A recent announcement by the Health & Safety Commission that Britain isset to miss targets for reducing work-related ill-health by 20% by 2010will come as no surprise to the UK's HR directors. They have to dealwith record absenteeism and the 2.2 million employees who claim to beaffected. Health cash plans (HCPs), where staff can claim for healthcosts but which also aim to foster a preventive approach to health, havelong been touted as the answer for encouraging staff to have regularcheck-ups to detect ailments before they become serious. The problem,however, has been that they just haven't proved popular. Currently only5% of the adult population has one.
But could the tide finally be turning? The November 2007 report on thehealth cash plans market by market research company Mintel seems toindicate an upturn could be on the cards. Mintel suggests the market hasthe potential to quintuple in size. Valued at 485 million in2007, it forecasts contributions could grow by 33% over the next fiveyears, reaching 645 million by 2012. Moreover, it predicts one ofthe main drivers of this explosion will be growing demand from thecorporate sector as employers shun inflationary private medicalinsurance (PMI) premiums and opt for value-for-money HCPs that cover theentire workforce.
"The market is already changing, with not only more, but bigger,companies than ever before interested in health cash plans," says JillDavies, deputy chief executive of HCP provider Westfield Health.
For Davies growth has largely been down to her being more proactive. Shesays: "We listened to employers' concerns about employee legislation,absenteeism, improving productivity through a fit, healthy and motivatedworkforce and began offering more targeted packages." The nub, and maincriticism of the Mintel report, however, is that despite Westfield'sattempts, health cash plans are just still not on all employers' andemployees' radars - a factor it says will adversely affect their abilityto improve the nation's health. A consumer study, conducted by GfK NOPand Mintel last July, showed that while a fifth of non-HCP subscriberswould be interested in getting an HCP, more than two fifths of employeeshad never even heard of them.
"People often confuse PMI (see left) and HCPs, so one of our primeobjectives is to educate the market while driving consideration of ouroffer," says Clare Lee, head of brand development at HCP providerHSA.
HSA is trying to reverse this trend, and is taking it upon itself tomake sure that HCPs are on everyone's lips. It launched a multi-millionpound brand push in January, with the aim of making HSA a householdname.
Working with creative agency Swordfish, the firm has developed theslogan Healthplans. Simple. Affordable. It also uses a jumper 'sleeve'device (above) across all of its marketing materials. This includesmagazine inserts, print ads in trade titles, 48 sheet outdoor postersand a national TV ad campaign, which runs in three bursts untilNovember. "The sleeve represents a health 'conscience' that nags away atus," says Lee.
Joining in the publicity campaign is HSF Healthcare, which has launcheda new website. "It's not just an information tool, it's also a salesvehicle," says sales and marketing director Stephen Duff. "We wanted toget away from the dour medical approach." For business clients, thisonline tool is complemented by the face-to-face approach and a dedicatedteam that regularly visits organisations and explains to the workforcehow HCPs work, and why they may be a better option than PMI.
According to Davies, the use of intermediaries or brokers selling HCPshas been a problem. "Traditionally, the intermediary market did not seethe worth of promoting HCPs and was more interested in the profitmargins from other options, where the number of policyholders was lowerbut the commission higher," she says, referring in particular to PMI."Now brokers are finally seeing that we can get volume, so cash plansare proving their worth." Certainly, over the past 12 months, manyintermediaries, such as the PMI Group, have introduced dedicated HCPspecialists.
One of the biggest barriers to growth, says Mintel, is the fact mostHCPs are entirely paid for by the employee. Just 8% of all HCPs are paidfor by employers. "We are keen to tell employers that if they absorbpart of the cost, it will save them money overall because it's a healthmaintenance and budgeting benefit," adds Duff.
But having evolved from the 'penny in the pound schemes', popular withlow-paid workers pre-NHS, nowadays HCP providers are also keen toposition themselves as modern mutuals. Not only are they having to boastthe typical advantages of having a cash plan - no medical examination isrequired prior to joining, spouses and dependants are usually includedfree and premiums do not increase with age - but putting intoperspective rising healthcare costs, plus demographic and lifestylechanges that are shifting the onus for healthcare provision (such asdental care) from the NHS to the individual.
Mintel forecasts that the expected expansion in the 25-34 age populationfrom 2009 onwards should help boost subscriber numbers - but only if thebenefits of HCPs are communicated enough to reach this group. To attractyounger policyholders, some providers have introduced discounted gymmembership and alternative therapies, including physiotherapy.
Those focused on the corporate sector, however, have leapt on optionsthat help organisations meet their employee wellbeing and legalresponsibilities in a more effective manner. "If you look at where cashplans have come from, they are traditionally a consumer product," saysRichard Halley, head of b2b sales at HSA. "But if you introduce servicessuch as employee assistance, screening and occupational health, you givecompanies something relevant, cost-effective and far moreefficient."
