A place for PHI?

Do employers still view Permanent Health Insurance as a useful benefit?
Compiled by Simon Kent

The way we look at Permanent Health Insurance (PHI) is that it is in the
interest of both the employer and employee to have some form of income
protection. It enables workers to have some financial security in the event of
serious illness or disability. We see this as an integral part of our overall
approach to healthcare, so our employees have access to health support advice,
an employee careline, free health screening and a private medical insurance

While we do not specifically offer PHI, we self-fund our own prolonged
sickness benefit. As far as our employees are concerned, this is the equivalent
of PHI and is available to all eligible employees.

The main reason why we provide this benefit ourselves, rather than through a
third-party PHI scheme, is the belief that if we do it as a self-fund, we can
keep a fairly close tab on who is accessing the fund, where they come from in
the organisation, how we can support them and whether there are any trends in
this provision. If people go sick for any length of time and you have a PHI
policy through third-party insurance, there is a tendency for you to think ‘out
of sight, out of mind’ – particularly when all you pay is an insurance premium
and that premium tends to escalate. If you pay the benefit yourself, there is a
tendency to maintain contact and therefore have a better success rate at
getting people back to work.

While hugely important for the individual, the financial payment is the
‘easy’ part. It can be expensive, but it is relatively easy to provide. The
more difficult part is maintaining the relationship when, for a variety of
reasons, people who have been absent for some time feel reluctant to make the
first move. The longer the period of time with no contact between employer and
employee, the harder it can be to get people back to work.

Mandy Devonald-Batt
Head of HR, SASUK

In the past five years we have had
only three claims on PHI, so we have a healthy workforce. The only difficulty
I’ve experienced has been a reluctance on behalf of the insurers to accept a
claim immediately. I had one experience where an employee wasn’t paid until
five months after the date payments should have begun, and then the benefit
arrived in a lump sum. It put us in a difficult situation, because our contract
says we will pay sick pay until the 26th week of illness, but there’s no actual
commitment for the company to continue paying past that time, because PHI
should have kicked in.

If you are considering redundancies and employees receiving PHI
are involved, determining who will go can become a moral problem because making
those people redundant also removes their entitlement to PHI.

Derek Kemp
Group managing director of employment law, Human and Legal Resources

There is still a place for PHI.
Problems always arise through badly-written contracts and essentially that is
easy to address.

Airtours made two errors in its PHI contract (see p13). It
didn’t make it clear it could terminate someone’s employment. It also tried to
tell its employees when they would receive their money – but that is the job of
the insurer. The contract should have said PHI will be paid at the entire
discretion of the insurer. Put the right terms in the contract and explain it
to your employees, but leave it to the insurer to run the policy. With these
golden rules, PHI is a benefit which should be provided more, not less. It is
not very expensive and is something any employer should offer.

As an employer, I would like to help someone disabled in an
accident – particularly if they were on company business at the time.

Steve Harvey
Group director of people and culture, Microsoft

Our employees’ peace of mind is
critical to us – we don’t want them or their families looking over their
shoulders wondering what would happen to them in the case of any unexpected
health emergency.

We have maintained our PHI throughout our benefits package, and
even with our upcoming change to flexible benefits, we will still have it as a
base benefit.

We currently have employees who benefit from permanent health
cover, and it works very well for them. At Microsoft we focus on our employee
well being programme, and we have brought in critical illness cover.

I would encourage all companies to reconsider their position,
and put the long-term interests of their employees at the top of the agenda.

Rod Mckenzie
Healthcare consultant, IHC

The problem some employers have is
that they aren’t doing enough on the occupational health side of things to
address potential claims before they arise. Insurance companies work to ensure
as few claims are made as possible, and that can include practices such as sending
out the insurance company’s own qualified nurse to fill out the claim form.

There is increasing importance placed on whether the individual
can capably go back to their job. Schemes which are based on the individual’s
own occupation give no scope for the insurer to try and find suitable
alternative work for the individual. If you arrange PHI based on any
occupation, the insurance can support the individual while they adapt to their
new workplace and the scheme may be better for all concerned.

Employers can usually do something positive in terms of how
they deal with health across the workforce.

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