save over £210,000, simply by helping them to realise several cost efficiencies. Firstly, they had been with the same provider for over a decade, when a full market review showed potential cost savings that enabled them to renegotiate terms to immediately save £160,000.
Secondly, as their benefits offering had evolved over time, they had ended up with several overlapping services. For example, they were paying for a virtual GP service, when this was also included for free within their income protection service. Redirecting this service, to ensure continuity of cover for employees, saved another £30,000.
Finally, removing stand-alone virtual cancer care, when this was duplicating comprehensive cover within the scheme, achieved further savings of £20,000. Making the overall savings £210,000 – more than £210 per employee covered.