[SPONSORED BY MEDICASH – READ HEALTH & PROTECTION’S Q&A WITH MEDICASH’S PAUL GAMBON HERE]
Demand for cash plans remains high across UK plc and shows no signs of letting up.
That demand is broad, but sectors like hospitality in particular, are jumping aboard the cash plans train.
While younger workers are driving this demand, challenges with securing an NHS dental or GP appointment are also key factors.
Increasingly, helping employers mitigate the ongoing cost of living crisis is influencing design of these benefits.
And as demand for at least some form of health benefit grows as NHS waiting lists remain stubbornly high, the humble cash plan could be coming into its own as means of mitigating the challenge from rising premiums.
Another strong year of growth
The corporate cash plan sector enjoyed yet another strong year of growth last year, according to Health & Protection’s sister title Corporate Adviser’s Workplace Protection & Wellbeing Report 2024.
The report revealed an increase in 2023 of 14.8% in the number of employees covered by employer-paid plans.
The positive year for cash plans saw providers add more than 200,000 new employee members in 2023, with the total number of employees covered by plans paid for by their employers now standing at well over 1.6 million.
And when factoring in those family members also covered by plans, the number of people covered through corporate plans stands well in excess of two million, according to the report.
Rapid increase in uptake
Speaking to Health & Protection, Paul Gambon, sales and marketing director at Medicash, notes a continuing rapid increase in the level of uptake of cash plans among its customer base.
“The big impact has been since the pandemic but it seems to have progressed from there,” Gambon explains.
But he says the firm has seen wider interest in industries with lower paid workers like the hospitality sector.
“They’re trying to be competitive,” he adds. “They’re trying to attract those sorts of people that clearly haven’t got the finances to be able to do that.”
Demand is broad
Mike Hesch, head of UK employee benefits at Engage Health Group, maintains there has been a continued trend in the take up of cash plans.
“More recently due to the extra mental health support they can add to a company’s benefit programmes at a relatively low cost,” he explains.
“Due to the range of benefits it offers, it still has a broad demographic demand. It is still prevalent in manufacturing, charities, social care, public bodies, but as their main health benefit.
“Where we are seeing more of a change is the way it’s being used as an extra benefit for those companies who really struggle to attract and retain staff and want to offer the highest level of benefits possible and will therefore offer a cash plan alongside a full private medical scheme.”
Kristian Breeze, director of healthcare at Ascend Health, agrees.
“The demand for cash plans in the UK has seen notable shifts over recent years,” Breeze tells Health & Protection.
“Traditionally popular among lower-income earners and public sector employees, there is now increased uptake among younger professionals and private sector workers.
“Industries such as retail, hospitality, and SMEs, which typically could not afford comprehensive private medical insurance, are increasingly adopting cash plans. This demographic expansion is largely driven by rising awareness of health benefits and the need for cost-effective healthcare solutions.”
Interest growing from larger companies
While cash plans may have been seen as a means for paternalistic smaller employers to introduce some form of health benefits for staff, interest is growing among larger firms.
“The other pattern that we have seen is larger employers being interested in what we do,” Medicash’s Gambon continues.
“If you go back a few years, a lot of our schemes were in the 50-100 bracket, now a lot of schemes are much larger businesses.”
He notes that even though cash plans are a lower cost benefit it can still cost a lot to provide to a large workforce, so employers want benefits that are going to be value for money.
And the appeal is huge for employers given how wide ranging a cash plan can be with a multitude of benefits all under one roof.
Unsurprisingly, growth in demand is particularly driven by the ongoing pressures of the NHS and visiting a doctor, which means having a virtual GP built into the plan is very important now.
But virtual GPs are not the only benefit in high demand with access to dentistry being another issue.
“One in four have not been able to access NHS dentistry in the last two years so it’s important to have other ways and other mechanisms to be able to have access to that,” Medicash’s Gambon explains.
“Mental health hasn’t really improved across the country. You’ve got geopolitical tensions, the state of the economy, all those sorts of things adding to work and home life pressures.
“Musculoskeletal issues are still ongoing as a big issue. We’ve seen big growth particularly around physiotherapy within our policies as well.
“So that’s seen a huge benefit and that affects absenteeism rates within businesses as well both from short term and long term perspectives.
“Clearly, if you reduce absences, that’s going to reduce that cost to the business as well.”
Another a factor behind the popularity of cash plans is this is not a benefit where a policy is taken out and the associated documents are hidden away in a drawer.
“It’s not something you would be paying into for 10 years and never actually use,” Gambon adds.
“There’s much better awareness than there was in the past. I think health plans stand on their own two feet in terms of a benefit that is well worth advisers talking about.”
High performing benefit
The ability of health plans to stand on their own two feet is supported by the fact that they continue to be a high performing benefit.
Indeed, a Health & Protection breakdown of Financial Conduct Authority (FCA) value measures data on insurance products late last month showed healthcare cash plans were leading in almost all categories measured by the regulator.
While the data relates to retail and individual cash plans, out of more than 30 types of general insurance product assessed by the FCA, cash plans were at or near the top of the list, performing particularly highly for claims frequency, premiums paid out and complaints.
Escalating premiums
But with increased usage comes the risk of rising premiums, Steve Ellis, managing director – corporate at Prosperis, explains.
In the private medical insurance (PMI) product this is becoming an increasing serious concern as premiums soar.
“The one I have on my desk at the minute, their concern is how to get staff engagement but the flip side is if they increase engagement, their premiums will escalate, it could be a watershed moment,” he says.
“That is the way people are thinking. Is it a shift towards community-rated plans again where everybody pays the same rate?
“Once you’re stuck in a bespoke plan, can you get out of it? So I’ve got people looking at it thinking, is it the right long-term strategy?”
Though according to Engage’s Hesch, steeply rising PMI premiums have not led to firms cancelling these schemes to replace them with a cash plan, yet.
But it is starting to drive some business activity and behaviours.
“If the increases continue at the same level cancelling PMI and taking on cash plans may be something that we see more of,” Hesch concedes.
“At the moment, many employers are reducing cover levels and implementing an excess on their private medical plans.
“Some are using that reduction in cost to implement a cash plan and then getting staff to utilise the benefits of the cash plan first, although this is still rare as most need the reduction in cost to be able to continue to afford the core private medical plan.
“Most cash plans, even with increases in renewal costs, remain affordable.”
Rest of workforce solutions
And with NHS waiting lists staying stubbornly above 7.5 million, the imperative to provide some health benefits continues.
“For companies that offer PMI to certain employee groups based on seniority or length of service, cash plans are a way of providing affordable everyday health benefits, such as dental and optical, to the rest of the workforce,” says Debra Clark, head of wellbeing at Towergate Health & Protection.
“I hope that we continue to see cash plans develop as propositions in the future so they remain as popular as they are today, perhaps with even more focus on preventative health and keeping people well as much as looking after them if an issue arises.
“I suspect they will have to continue to innovate as this is a highly competitive market and companies will shop around for the best deal.”
And that innovation will be required – particularly among firms wanting to grow headcount.
Looking to the future, predictions are that opportunities for growth of the cash plans market remains as the underlying factors behind demand are not likely change greatly any time soon.
Employer paid cash plans only cover around 2.5% of the UK population so the belief is that there is huge upside and the potential.
Read Health & Protection’s Q&A with medicash sales and marketing director Paul Gambon