When companies purchase certain financial products, such as pensions, private medical insurance, income protection, employers’ liability and critical illness insurance, many do this through an intermediary due to the regulations of the Financial Services Authority.
An intermediary’s role is to discuss the perceived risks to a company and propose solutions, usually in the form of an insurance-based product to help companies manage the impact on their bottom line. This role is increasingly offering an interesting career option for occupational health (OH) advisers. So how can an intermediary help employers get a cost-effective OH solution?
The key purchasers of these services are usually finance directors, HR and benefits managers, who require an understanding of how the products, such as absence management, private medical insurance and income protection can integrate, demonstrate a return on investment and thereby ultimately impact the company’s bottom line. The problem is they face a bewildering array of conflicting advice on exactly what constitutes best practice.
The intermediary can help with the complex task of selecting an OH provider which would otherwise involve considerable research for employers. For example, they need to understand what their requirements are, what’s available and the different methods of delivering the services.
Intermediary services aim to measure the business impact of OH services, examine the benefits of different delivery methods and identify improved employee wellness products to improve productivity, employee satisfaction and enhance positive healthcare trends.
When purchasing OH services employers often forget or overlook basic lessons about competition and procurement that are second nature when buying other goods and services. Rather than managing health, employers have attempted to manage costs. As a result instead of understanding the quality and value differences in OH offerings, companies have bought OH services on the basis of price.
This is an easy mistake to make if OH is seen as a commodity rather than a service that works strategically to find ways to improve value and reduce the long-term costs of health for the company and employees. Most attention has focused on the direct cost of OH, while the indirect costs (absenteeism, lost work time, low productivity) have been largely ignored.
Intermediaries can have a key role in helping employers reap the benefits of increasing competition among providers of OH services. Companies including Cigna, Bupa, AXA PPP and Norwich Union OH are investing heavily to compete for increasing employer demand as well as to shield themselves from future downturns in the private medical insurance market. There have been acquisitions and, partnerships together with new product launches such as absence recording tools, electronic health risk appraisals and remote case management. There is also a drive in the industry to intervene early and promote wellbeing initiatives.
Employers who invest in OH services can save costs in risk insurance with several income protection insurers now offering discounts on premiums of between 5% and 10% to employers if they have an OH service in place.
In addition, further discounts can be secured if all potential claims are notified at week four of a period of sickness absence. This early notification allows the insurer to offer interventions such as physiotherapy and psychological therapy earlier in the management of the case in the hope of preventing a condition becoming chronic and the possibility of the employee making a costly claim later.
If a company has a history of low claims there will be more competition among the providers to win this business when the employer does a market review. This often leads to a reduction in premiums for the company and a decreased overall spend on income protection. It can lead to a virtuous circle where employers can use these cost savings to pay for and OH consultancy and source a robust OH service.
Although the work of an intermediary focuses on OH provider selection and auditing of OH services, they can also advise on health screening, absence management, employee assistance programmes (EAPs), income protection appeals and integrated projects.
The OH provider selection process is in four stages:
project scoping and information gathering
The process involves analysing previous utilisation data extrapolating costs and forecasting future spend. This is usually followed by a stakeholder workshop, the outputs of which formulate the specification which goes out to tender. The tender responses are then analysed against the clients’ requirements and a detailed report produced.
The successful providers are then invited to make a presentation on why they should be chosen and how they propose to deliver the service. Increasingly clients like to use case studies so that the provider can explain how they would handle a particular scenario. We also recommend that clients visit the provider sites so that they can see at first hand the operation in progress.
There are currently no formal standards of accreditation in OH provision and no guarantee of quality when employers purchase such services, and there is a degree of dissatisfaction from employers who purchase OH services from both insurance-based and specialist based OH providers.
A particular challenge for the insurance-based providers is the strength of their brands. Many of our clients identify with ‘brand names’ and base their expectations of quality on these. However, in reality, the insurance side of these business for which the brand name is known often have different cultures and personnel to those of the OH side of the business. Many of the insurance companies still operate their OH discussions in ‘silos’ with relatively little crossover to core business areas.
An intermediary consultant can help an employer to understand the quality problems that plague providers, set new expectations about the quality of service required, use providers that demonstrate excellence and measure and hold the providers responsible and accountable for the company’s health.
Employer complaints about providers
They don’t understand our business
Advice is not commercial and is often indecisive with providers tending to sit on the fence
We have to chase the provider for reports and outcomes following consultation
They deliver the service to suit themselves, with poor levels of communication
Return to work plans are not discussed with HR
The management information is poor
The services, such as Employee Assistance Programmes and OH, are working in isolation
The service is patchy across the country
The service requires lots of internal management
How an intermediary can help
Discussing and giving feedback to the insurers about clients’ experiences are of their services
Giving regular feedback on tender submissions and presentations
Asking providers to deliver to more efficient key performance indicators
Asking providers to consider different ways of delivering their services to tailor them to the needs of clients
Suggesting measures and metrics so that a return on investment can be demonstrated
Interpreting and negotiating costs, as comparing like for like can be almost impossible. The costing of OH services is becoming increasingly complex with the introduction of packages, quota limits, discounts, per capita costings and retainers, for example
Discussion of ways to make sure the service is delivered to the specification
Suggesting on occasion that a different person delivers the service or for a change in the account manager, as often certain personalities are not compatible with certain cultures
Criteria used to source OH providers
Areas of expertise
Spectrum of services
Knowledge of the market
Ability to manage contractual relationships
Charlotte Bray MSc, BSc, OHA, RGN is a specialist consultant in OH at Aon Consulting. Charlotte.firstname.lastname@example.org