Are your workers taking care of their own health?
The rising cost of private medical insurance (PMI) is encouraging employers to rethink employee benefits and take a more preventative approach to health and wellbeing. But is it working and are they giving employees what they really want?
Guest bloggers Chris Ellis and Ed Hussey
The cost of PMI for employers has been rising sharply, at around 8% year-on-year, which is much higher than the current rate of inflation. There are a variety of reasons for this, amongst them, demographics, fiscal and the increase in medical costs generally.
An ageing workforce is leading to more claims for age-related conditions such as cardiovascular and musculoskeletal disorders and the rise in the number of claims is pushing up premiums. Another contributory factor is recent increases in the rate of Insurance Premium Tax (IPT), which has risen incrementally from 5% in 2010, to the current rate of 12%, which took effect on 1 June 2017. As medical innovations come through, they are often expensive and mean that people who otherwise would die, are continuing to live which is putting further strain on medical costs.
Employees who are lucky enough to benefit from PMI as part of their reward and remuneration package, are not always encouraged by their employers to consider the cost impact of bringing claims and in some businesses, this has led to a culture of unnecessary claims or misuse.
Despite the cost implications, some SMEs still wish to offer PMI as a standard part of employment packages; they view it as an important means of attracting and retaining talented people. When reviewing their employee benefits, employers often comment how difficult it has become to employ the best people and import the skills they need to grow. If larger corporates are offering PMI, then they want to do the same. Furthermore, research has shown that PMI is consistently one of the most popular employee benefits among workers too.
Before taking a decision to introduce a PMI scheme or continue with an existing one, business managers must make sure that they know what employees really want. For example, a mid-sized law firm might employ a high proportion of older workers who value PMI highly, whereas a smaller, entrepreneurial business might have a predominance of millennial workers, who want more paid leave and lifestyle benefits. Employee surveys should be used to gather as much intelligence as possible about what motivates workers, so employers can design employee benefits to suit.
fter completing an employee survey, if employers still wish to offer a PMI scheme but need to control costs, there are options available. For example, some SMEs opt for a ‘cash plan’, which allows employees to offset part of the cost of medical treatment or, if using the NHS, a cash payment. For example, optical or dental care, diagnostic test or physiotherapy. These plans are flexible by nature and can be established according to the size and profile of the workforce.
For larger businesses with more than 500 employees, it may be worth setting up a ‘Healthcare Trust’ as an alternative to a traditional PMI scheme. While these Trusts place more responsibility on the employer and have more fixed costs attached, they can be delivered more cheaply. In a nutshell, the employer meets the cost of claims by funding an ‘insurance pool’ but with a stop loss insurance to meet the cost of sudden very high claims.
All employers should consider putting in place a HR programme to promote health and wellbeing and encourage employees to take more responsibility. This may require a culture change in some organisations, particularly if employees have come to rely on their employer to provide for them. As well as encouraging workers to look after themselves, line managers could make sure they take regular breaks and use their holiday entitlement, as well as monitor signs of stress. Putting in place an Employee Assistance Programme (EAP) giving employees access to confidential stress management advice and counselling support can also be helpful and encourage workers to help themselves when needed.
Regardless of whether employers choose to offer PMI schemes or not, they can’t afford to ignore workplace stress and the negative effect it can have on workplace productivity. Taking a tick-box approach to health and wellbeing by offering a selection of benefits and an EAP, is unlikely to be enough to protect the business from long-term absences. Instead, employers should adopt a holistic and preventative approach; listening to what employees really want, equipping them to take more responsibility and empowering them to discuss workplace issues as necessary.
Taking a more preventative approach, some SMEs are choosing to introduce other perks that are intended to help employees to adopt a healthy lifestyle. For example, providing tempting fruit bowls and bottled water; lunchtime yoga or pilates classes; subsidised gym membership and incentives for those choosing to walk or cycle to work. Workshops providing resilience or mindfulness training are also increasingly popular; encouraging self-awareness and equipping employees to recognise signs of stress and learn how to deal with them before they become a problem.
Stress-related health conditions can have a significant impact on workplace productivity for many SMEs, particularly if periods of absence become protracted. According to the Health and Safety Executive (HSE), the total number of cases of work-related stress, depression or anxiety in 2015/16 was 488,000 and the total number of working days lost was 11.7. The CIPD’s latest Absence Management survey, published last month, identified stress as the most common cause of long-term absence and the second most common cause of short-term absence, following minor illness. The survey also revealed that reported mental health problems, such as anxiety and depression, are increasing.
PMI schemes and their alternatives can help businesses to manage workplace stress and attract and retain talent, particularly when offered as part of a complementary package of health and wellbeing benefits. Rather than taking a tick-box approach, however, employers should adopt a holistic and preventative approach; listening to what employees really want, equipping them to take more responsibility and empowering them to discuss workplace issues as necessary.
Chris Ellis, financial planner and Ed Hussey, director of people solutions at accountancy firm, Menzies LLP. The firm provides advice to SMEs about employee benefits and consultancy to HR managers.