Formalising a workplace health and wellbeing strategy is tricky and can prove expensive. Nick Martindale asks if cash plans are strong enough to be the principal building block.
- Cash plan providers have begun developing products to accommodate wider health and wellbeing needs
- Tailoring the services offered and varying coverage levels can support different workforce populations
- Cash plans can form the spine of a successful strategy but are typically not diverse enough to be the only option
For decades the humble cash plan has existed largely to help workers cope with unexpected health costs, particularly around dental and optical treatment, paid for by employees. Around the turn of the century, however, more employers started paying for these schemes themselves, seeing them as a means of offering additional benefits to people who did not quality for private medical insurance (PMI).
The economic downturn - coupled with years of increases in the cost of PMI; the latest being the rise in insurance premium tax from 6% to 9.5% - saw more employers looking at cash plans, and products evolved accordingly.
"Cash plans are seen as a very good risk and health and wellbeing tool, and not as a poor man's insurance anymore," says Jelf Employee Benefits technical director Matthew Judge.
"They're well received, still relatively low cost and offer good benefits; most cash plans will provide a reasonable level of dental and optical and therapy benefits, and a lot of providers will tailor plans so you might have a fairly healthy outpatient benefit too. If you do have a condition then you may not have insurance but you're halfway there, and you can be treated much quicker because you already know that you do need some treatment."
At the top end of the range, cash plans are now not far off some of the lower-end PMI offerings, says Buck Consultants senior consultant Chris Evans.
"These ‘super cash plans' are now beginning to include things like hospital treatment insurance which pays for specific elements of surgery and medical procedures," he says. There's also a desire to add more value by collaborating with external third parties, he adds, giving the example of Medicash offering access to Best Doctors under the terms of its plan.
All this begs the question of whether it is now possible for employers - particularly those without the budget to consider PMI - to build a wellness strategy around cash plans. In some ways, this makes sense, argues Evans, who says he's aware of at least two organisations that have moved over to cash plans from PMI. "In an ideal world PMI might be offered to all employees, as part of a wellbeing strategy, but that's not possible because of the cost," he says.
"A cash plan actually sits quite well as a core or base level of access to medical intervention and treatment." Utilisation rates tend to be much higher too, he adds - around 20% or 30% - which means more people might start to engage with wider health and wellbeing issues than could be the case with PMI.
Not surprisingly, this is a concept cash plan providers are happy to support. "When combined with hospital treatment insurance, they can provide a continuous healthcare package at a fraction of the cost of full PMI," says Westfield Health executive director Paul Shires. "Together they provide every day, preventative health cover, access to diagnostics and surgical treatment, and help with rehabilitation."
Simplyhealth sales director Raman Sankaran echoes the point that they can be a sound building block: "Cash plans are a great basis around which to build a health and wellbeing strategy, providing benefits that support an employee's physical and mental health.
"By covering a range of benefits that can be used by all employees, cash plans have a broad appeal and encourage people to take a proactive approach to looking after their health, helping to prevent health problems occurring, which in turn helps to reduce absence levels and improve health in the workforce."
Some traditional PMI providers are now also realising the potential of cash plans as a starting point for a wider wellness strategy. "Cash plans have as much of a role to play as PMI and allow organisations that don't have the budgets for traditional PMI to really engage in that agenda," says Bupa UK corporate director Patrick Watt, at.
"We're now seeing the health and wellbeing agenda really resonate not just with larger employers but small employers too. People get the fact that a healthy workforce will be more engaged and productive, and the impact that can have on your absence. The aspects of cash plans which resonate even at the low end, such as dental and optical care, are very much part of an individual's wellbeing. There is a very good argument to include cash plans much more in that wellbeing agenda."
One employer which has made good use of cash plans is recruitment business Serocor Group. The business provides two levels of cover, according to pay grade, and reserves PMI for its directors.
"We use it very heavily as an employee engagement tool, and as a wellbeing tool," says head of people development Heather Cracknell. "Our salesforce tend be aged from about 20 to 28, and a lot of them use the gym so rather than them having injuries and going off sick, they get physio and claim the money back, so the recovery is so much quicker. It also includes consultations and we've had quite a few pay for MRI scans on it, as well as in-patient day surgery."
