The financial services regulator has rejected the option of introducing an insurer guided private medical insurance (PMI) staff benefits policy because it leads to a “reduction in choice and convenience”.
The Financial Conduct Authority (FCA) said it had considered the option as a way to reduce the cost of its employee scheme which has seen premiums double in five years.
However, it chose to go ahead with its initial option consulted on last year of a two-tier excess payment of either £100 or £200 per year for employees and family members who use the scheme.
‘Reduction in choice and convenience’
Guided care options have become increasingly popular within the PMI market and more insurers are starting to offer the option which usually reduces the range of clinicians and centres available but also the cost of the scheme.
The FCA noted it was not prepared to introduce these limitations.
“Some employers provide guided medical cover. This means the insurer tells you which hospital or consultant you should use,” the FCA said.
“While this would reduce the cost of our coverage, we balanced this against the reduction in choice and convenience and decided against the option.”
The FCA noted staff feedback was against introducing an excess, with the Staff Consultative Committee’s counterproposals being no excess or a sliding scale of excess starting at zero.
However, the regulator said rising premiums were a long-term trend and not significantly affected by Covid, and to put the benefit on a sustainable footing it considered several options.
It believed retaining the existing comprehensive coverage remained a significant advantage to colleagues and the organisation.
The FCA also rejected offering different cover depending on job grade, saying it was “proud that all colleagues receive the same benefits, regardless of seniority.”
‘An excess is reasonable’
Instead, the FCA stood firm on its original plans to charge a once-a-year excess, with lower grade employees and their dependents paying £100 each on their first treatment and higher grade staff and their dependents paying £200 each on their first treatment.
“We believe an excess is reasonable,” the FCA said.
“It reflects the fact that one is payable in those few public sector organisations that provide PMI and in most private companies that offer the benefit. Continuing to offer PMI excess‑free would keep us out of step from the market, which is hard to justify.
“We considered introducing further differences on the excess payable based on seniority and pay. However, we are not aware of other employers using such an approach. Instead, a flat cost regardless of pay scale is more common and less complex,” it added.
The regulator also noted that some staff had questioned whether female employees, those with disabilities or large families would be more harshly treated by introducing the excess.
The FCA said evidence that women in general had lower levels of savings and were over represented in its lower pay grades was why it had introduced a progressive two-tier approach.
It added that the excess being payable only once over a 12-month period per person insured, regardless of how many times each person requires treatment, would help mitigate the impact on disabled people – although chronic conditions are not covered.
“While there are always exceptions, it would be unlikely that all the members of a large family required treatment in same 12‑month period,” it continued.
“In this unlikely event, we do not think the modest excess would deter colleagues from seeking treatment their family needed.”
The excess policy will come into effect from 1 June along with the start of the FCA’s new benefits year.
Industrial action dispute
The reasoning was revealed as the FCA responded to a staff consultation on its pay and benefits policy and published an updated plan to that proposed in October.
The latest employment offer contained several changes to pay and reward proposals which the regulator is hoping will be approved by staff.
Its original proposals were widely rejected with staff overwhelmingly backing strike action in protest over the changes.
A non-binding indicative ballot by trade union Unite saw 87% of members back the potential for industrial action.
The first consultation generated 4,500 responses through the regulator’s feedback tool, 2,200 emails to the team, 700 comments raised in meetings and over 580 questions answered on its intranet site