Senior EBCs urge PMI market to continue move to Open Referral

Health Insurance panellists debate 'perfect storm' facing private healthcare industry

A “perfect storm” is brewing which could change the landscape of the health insurance and private healthcare landscape forever, according to panellists assembled for Health Insurance's Boardroom Briefing on corporate healthcare.

Participants at the event – held just ahead of the Office of Fair Trading's decision to refer the private healthcare market to the Competition Commission – agreed that there is little doubt that employers will continue to kick back against the rising cost of private medical schemes. This will come at a time of great uncertainty, they said, when major reforms to the NHS are bedding in.

There was also widespread agreement that private hospitals and consultants will have to change their ways of working in order to make healthcare more affordable for employers, or else the private medical insurance (PMI) market will continue to contract.

Participants also said PMI providers will need to find new models of funding healthcare in the years to come.

Aviva UK Health’s Nick Reynolds said: “There’s a perfect storm brewing. Employers want innovative ways to maintain the benefits and reduce costs at the same time. You can put in limits, you can raise excesses, insurers have tried with hospital networks to reduce costs, but they are fairly blunt tools. [...] Aligned to that you have got the private hospital groups who just seem to think that they can put through increase after increase, year after year, and they’re not getting any more efficient or any more effective. Employers are not going to carry on just paying and they want to see a different approach to this market.”

Consolidation in the PMI market is going to be one of the factors that brings the issue to a head, according to Jon Austin of Xafinity Consulting, the advisers.

Austin said: “As consolidation comes, so there will be a commensurate hardening of prices and that’s actually going to force the debate straight to the fore. That is going to drive the change because year on year increases such as we’ve had over the last 25 years are no longer sustainable. There have to be other changes.”

As procurement departments continue to play a greater role than their HR colleagues in managing corporate healthcare schemes, cost is becoming the main factor driving purchasing decisions, participants said.

John Horley of employee benefit consultancy Enrich explained: “A lot of organisations are bringing procurement in almost for the first time so you’ve got very inexperienced people coming into the market. They’re coming in to make their mark which is basically that they need to save costs. So you’re not dealing with an educated adversary, if you like, you don’t have the opportunity of explaining the long-term benefits of the investment they’re making and the product and services that they’re buying. Procurement is just looking to drive down costs, they’re not taking into consideration the return on investment that they might get with reduced absenteeism.”

Paula Aitken of The Private Health Partnership, another intermediary, added that companies’ attitudes to other cost focused insurances such as employer’s liability and professional indemnity are having an impact too.

“That is beginning to translate across to the healthcare benefits and the onus is on us to educate them [employers] that it’s a very valuable benefit,” she said. “That’s absolutely paramount.”

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