Halley points to organisations that for duty-of-care reasons may need toupgrade their existing optical provision for VDU operators, or includestress management for the entire workforce. "With a corporate cash plan,it means one provider, one policy and the option to reallocate existingbudgets and make them work harder," he says.
This is something finance company the Richmond Group has recentlyundertaken. "Previously, we were paying for eye tests and contributingtowards the purchase of glasses for our people," says operationsdevelopment manager Vikki McCallum. "Now, people can also get dentalcare, while we're able to run health-screening clinics for smokers andto check people's cholesterol levels, and it's saving us money."
The big question of course is whether HCPs will continue to take off ifbosses are not prepared to foot the entire bill. Certainly, anecdotalevidence suggests that take-up on voluntary schemes is oftendisappointing. But Westfield's Davies says this too is changing. "Over80% of our new b2b business so far this financial year has been fromfirms paying the whole premium." Maybe 2008 will be the HCP year atlast.
IS PMI DEAD?
If the economic climate gets tougher, as seems inevitable, it is likelythat some employers and individuals will choose to scale down their PMIcover and switch to an HCP instead.
According to the Association of British Insurers' (ABI) latest figuresfor 2006, just under 10% (5.9 million) of people in the UK have PMI, ofwhich 4.2 million have corporate coverage. However, the ABI warns thatboth individuals and corporate subscribers need to look very carefullyat everything on the market and what individual policies offer.
"PMI and HCPs are very different things, so if an organisation islooking to get people back to work quickly after sickness or injury,they may be better off with PMI with some element of built-inoccupational rehabilitation," says ABI assistant director of PR JonathanFrench.
However, Kate Naylor, deputy HR director at logistics firm Gist, whichprovides supply-chain services for clients including Marks & Spencer andCarlsberg, believes that many employees currently covered by PMI wouldfind an HCP more advantageous. In fact, she is currently in the processof asking her senior managers which of the two they would prefer.
"An HCP is not just a health benefit, it's a financial benefit. And asthe tax liability for PMI has gone up, I believe many of our youngermanagers would be better off with an HCP," she says.
Having initiated cash plans at two organisations, including Gist, sheadds: "PMI is all about peace of mind and is something you hope youwon't use. However, while cash plans may be seen as the poor man'srelation, they're a good way to put money in people's back pocket atrelatively low cost and often more relevant than PMI for those withyoung families."
WHO HAS CASH PLANS?
- One in 20 adults in the UK aged over 18 has an HCP. But as many plansinclude additional family members, only 5%-8% of the total populationare covered
- The typical HCP subscriber is a working ABC1C2 aged 35 to 64
- Most corporate packages cover existing conditions and have no agerestrictions, so are popular with over-50s - but watch out for youngeradults with family responsibilities, sporty lifestyles and designs onsmart teeth and glasses getting in on the act
- Unlike PMI, the vast majority of plans are taken out by individuals orby a group of employees through a salary deduction arrangement
- The corporate sector, where bosses pay for HCP in full, accounts forjust 8% of subscriptions
- Dental and optical treatments represent the largest share of claims(62%). Complementary treatments and online health information are seenas the least important benefits by subscribers
- In the b2b market, benefits relating to occupational health, such ashealth-screening, employee counselling and assistance, are becoming morepopular, as are flexible and bespoke packages, integrating criticalillness and personal accident cover
- Discounted gym memberships appeal to employers looking to encourageactive lifestyles
- The most popular advertising channel is the press. Sponsorship isanother avenue that providers use to raise brand awareness and fulfiltheir CSR responsibilities
- Almost half of those questioned say HCPs represent good value formoney, while two-fifths said they had never heard of HCPs before
Source: Mintel/GfK NOP
CASE STUDY
The Dexel Tyre Group, which has 150 staff, recently upgraded itscorporate HCP. At a cost of 4.33 per head each month, the firm isproviding dental and optical cover, maternity and hospital stay grantsfor staff and their dependant children. "People can claim for visits tohospital specialists, physiotherapy, chiropractic, osteopathy andhome-care benefits," says finance director Julie Eyre, who oversees thescheme. "There are also health club concessions, a 24- hour GP phoneconsultation line and a 24-hour counselling and advice line," she adds.Currently around two-thirds of the workforce have taken up the scheme ona voluntary or company-sponsored basis.
- The HCP market is valued at 485 million in 2007. Mintel'sstandard forecast model suggests contribution income will grow by 12%over the next five years, reaching 542 million by 2012. Its mostpositive scenario (which assumes more robust growth in premium rates)puts this figure at 645 million, representing a rise of 33% atcurrent prices.
THE HCP MARKET FORECASTS
485m - 2007
542m - 2012
645m - 2012
Currently just 8% of all HCPs are paid for by employers
Currently only 5% of the adult population has a regular check-up
The health cash plans market is forecast to grow by 33% in the next five
years
Mintel forecasts that the expected expansion in the 25-34 age population
from 2009 onwards should help boost subscriber numbers.
