Employers with medical insurance schemes are braced for a 50% rise in insurance premium tax (IPT) following Sunday's increase.
IPT increased from 6% to 9.5% yesterday (1 November 2015). According to health and protection adviser Punter Southall Health & Protection (PSHP), the rise will mean a scheme with 500 members paying a net premium of £450,000 a year will jump £15,570 in IPT, bringing the total amount of IPT payable to £42,750.
Given the rest of Europe pays even higher levels of IPT, Soraya Chamberlain, PSHP director of corporate healthcare, expects further increases in the future.
The hike may encourage larger employers to consider moving to different medical insurance provision. For those with more than 1,000 employees a corporate healthcare trust offers a viable alternative, while companies with between 200 and 1,000 employees could explore a corporate deductible/master trust.
But what can employers who want to retain their existing medical insurance schemes do to help mitigate the effect of the increase? Here is HR magazine’s quick guide to steps organisations could take and the short- to long-term impact they would make:
1. Introduce a claims excess
This brings an immediate discount to current rates, potentially reduces future claims, and may discourage younger, healthier people from remaining in the scheme
Premium increase or decrease: -5% to -10%
Impact: high
2. Remove psychiatric cover
This is unlikely to be received negatively by the existing membership but produces a low discount for the employer
Premium increase or decrease: -2%
Impact: low
3. Explore whether to reduce cancer cover levels
This would offer both short-term and long-term savings. However, it is a high-profile benefit and removing it may damage reputation
Premium increase or decrease: -5% to -10%
Impact: medium
4. Introduce a six-week NHS wait option
A six-week wait option means employees requiring treatment for which the NHS waiting list is less than six weeks would use the NHS for that treatment. If the waiting list is longer than six weeks the employee would be eligible to receive his or her treatment straight away privately. Introducing this option provides a high discount but may lead to an increase in staff absence and, at the moment, only a limited number of providers offer the policy
Premium increase or decrease: -10% to -15%
Impact: high
5. Move to full medical underwriting for all existing members
This gives an immediate discount to current rates but existing claimable conditions will no longer be included going forward
Premium increase or decrease: -8% to -10%
Impact: high
6. Move to full medical underwriting for all new members
This would not have an impact on existing membership, so risk does not change but it would contain costs in the longer term
Premium increase or decrease: none
Impact: low
7. Introduce an outpatient limit
This is a relatively common benefit limitation and gives an immediate discount to existing rates
Premium increase or decrease: -3% to -6%
Impact: medium
8. Increase NHS cash benefit
This does not give a discount to existing rates but may have a limited impact on future cost containment
Premium increase or decrease: none
Impact: low
9. Introduce specific stop loss insurance
Specific stop loss is a form of excess risk coverage that provides protection for the employer against high ‘catastrophic’ claims of any one person. Introducing this does not bring any immediate cost saving but can be a longer term cost containment tool. However, it is not widely available with fully insured contracts
Premium increase or decrease: +1% to +5% of fund
Impact: low
10. Introduce an annual maximum benefit
This will bring an immediate cost saving but naturally affects members with the most serious conditions, therefore introducing it may not give out a desirable message to employees. A limited number of providers offer benefit maximums
Premium increase or decrease: -2% to -10%
Impact: medium
11. Guided/open referral
With guided or open referral patients are given a limited choice of consultants by the insurer rather than a named consultant they and their GP choose. It is offered by a limited number of providers and not all will produce immediate cost savings. However, it can be a longer term cost containment tool – though additional claims analysis is required to assess suitability
Premium increase or decrease: 0% to -5%
Impact: medium
12. Removal/co-funding of company-paid dependant cover
This would give immediate cost savings while dependants would still benefit from a competitive rate, some 30%-50% lower than personal policies
Premium increase or decrease: up to -20%
Impact: medium
With thanks to Punter Southall Health & Protection for its guidance
