Many things have changed in the eighteen years since I started advising on Private Medical Insurance – we have moved from thirty different insurers offering their own ranges of cover to just four big providers – to name just one!
Year-on-year increases in premium
This is the one constant that remains. Insurers will of course put this down to a number of main factors: medical inflation (which could be an entire article in its own right), existing policy holders who are are more likely to claim as time goes on, and the claims performance of members on cover. All those combined in 99 times out of 100 cases will lead to an increase in premiums for the employer and an increase in BIK tax for the employee, both of course are unwelcome and both are regularly eye-watering percentages.
The purpose of PMI
If you take PMI back to its very basics, its purpose is to ensure that your employees are back working as soon as possible after an illness or injury. As a business owner, you do not want your best people waiting eighteen weeks to see a specialist, or over a year for the surgery which is preventing them from sitting at their desk. For the very same reasons, senior employees have also come to expect PMI to be included in their benefits package when choosing their next employer. Unsurprisingly, they too do not want to be in pain while waiting on their local NHS.
Many agree that when it’s needed most - for life-threatening conditions - the NHS is there for us. Sir Alex Ferguson’s recent well-publicised treatment and subsequent fundraiser speaks for itself. In the vast majority of cases, the NHS will treat you quickly and efficiently. Admittedly, it might not be in the same hotel-like comforts of some PMI treatment, but satisfaction with the NHS is at an all-time high, according to a recent survey.
A case for the six-week wait
The six-week wait option has always been available with most insurers. Although the thought of including a waiting time has rarely been on the agenda, excesses are often increased or outpatient limits are imposed in order to curb the ever-rising costs. Due to constant premium pressure, the six-week wait option is becoming more popular as a way of containing cost – both in the short and long term. The rule itself says you can seek private treatment for outpatient consultations, diagnostic tests (that don’t involve surgery), and CT, MRI or PET scans, whatever the length of the NHS wait. In practice, this rule essentially means the insurer will not be required to cover a serious condition (such as urgent heart surgery, or cancer treatment) past the initial diagnosis.
With the regular advent of new, expensive treatments – certainly when it comes to conditions such as cancer – this removes a costly risk from the insurer, and as such can offer a significant saving in premium to all policy holders. It also protects the scheme from future price increases, as the very largest claims will no longer be covered under the policy.
The alternative: premium increases
The six-week wait of course will not suit all employers and employees, so advice should always be sought when considering a significant change such as this. However, when costs are continually rising, the overall viability of a company-funded PMI policy is becoming a very real issue for many businesses. With long-term, serious illnesses affecting more and more people (and the treatments only becoming more and more expensive), bearing the cost of this under an insurance policy means only one thing; premium increases.
In recent years I have witnessed a one cancer claim totalling over £200k in a policy year – these regularly come in at the £80-£100k mark. In cases where there is no twelve-month limit for Biological Therapy, these costs can repeat into the next policy year for the same claimant. Sustainable pricing is a ideal offering, but with all the best will in the world, no scheme can repeatedly swallow claims at this level, without significant increases in premium. When those premiums become unsustainable for the company to pay, or the non-claiming population choose to decline their cover due to the cost, the risk of those remaining in the policy goes up along with premiums.
In this scenario, perhaps the six-week wait won’t have such negative associations. The policy can still meet the fundamental needs of the employer and policy holders, but has a natural protection built into it – ensuring its long term viability as a top five employee benefit.