Mike Blake, compliance director at national specialist intermediary PMI Health group, says: “Employers are being a bit cautious about going down the self-insured route. They must be comfortable with the risks, and scheme members have definitely declined with downsizing over the past couple of years, possibly by up to 5%. So, as the spread of risk is reducing, finance directors may feel it’s worth paying a little bit more to get a fixed price.
“I’ve even come across mergers reducing scheme numbers by as much as 30%, and it is often during mergers and acquisitions when the keenest pricing gets put on the table. The merged party often ends up with schemes with different insurers, and may therefore be looking to consolidate to one insurer. Insurers may want to pick up a bit more membership and worry about claims the next year, when they feel they may be able to hold onto the scheme and increase the price if they impress with service levels.”
Somewhat strangely, going down the self-funded route often does not necessarily also involve using a corporate healthcare trust. At Bupa, for example, well over 50% of group PMI schemes with over 1,000 lives are self-insured but only around 20% actually use trusts. In some cases employers may be put off by the idea that trusts involve legal baggage but this is no longer true, and trustees’ duties are nothing like as onerous as they are with pensions.
There is also a feeling in some quarters that trusts can involve perception and communication issues because they have a benefit that is discretionary rather than guaranteed. But there is no apparent evidence to suggest that employees are any less likely to get paid in practice with trusts. Indeed, the flexibility that trusts offer to cover things not covered by insured schemes means that employees can enjoy even broader cover.
Chris Bailey, principal at national intermediary Mercer Health & Benefits, says: “In the majority of cases it is hard to see why those self-funded schemes out there not using trusts aren’t doing so, and we see the majority of new schemes being written via trust. We have also seen clients being more inventive around benefits in trusts and around the way they are administered. They have, for example, been introducing guided pathways to manage choice of hospitals and consultants and have even been upgrading rooms and providing better newspapers.
“Administration costs on trusts are being driven down and we are also seeing more use of intermediary negotiations to check that stop-losses are the right size. In the past employers would tend to accept the stop-loss level that the insurer suggested but with the economic downturn employees don’t want to pay for more stop-loss cover than they are going to need. Aggregate stop losses used to typically be 133% or 125% a year ago but now some are as low as 110%. There is also more targeted use of specific stop-losses, particularly for cancer, where there is often a stop loss of £50,000 per cancer claim.”