Rise in UK health benefits costs prompts adviser debate : The cost of providing health benefits to employees in the UK rose by 4.9% in 2010, a larger increase than anywhere else in Europe, according to a survey of employers conducted by Mercer.
Across the continent the cost of providing private medical insurance (PMI) and other health-related benefits (such as dental benefits, employee assistance programmes, critical illness insurance and income protection) rose by 3.3%, according to the benefit consultant’s survey of 556 employers in 14 European countries.
The figure was calculated by polling employers on the average increase in the per-employee cost of supplying all health-related benefits then finding the average for each individual country. Employers across the countries reported different causes of the increase in costs. In the UK it was attributed to medical inflation while in other countries employers were more likely to cite increased utilisation of health services or regulatory changes.
Despite the increases, the survey found that most employers remain unwilling to restrict eligibility for benefits or scope or coverage or to shift more costs to employees, preferring to focus on measures that do not directly affect employees, such as insurer negotiations and managing their scheme. Just 8% of the UK employers require employees to contribute to the cost of PMI, compared to 80% in France, although 47% require a contribution for including dependants in schemes.
Asked about why they offered health benefits, employers were most likely to cite the attraction and retention of talent (73% rated this as important), which may explain their reluctance to introduce cost-sharing. Other objectives included managing employee health risks and improvements in productivity. Two-thirds (66%) of respondents said that future social welfare reforms would increase the pressure on employers to provide private health benefits.
Other intermediaries questioned Mercer’s findings. Karen Gamble, director of health & wellbeing at Heath Lambert, said each scheme, particularly larger, self-funded ones, would have medical inflation particular to itself, while the bulk of the market (SMEs) would be community-rated.
“I think what is interesting is the way that some administration fees seem to go up by the rate of the retail prices index [RPI], although I’m not sure insurers costs go up at that rate,” she said. “Generally I would say that RPI is a fact but the average can be a bit misleading.”
Lindsey Joseph, divisional director for group risk at Manchester-based intermediary LEBC Corporate Healthcare Solutions and spokesperson for the Association of Medical Insurance Intermediaries (AMII), said Mercer’s 4.9% was “not necessarily indicative” of the SME and corporate sectors, “where increases are varying quite considerably”.
AVERAGE CHANGE IN PER-EMPLOYEE COST OF HEALTH-RELATED BENEFITS 2009 – 2010