Adding dependants to group PMI schemes is contributing to a spike in claims, usage and premiums creating a generational divide across UK plc, Graham Simons hears.
Employers are increasingly adding coverage for their employees’ dependants to group plans leading to increasing use and premiums, which has come as a real shock to uneducated employers.
Health & Protection’s workplace wellbeing roundtable in association with Vitality heard this meant some organisations were open to conversations about getting a better handle on these increases.
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The benefits for employees who are happy to wait for treatment for themselves but not for their children, are obvious.
But with younger employees effectively subsidising claims from the dependants of their older colleagues, there comes the risk they may seek to secure a better deal or even ditch their cover.
“Clients understand some of those drivers around some of the claims inflation they have been seeing and the impact on their premium inflation, particularly musculoskeletal (MSK) and mental health, reductions in the average age of claimants and an increasing shift towards claims by dependants,” said Brett Hill, head of health and protection at Broadstone.
“They’ve been very open to conversations around strategies that might start to bend the curve on some of those trends.
“But certainly over the last 12 months a lot of those conversations have been around what could be done in the future because they can’t afford to do it today, because today they’ve got to pay their bill, and cover the premium increase on their healthcare.”
Massive increase in usage
David O’Reilly, head of consulting at NFP Europe, maintained that with schemes now increasingly offering dependants cover, there is definitely a conversation happening as big claims come through.
“You look at the data and it’s coming off the dependants rather than the employees, and they’re saying, ‘hang on a minute, we’re getting these huge increases’.
“However it’s for family members, which obviously is a nice thing to cover and helps the employee that’s facing that challenge, but they want people back in work rather than the dependants being looked after.
“So that is one challenge we’re talking about at the moment.”
Athos Rushovich, director for specialised health sales and dedicated distribution at Vitality, said benefits usage, particularly in primary care, by children and dependants is “massively increasing”.
“Anecdotally, when we analyse our data in terms of reasons for purchase, a lot of it is people saying, they are happy to be at the mercy of the vagaries of the system, but not for their children,” Rushovich said.
He added that claims data held by the insurer supported the notion that dependants and particularly child dependants are a driver of increased usage.
That spike in premiums is coming as a “real shock” to clients.
“Any of us that go and talk to clients at their pre-renewal, it’s not a pretty picture often,” said Clare Dare, head of specialist consulting at PIB Employee Benefits.
“They ask how did this happen? And when you look at the size of the claims, they’re often not huge, you might have one or two big claims, but it’s just there’s so many more incidents.
“The problem is when you’re asked to do the comparison between employees and dependants, the dependants’ graph is huge, and they are saying ‘hang on, this benefit is for our employees’.
“So that’s a difficult conversation, because you’re supporting the whole person then, aren’t you, the whole family.”
Better policing of schemes
The point was raised that better management and a tighter rein on these schemes would help reduce the burden of use, improve employee commitment and keep a better handle on premium increases.
Dan Cockram, employee benefits director at Partners& was one of those arguing there was a case for clients being better at policing their own schemes such as not allowing take-up windows at different stages of the year.
“HR teams do not have the time or resource to manage schemes,” Cockram said.
“It’s not a coincidence that all of a sudden people are popping family members onto schemes when there’s a treatment need and of course, that has a terrible impact on claims.
“We will try to educate clients around it being a great benefit, but also it needs to be sustainable for the organisation and the insurer.
“Running a scheme where it’s a little bit too loose and people are dipping in when they have a health concern, ultimately that is only going to lead to increasing premiums and challenging conversations in future renewals.
“So sometimes the client needs to take a little bit more time to consider how they manage the scheme and be at least a little bit stricter.”
Not educated
There was agreement from others who said they were also seeing these trends very frequently with HR managers.
They added part of the problem was HR and benefits teams had not received much training about the optimum ways to run their schemes, and notably therefore intermediaries had a responsibility to support them in this.
“They’ve not really been educated,” said Nick Hale, founding director of Engage Health Group.
“It’s not really their fault; they’ve got an ethical quandary because someone in accounts has called up saying their partner has just been diagnosed with cancer and didn’t join the PMI scheme back in January when they should have done but would like to now.”
As an example, Hale cited a conversation with a prospective client.
“The director brought us in because they wanted to control the cost more,” Hale continued.
“With a bit of digging they couldn’t work out why their premiums were yo-yoing up and down over the years.
“That’s what had happened; the HR manager was trying to wrestle with the ethical quandary that she had versus the financial responsibility and she wasn’t getting there.
“That was having this really negative effect on how the scheme was being used – lots of people paying in for years and years, not using it, and then somebody jumping in and taking up all the claims in one go.
“We’ve got that responsibility to educate, that’s absolutely right.”
Younger employees looking elsewhere
Hill maintained this issue will increasingly become something organisations need to think about with some employees effectively funding dependant cover of other colleagues.
“That needs to be looked at again because those dependant claims are driving a single unit rate,” Hill continued.
“The single unit rate is going up at a rate that is causing your younger employees to look again at the P11D benefit,” he added.
“Then you’ve got younger single employees effectively subsidising the dependants of older and typically better paid colleagues.
“If those younger employees start to look at that unit rate and think they could almost source this cheaper themselves, or at least think they can, then you’ve got a risk of lapse spirals starting to develop.
“Some employers will need to start looking at the weighting of single versus family and things like that on their cross-subsidies and they need to address those to make sure the burden of funding is falling where it should.”
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