In focus: Cash plans– a new hierarchy emerges

“What providers need to realise is that clients expect them to be more transparent in their dealings. They may say that premiums are fixed for three years but in the small print they reserve the right to increase these if claims patterns prove adverse. At the moment they are not feeding back to clients whether claims are positive or negative in relation to premiums but a cash plan is the only employee benefit scheme you are guaranteed to claim on, so clients need to know whether they are getting value.”

McGuinness reports that his clients are continually requesting greater dialogue and transparency about claims and one of them is actually considering switching provider simply because it would not discuss claims and premium rates. However, once he informed the provider of the client’s intentions he had the previous three years’ claims information within 48 hours.

He continues: “If cash plan providers realised that giving out such information can strengthen relationships with clients it could help them capitalise on what I consider to be considerable potential in the market at a time when other healthcare benefits are experiencing a downturn in demand. I’ve had a number of clients seriously consider getting rid of private medical insurance (PMI) schemes to cut costs but I’ve never heard any mention of doing without cash plans because employers know they would have employees banging on their door complaining they couldn’t get optical and dental treatment covered.”

Recently the cash plan market has performed better than some other areas of health insurance and protection. According to Laing & Buisson’s UK Health & Care Cover 2009, the number of company paid contributors increased by 29% during 2008. But these account for only 13% of the cash plan market, and overall contributor numbers fell by 1.6% to 2,943,000 during the same period.

Progress reports volunteered by providers for 2008 contain no horror stories. Westfield Health refers to a record year for sales in its last financial year to 31st March 2009, with intermediated sales rising by 43%. BHSF reports sales “broadly unchanged” and Medicash sales “slightly higher” for 2008, and Simplyhealth is adamant that overall losses are primarily a reflection of poor investment returns and that its cash plan business continues to be successful. It reports that corporate cash plan sales through brokers doubled last year but acknowledges that all three of its cash plan subsidiaries saw “increased challenges on the direct side as the year went on”.

However, one is left with a sense that 2009 has generally proved harder work for most. Some providers conveniently do not volunteer any relevant figures. Westfield Health, for example, refers to a “strong start” in the first quarter of its current financial year. Others acknowledge some drop-off in demand. Sovereign Health Care, which enjoyed a 58% increase in new cash plan business during 2008, reports new sales 14% lower than this time last year, and HSF health plan, which enjoyed a “slight increase in sales” during 2008, admits a decrease of around 10% during the last six months.

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