Health insurance: Beneficial purchases?

In January, with the global economy spiralling downwards fast, the consultancy Mercer published a piece of research that should give occupational health professionals pause for thought when it comes to considering how, where and, crucially, how much employers will be prepared to spend on health insurance and benefits during the recession.

On one hand, the poll of 800 companies across Europe painted a surprisingly robust and positive picture of healthcare spending and intentions among employers. On average, 5.3% of payroll goes on health benefits, with more than half of the firms polled reporting, despite an increase in costs in 2007, a firm intention to maintain health and benefit programmes regardless of the worsening economic backdrop.

On the other hand, and more worrying, while health insurance and health-related benefits were still valued by employers, many organisations struggle to manage employee absence because of a lack of good data, argues Steve Clements, principal in Mercer’s health and benefit business.

Cost-benefit analysis

“Health costs are rising across Europe and yet we know that health benefits remain extremely highly valued by employees. For health benefits to deliver employee productivity objectives and remain attractive to employees, companies must have access to good data. They should be more assertive to access the cost drivers of their health benefit plans and productivity drivers, such as absence causes and cost,” he warns.

With budgets being scrutinised ever more closely and tougher questions being asked of insurance and benefits providers, as well as of HR and occupational health, this lack of robust data and the subsequent difficulty it creates in making an effective business case for investment is potentially a very serious issue for the future.

Already, not surprisingly, employers’ spending priorities and spending decisions are changing, points out Alex Bennett, head of healthcare consulting at Aon Consulting. “A lot of altruistic, good practice initiatives – for example, health education and wellness programmes and how to improve productivity and engagement through wellbeing and health – have been falling off the agenda,” he says.

Targeted spend

Providers and insurance firms say they are seeing firms not so much cutting spending absolutely as more a combination of organisations not taking on new spend, while also revisiting how and where current spend is being targeted.

“It may be a case of bringing in interventions at an earlier point or in a different setting. It is almost a case of going back and reviewing it from first principles,” suggests Bennett.

“I’ve heard of two companies that have been talking seriously about giving up their medical insurance, but whether that is a one-off or a sign of a trend is unclear,” says Dudley Lusted, head of corporate healthcare development at AXA PPP ­healthcare.

Similarly, there have been instances of organisations asking for the same service for a 10% lower fee, says David Wright, chief medical officer at Atos Healthcare.

Nevertheless, with recruitment now frozen in so many companies, one potential silver lining is that healthcare benefits and insurance are still seen by many employers as something worth spending money on. This is not least because employers recognise that it is even more vital in recessionary times to keep those employees they still have happy, engaged and – most importantly of all – firing on all cylinders.

Most valued benefits

Earlier this year a poll of nearly 1,300 people by Aon identified the benefits most valued by workers, with continued income in sickness rated highest and counselling coming at the bottom.

Intriguingly, access to occupational health only made it to the middle of the table, and, somewhat damningly, was rated less highly than access to healthy eating options in the staff canteen.

But this may not be so surprising, because often the benefit OH brings to an organisation is clearer to employers than it is to employees, even though OH professionals will tend to be most focused on the latter, explains Wright.

While much of the attention, nominally, of an OH department is on getting employees back into work, for employers the main value of it is often that it makes the issue of sickness and absence much easier for managers to manage, so freeing them to get on with more “important” things, he suggests.

“The employees’ perception of OH can vary depending on how managers use it. If they use it as a sickness absence police then the employee, naturally, tends not to be so enamoured with it because of the implied threat attached. But if it is seen as something that helps people to stay at work, improve their health and retain their jobs, it is normally looked on more positively,” he says.

A more cynical perspective on this is expressed by Lusted. “Occupational health is often put in more for the benefit of the employer than the employee. It is so they know they can fire people legitimately and keep themselves out of jail.

“But the employee may not be getting a huge benefit from it,” he says.

Demand remains high

Another intriguing aspect of the Aon research is the lack of value given to counselling, whereas, in fact, many have seen an explosion of interest in and demand for counselling and employee assistance programme (EAP) services, argues Wright.

“In the past six months, those customers of ours who have EAPs have said they have seen the use going up significantly,” he says. “A lot of that is about the current uncertainty around the future and worries about money, paying the mortgage, family stress and so on,” he adds.

Stress management is a key area that employers need to be vigilant about right now, and one where insurance companies can often be well placed to help, agrees Helen Toll, health and safety consultant at Norwich Union Risk Services. In February, for example, it urged employers to be on the alert for signs of stress among workers and to ensure they had procedures in place to manage it effectively.

It also recently launched a range of one-day courses for employers on preventing and managing workplace stress.

Workplace hazards

“Stress should be treated like any other workplace hazard. A risk assessment should be carried out, both at organisational level and within each team. It is important to work closely with employees and their representatives to identify the main sources of workplace pressure and develop realistic and workable solutions that proactively tackle the underlying causes of stress,” points out Toll.

“Employers should provide additional support for employees experiencing stress. This could be through the business’s HR department or occupational health professionals. Providing access to confidential counselling services is also recommended,” she adds.

Managers miss the point

Nevertheless, there can sometimes be a gap between what managers assume is important to workers when they are off sick and what in fact tends to be uppermost on their minds, points out Bennett.

