When the time comes to consider health insurance renewals, most companies focus too much on the costs of the premiums, and that’s understandable – benefit budgets are generally under scrutiny and, as with most things in life, the cost inevitably increases year-on-year.
Health insurance premiums rise for a few reasons. First, there’s so-called “medical inflation”, which considers things such as the frequency and incidence of claims, increases in medical costs and the introduction of innovative medical intervention. Then, there’s the cost of any claims made under the client’s policy. Additionally – on SME/age-related schemes, anyway – there is the effect of the membership growing older, with most insurers now working on annual age increases rather than five or ten-year bands.
In our experience, insurers tend to account for medical inflation at a rate of up to about 10 per cent (global advisory firm Willis Towers Watson, for example, estimates UK medical inflation at six per cent) and age increases at typically three to four per cent each per year. This means that when a client gets their renewal paperwork through, they tend to see that the premium has increased by 15 to 18 per cent or so, which seems massive when viewed in terms of general inflation.
Another issue that leads to cries of “too expensive” is the wonderfulness of the NHS – being “free at the point of use” means most people have simply no idea of the costs involved. As a result, there is no perspective when reviewing health insurance premium rates. Therefore, sometimes some context is needed.
With this in mind, we often find it useful to make a case study of one specific condition – in this case cancer – to help put the cost of healthcare into context.
According to Cancer Research UK, the incidence of cancer in the UK has grown by seven per cent in the last decade (up 13 per cent if we look at the last 20 years). Further, data shows one in two people are now expected to suffer from cancer during their lifetime. Whatever the reason for this, the trend impacts directly on medical inflation rates, and for obvious reasons.
First off, immunotherapy alone starts at about £100,000, and even your standard chemotherapy drugs are expensive, ranging from £1,650 for a six-month cycle to £4,000 per month, depending on what is used. Further up the chain is doctor and hospital fees – these are high too. One leading private care provider, for example – in the case of prostate cancer – is quoting £4,536 for consultation, biopsy and diagnostics and £15,810 for prostatectomy. That’s £20,000 without follow-up drugs or further treatment. Then there’s the development of new technology – one example is proton beam therapy, which costs about £100,000 per treatment.
Big numbers, of course – and once these are digested, we feel clients better understand the value of health insurance, better contemplating the costs of providing the benefit.
Private medical insurance (PMI) provides employees with timely access to diagnostics and, if required, treatment. Looking from a purely business point of view, this will reduce lost productivity due to sickness absence, stress and presenteeism.
PMI also offers employee members access to treatment options that may not be easily available via NHS facilities. The cost of specialist drugs and expensive, innovative treatments are controlled by NICE (National Institute for Clinical Excellence) and NHS management to maximise the financial resources of the NHS. Again, private access to these treatments will directly impact on productivity if an employee is able to resume work more quickly than otherwise expected.
As with most insurance policies, PMI suffers from the fact it’s often difficult to weigh up the cost versus the benefit. Most people buy insurance and hope they never need to claim – then when it comes to renewal they question the value because they haven’t had any claims! Health insurers are trying to change this perception by improving wellbeing add-ons, but the key message should be the protection that PMI provides when it comes to access to care and specialist treatments.
When the cost of premiums is weighed against the potential cost of treatment, there is clear value in the insurance. All too often employers focus on how much PMI costs rather than the positive impact access to expensive treatment has on the employee, their family and their engagement with the business.