Analysis: Cash plans for consumers

What budget options are available to the man on the street?

Cash plans are normally accessed through the workplace, either on a company paid or voluntary basis. Harvey Jones looks at what is on offer to the man on the street

As hard-pressed clients battle to keep up with rising private medical insurance (PMI) premiums, brokers are inclined to forget there is a cheap rival out there.

It is called the healthcare cash plan, and providers sometimes like to market it either as an alternative to budget PMI, or a fallback for people who can not afford health insurance at all.

But in these uncertain times, cash plan providers are also having a thin time. The total number of individual and company plans fell 2.9% in 2010 to 2.65 million, the third consecutive annual drop, according to Laing & Buisson. That was largely due to a 5.4% slump in sales of individual and voluntary plans, to 2.21 million. The smaller employer-paid market is growing strongly.

Austerity Britain must take a dollop of the blame. As the double-dip recession stretches family budgets, some consumers have been cutting back on essential cover such as household insurance. Cash plans will be sacrificed first.

Another reason is the abject lack of broker interest in the individual cash plan market.

Cash plans are designed to help people budget for their everyday healthcare costs. Customers pay anything between £10 and £40 a month in return for regular cash payouts towards dentistry and optical costs, treatment such as physiotherapy, osteopathy, homoeopathy and chiropody, and hospital consultation and stays.

Plans reimburse 50%, 75% or 100% of the cost, depending on the policy and level of cover. Customers send their receipts direct to the cash plan provider. Payment arrives within days, direct into their bank account.

Clearly, it is not PMI. Cash plans do not cover hospital inpatient treatment, although a number of policies do make a contribution towards outpatient consultations and diagnostics.

Contributors to individual and voluntary cash plans now total 2.1 million. Most are happy to pay the premiums because they can make regular claims on the policy, and feel they are getting something for their money. They do not always feel that about PMI.

Families particularly like them, because up to four children can be added free to the typical policy.

HSA has long been the cash plan market leader, and has even advertised its plans on mainstream TV channels. Now it trades under the SimplyHealth umbrella, as do BCWA, LHF, HealthSure and Totally Active.

TWO DIFFERENT BEASTS

Cash plans and PMI are two different things, but they complement each other perfectly, says Howard Hughes, head of intermediary marketing at Simplyhealth, which provides both.

“PMI is there to deal with any medical problems that occur,” he says. “Cash plans aim to prevent those problems occurring in the first place.”

They do this by giving people a financial incentive to look after their health.

“To feel the true value of a cash plan, people should use them on a regular basis, by keeping up to date with their health appointments and claiming the costs on their plan,” Hughes says.

Cash plans offer benefits that are not covered by PMI, such as optical and dental treatment, says Paul Shires, executive director at provider Westfield Health. They can also fund treatment excluded by a budget PMI plan.

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