The plan from Bupa also features a range of other treatments including reflexology, chiropody and acupuncture, as well as a 24-hour health helpline which can put people directly in touch with qualified nurses, while the business also offers the facility for staff to upgrade at their own cost, either to a higher level of cover or to include family members.
Yet there are also limitations to relying on a cash plan, particularly when it comes to facilitating treatment for more serious conditions.
"A higher end plan will now include an initial consultation, diagnostics and a CT or MRI scan but what they don't do is take you on into the inpatient treatment you then need at the end of the diagnostic journey," says Mercer partner Chris Bailey.
"It's very nice to have the money back for optical and dental treatment, but they're not really the major causes of ill-health or lack of productivity in the workplace. So I don't think they're the answer but they do form part of a wider healthcare or wellbeing strategy, around engaging with your people and getting them to act differently, so the three pillars of stopping smoking, nutrition and activity. But that isn't the focus of cash plans."
Gaps to fill
Buck Consultants' Evans, too, believes cash plans cannot form all of the answer. "I've not seen any of the cash plan providers who can offer that start-to-finish proposition," he says.
"If an employer was on a very restricted budget, then the cash plan could be the primary spine to their wellbeing strategy, but I don't believe that cash plan providers at this point have a sufficient presence around the preventative aspects, even though most cash plans now will give an option for covering things like health screening. But there isn't the analysis that sits behind that to help the employer interpret that information and determine what else they might need to be doing to help their employees."
Where the increased remit of cash plans can help, however, is in filling the gap between state-funded GP or NHS services and private medical provisions.
"Cash plans are excellent benefits for members to get quick and convenient treatment for small conditions without the hassle of having to see a GP or get authorisation from the insurer first," points out Barnett Waddingham workplace health consultant Sarah Tanswell.
"PMI providers are seeing an increase in musculoskeletal claims year-on-year as members can find it difficult to get quick treatment on the NHS. But this often means members having to go to their GP to get a referral to see a consultant before they can be referred on for treatment. A cash plan allows members who know what the problem is to seek treatment from a qualified physiotherapist directly and in their own time."
If nothing else, the advances in cash plans have ensured those employers which have traditionally steered clear of PMI for most of their staff can offer a viable alternative.
"The big area where they are growing - and where to some extent they are replacing PMI - is where there is a large proportion of uninsured people," says Jelf's Judge. "The market in terms of healthcare hasn't really grown; penetration has hovered around 10-11% for the last 30-odd years. So companies are using cash plans as a second line, either as paid-for, partly-paid or self-funded products."
Despite these developments, cash plans also need to evolve if they are to remain relevant, as they have done successfully in the past (see below).
Aon Employee Benefits principal Rachel Western believes they will need to offer employers a greater degree of personalisation, to help meet the needs of their specific workforce. "Bespoke, structured cash plans offer a more realistic option as far as health and wellbeing strategies are concerned than standard cash plans do," she says, adding that providers must also develop closer relationships with other health services.
Focusing more on mental illness as well as physical is also likely to become more important, particularly as this now accounts for 40% of all work-related illnesses, according to the Organisation for Economic Cooperation and Development.
"Mental health is clearly a serious and growing problem for businesses, as well as the UK economy," says Westfield Health's Shires. "There is definitely a huge opportunity for cash plan providers to raise awareness of the taboo surrounding employee mental health and to make treatment more easily accessible." Options here include employee assistance programmes and even cognitive behavioural therapy sessions, he adds.
Mercer's Bailey, meanwhile, believes the challenge will be for cash plans to remain relevant in an increasingly digital age. "Generation Y are now very firmly in the workplace and their expectation is that they can access things at work as easily as they do in their home life, so that will be where the market develops," he says.
"Consumers broadly want to have more freedom of choice so they can access a cash plan through their smart phone, be reimbursed directly with their bank account, and be able to buy their glasses from a direct online discount retailer rather than having to go on the high street. Cash plans need to move with the times and really resonate with that consumer audience."
A potted history of cash plans
- Originally set up as local Saturday Hospital Funds in the Victorian age, where employees would pay an amount per week to entitle them to medical treatment
- When the NHS came into being, the focus shifted more towards measures that were not funded by the state, such as dental and optical
- Traditionally distributed through trade unions
Around the turn of the century employers started offering paid-for cash plans to employees
- Today health cash plans funded by companies account for 31.5% of the total market, representing 833,000 contributors, according to LaingBuisson.
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