How to make PMI more cost effective
Private medical insurance (PMI) is a popular benefit, offering employees access to private medical treatment and helping employers to reduce sickness absence.
Research shows that it is the most popular benefit offered by employers1. Yet, it is often perceived as an expensive benefit. In fact, 76% of employers cited budget as their biggest barrier to introducing benefits they would like to offer2. But there are ways for you to keep the costs affordable.
There are several ways to keep policies and premiums cost effective. These include:
- reducing the level of benefit by introducing caps on cover levels, for example capping the amount of out-patient benefit,
- removing more specialist cover such as psychiatric benefits, or
- restricting the network of hospitals where employees can access treatment.
The most common way employers tend to cut costs is by incorporating a higher policy excess. This means that employees pay towards the cost when making a claim. This will allow you to still offer employees access to a range of benefits but limit the cost by having the employee contribute to their treatment. However, it might solve one problem in the short term but create another one in the long term, as it can limit access to the benefit for some employees when they go to claim and cannot afford the excess. If your employees cannot access the treatment and get back to work, it becomes a counterproductive solution.
Benefit caps limit the level of cover that your employees can access within a PMI scheme. The downside to this though is if your employee gets to a certain point in their treatment or recovery and is unable to claim any further. This can affect their ability to recover and return to work.
Another option is to limit hospital access to avoid treatment in the most expensive locations or limit the way in which individuals can access the treatment. For example, through open referral where the insurer can guide the treatment plan through a select choice of consultants, rather than allowing the employee to choose their own. Some providers will also allow you to incorporate the NHS within the policy to help reduce costs. So if the NHS can provide cover within 6 weeks of the date it should be undertaken, your employee would use the NHS. However, if the waiting list is longer than six weeks, they would go privately.
Adopt a holistic approach to your health and wellbeing strategy
Incorporating PMI into a broader health and wellbeing strategy can also be one way in which you can encourage staff to adopt a healthy lifestyle as a preventative measure for ill health.
Encouraging your employees to look after their health can help reduce the cost of high premiums and ongoing treatment, as well as delivering lower sickness absence. Although you might spend more money on health benefits in the long run, you should save money by helping to avoid long-term absences.
Delivering a strategy for your business that finds the right balance of prevention, intervention and protection can help to maximise the physical, emotional and financial wellbeing of your employees. Early intervention is key and the earlier your employees can access services, then the more cost effective it can be in the long term.
That’s why many PMI policies now offer a lot more health and wellbeing initiatives, such as access to private GPs. The aim is to get your employees treated and prevent a claim from even occurring.
Tailored support to your business and your employees
If you’re planning on changing your healthcare offering, it’s worth taking the time to understand your workforce demographic to maximise your investment. By reviewing the needs of your employees you can tailor and engage them in a strategy to meet their specific challenges.
Data insights can also help you get to the heart of any wellbeing issues affecting your organisation and decide where best to invest to improve your employees’ wellbeing. Preventing illness is impossible, but focusing on keeping your employees as healthy as possible will keep your overall claims down and maximise your return on investment.
1 Employee Benefits research, 2017
2 Employee Benefits research, 2017