How medical inflation is driving up the cost of employee health insurance
As if the cost of living crisis wasn’t wreaking enough havoc on peoples’ finances, we now have to deal with the rising cost of employee benefits as well. Namely private medical insurance (PMI).
Everything from a greater focus on expensive scans and new technology to a rise in the number of people opting into private health insurance is forcing the price up. This cost is then passed down to employers, making it harder for workers to access the healthcare they need. We’re uncovering the reasons behind these price hikes and sharing tips for companies hoping to reduce the burden on their staff and their budgets.
What is medical inflation?
When we talk about medical inflation, we’re referring to trends in the medical world and the rising cost to support them. This might mean the cost of treatments or simply the increased availability of them around the world that’s pushing the price up. Did you know that this year, medical inflation has doubled compared to an average of 9% in 2022?
There are endless reasons for this. One of which is that lots of doctors are now focusing more on preventative care which means more scans and diagnostics and therefore higher costs. Similarly, new technology (such as keyhole surgery) is better at diagnosing and treating life-threatening illnesses, but these come at a cost.
Newly marketed drugs are also more expensive now than they were just a few years ago. The total cost of prescription medicines to the NHS in England reached a new high of £17.2 billion in 2021 to 2022, according to a new report. Thanks to the rising cost of prescriptions, 10% of people have admitted to not picking up their medicine.
What’s going on with the NHS?
Bed-blocking, lack of staffing, insufficient funding and long waiting times have come together to cause something of a crisis in the NHS in recent years. Covid-19 only made things worse, and now fresh nurse and doctor strikes over poor pay are making it even harder for patients to get the care they need.
In the UK, over 300,000 appointments now require waits of over one year. Depending on the severity and complexity of the issue, many people can’t afford to wait for NHS treatment, which is forcing more and more people to fork out for PMI. And it’s not just patients going private. One in four GPS now has private healthcare due to growing concerns about hospital waiting lists, and we’ve seen a rise in NHS staff quitting the public sector and going private because of the cost of living crisis.
The impact on private medical insurance
A dangerous combination of medical inflation and the NHS crisis has led to many insurance providers, like Marsh, warning that premiums are likely to go up. In fact, market pressures are pushing the cost of PMI schemes up by more than 50% in some cases. Lots of corporate employers are expanding their cover so that more employees and their dependents can access schemes to keep their health in check. And it’s no wonder given that across the UK last year, 272,000 people used their own funds to cover the cost of having an operation or diagnostic procedure at a private hospital – a sharp increase from previous years.
Plus, we live in an ageing population and people, in general, are living longer. According to the World Health Organisation, between 2015 and 2050, the proportion of the world's population over 60 years will nearly double from 12% to 22%. Unfortunately with age comes illness, so we’re likely to see more people relying on private health insurance in later life.
How can companies prepare?
We’re all for employers giving their staff a helping hand by offering PMI – people need it now more than ever. But it’s an expense that’s slowly rising and, for some, may no longer feel affordable.
Whether your business is impacted or not (and by how much) depends on the insurance provider you use for private healthcare. Bear in mind that some will have taken a bigger hit or been burdened with higher supplier costs and pushed up their prices. Plus everyone calculates the cost of their premiums differently. So it’s worth doing some research around the best insurance providers before you settle on one.
If your provider has recently upped their prices, you might want to try negotiating with them to bag a better deal. Particularly if you’re a large company, they might be more open to offering you a package deal with a lower cost per employee.
Don’t forget to check exactly what you’re offering your employees. Many businesses would have opted for the added extras like dental and eyecare years ago when it was more affordable. But if these nice-to-haves are making your premiums unnecessarily expensive, it could be worth removing them from your benefits package and focusing on core healthcare.
Think carefully before ditching your PMI offering altogether. Private healthcare is a fantastic benefit that employees appreciate, so it could have a positive impact on your staff retention. Sometimes just knowing you have insurance is enough to keep you stress-free, and everyone knows that happy employees are more likely to be engaged and productive. Not to mention, a whopping 300,000 employees quit their jobs every year because of a long-term mental health issue, so providing health insurance could be a solid investment.
Luckily, Ben makes offering PMI easy. You'll work with a benefits consultant to help you determine the right one for you and how it will fit in with your overall package. From there, we'll help you find a provider at a preferred price through our global broker network. Did we mention we work with a whole range of big-name health insurance providers, like Bupa and AXA Health? It’s an investment worth taking your time over – your employees will thank you for it – and we'll help you do just that.