For example, when it comes to providing cancer cover, it is often less about getting access to the most expensive treatments through private providers and more about whether their income will be maintained, the speed of treatment and how they will be supported back to recovery and work, he suggests.

More employers, too, are asking tough questions about the cost of their occupational health spend. The danger for expensive, in-house OH departments in the current climate is, of course, the temptation for a hard-pressed chief financial officer to make an “easy win” and go the outsourcing route. “We do get asked more and more about the feasibility of outsourcing elements. Occupational health is still often seen as non-core and firms want to know if they can do it in a different way,” says Bennett. “It does not all, for example, have to be done face-to-face. Remote delivery is becoming more highly valued. But generally occupational health is still seen as a precious resource to have, what is the big issue is measuring it,” he insists.

Lack of understanding

Another wider issue is that employers sometimes don’t understand what an insurer, consultancy, outsourcing specialist or even a financial intermediary or corporate adviser can actually do or offer.

Often it will be HR rather OH itself making these decisions and having these commercial discussions – though again there is an issue here of whether OH is devaluing itself by failing to ensure it has the credibility to be involved at this point.

The employer can fear they are just going to end up getting a “hard sell” or that any advice or solution will, naturally, be tailored to the purchase of a new, and expensive, product or service.

But it really ought not to be that way and, particularly as firms are now more inclined to sit up and listen when the words “value for money” or “save money” are mentioned, the relationship is changing, suggests ­Bennett.

At Aon, for example, the company employs an occupational health consultant, Charlotte Bray, to help both sides understand each other better, he adds.

“It is true that occupational health people will often not listen to a health and risk insurance expert. But they will listen to another OH clinician,” he suggests.

And, in fact, OH often has a contribution to make, Bennett suggests. “I think sometimes it is almost a case of missing the piece. There is a huge role for occupational health to play in this.”

Similarly, at Simply Health, formerly HSA, the organisation has been working with a number of its clients to develop case studies to illustrate how interventions can relate to bottom-line benefits, argues corporate director James Glover.


“There is a tightening of belts and some reassessment,” he concedes. “It is employers taking the view of ‘show me the value in what you are doing’. Where something is just a ‘nice to have’ or there is less ability to show tangible value then it can become more problematic,” he adds.

Occupational health has traditionally been viewed by many employers as little more than a risk management tool, particularly in areas such as the management of stress-related illnesses, he asserts.

But with a growing tension between tighter budgets and greater employee expectations about what they can expect when they fall ill in terms of fast-track access or income protection, for example, many organisations are looking more closely at how OH can help them to square this circle.

“There will be a much bigger focus on what can get the most value for the benefits that are provided, what are the most valuable benefits that we can offer?” Glover suggests.

Which bring us back to the central issue identified by Mercer and others; the paucity of good, reliable, measurable data about the value or success of specific interventions, at what point which interventions work best and who, whether OH or someone else, is best placed to do the intervening.

Government plans

This need for authoritative data and standards is a central plank of the government’s plans for health and work following Dame Carol Black’s review of the health of working age people in 2008. The manufacturers’ organisation EEF also in February unveiled a new tool to help organisations measure how “healthy” they are, what they are doing well and where they can improve.

But, as Lusted points out, unless OH can really make the business case for investment in it, in the current climate of competing priorities and ever tightening belts, it faces an uphill struggle.

“OH can do a good job, providing people can find their way in. A lot of organisations have good policies and protocols but loads of people still slip through the net. Because of poor management, people who should be going to OH do not get there. When they go off [sick] people do not know why and protocols are not triggered,” he points out.

“The problem is occupational health has failed to prove its worth. It still needs to justify its existence through a return-on-investment model,” he adds.

Benefits most valued by employees

  • Continued income in sickness 88%

  • Critical illness insurance 68%

  • Private medical insurance 66%

  • Dental insurance 64%

  • Health screening 61%

  • Canteen healthy eating options 59%

  • Healthcare cash plans 58%

  • Occupational health 55%

  • Subsidised gym 41%

  • Weight loss support 33%

  • Flu vaccination 31%

  • Counselling 30%

Source: Aon Consulting

Where does the recession leave the tax breask debate?

One of 2008’s hot topics, and something touched on by the government in its response to Dame Carol Black’s review, was whether organisations should be encouraged to invest in health and wellbeing interventions and benefits through the ‘carrot’ of tax breaks.

The government’s ambitions around the Black recommendations have been widely welcomed by the profession, but there remain niggling doubts that, with the public purse now stretched by the cost of bank and other bailouts and declining tax receipts, the money for a fit-for-work health service and the other initiatives the government has outlined will be hard to find once the current funding runs out.

As yet, though work is progressing on the fit for work pilot projects the financial crunch has yet to come, suggests Wright.

“The proof [of the Black report] will be when the tenders are actually awarded and when it becomes clearer what they are going to do about helping small and medium-sized enterprises,” he says.

On the issue of tax breaks, behind-the-scenes work is still going on between the Association of British Insurers and the Department for Work and Pensions, says Lusted, but OH professionals, employers and providers should not expect quick answers.

“The tax man needs to know that by giving up some tax, he is going to see some benefit in return. It is a long haul and, with the amount of debt we now have as a nation, I cannot see this as something that the government is going to be spending money on,” he says.

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