A ‘perfect storm’ has created extraordinary private medical insurance (PMI) rate increases for UK employers, with some facing rate increases of more than 50%, with an average increase of close to 20%, according to Aon.
The global professional services firm advised UK employers that market pressures are pushing medical inflation to an unprecedented average high of 18.8% – more than double the 9.0% average in 2022.
“These market pressures will impact employers significantly, and specifically HR and finance teams, which will need to find solutions or address costs, that, in some cases, have risen by over 50%,” Aon said.
A combination of three key events in the UK has created the “perfect storm” Aon said. The first event to help drive the increase is higher demand.
“Far more people are joining private medical insurance (PMI) schemes. These new joiners are from corporate employers that are expanding cover to a wider employee base or employee dependents who previously had not felt the need to join,” Aon said.
Another factor has been a lower number of providers.
“One of the largest medical insurers has dropped out of the market, meaning existing schemes are largely placed with three other key insurers,” Aon said.
The third main factor is linked to greater usage of the medical insurance.
“Of the new PMI scheme joiners, more are claiming from day one, wanting to counter significant delays in treatment from the NHS. Claims have increased by 29.5% and claimants are up by 31% (month-by-month averages in 2022 versus 2023),” Aon stated.
Chris Simmons, chief broking officer, health solutions UK at Aon, said: “Previously, it would have been possible to broker a favourable price by analysing needs, reviewing the market and potentially switching providers, but many providers are at full capacity due to the growing demand and there are fewer savings to be made.
“Our guidance to employers is to discuss this early with specialist consultants and consider all options to mitigate any impact and make better decisions.
“We are seeing far greater use of private medical benefits, which is also shown by digital general practitioners (GPs) experiencing a 50% utilisation, leaping from 15% in 2022.
“Traditionally, NHS GPs refer further treatment through the NHS. However, people who use a digital GP are automatically referred to private medical care,” he added.
Rachel Western, principal, technical team at Aon UK, added: “HR and finance teams are likely to have different approaches to this problem, with HR having a responsibility to employee wellbeing, attraction and retention, while finance has a responsibility to reduce premium costs in an economically challenging period.
“There are actions they can take to help the problem – benefit redesign, different funding options and focusing on a preventative health strategy to bring down claim costs.
“Our recommendation is for HR and finance teams to bring each other into the conversation in order to consider both the strategic and health needs of the organisation and build a more resilient workforce.”