Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE: AON), says rising costs associated with Private Medical Insurance (PMI) are creating pressure on HR and employers to find extra budget, without seeing any further advantages for staff. This raises the question of whether increases from Insurance Premium Tax (IPT), medical inflation and the impact of high cost cancer treatment will make employers question the affordability of PMI arrangements altogether.
Rachel Western, principal at Aon Employee Benefits, said:
“There is a three-way increase on PMI costs creating an incentive for employers to review funding and administration approaches to help mitigate cost increases without having to degrade benefit levels.
“PMI is already largely a benefit for higher-paid employees – our concern is that if associated costs continue to increase, it will become even more of an elite offering. Insurance Premium Tax (IPT) has gone up in the last two Budgets from 6% to 9.5% and then to 10%. With IPT at significantly higher levels in some EU countries – in excess of 20% – there is growing concern that further rises may be forthcoming.”
Employers’ costs are also increasing because of high medical treatment charges, particularly those related to cancer. Additionally, costs from employer-sponsored medical plans are expected to rise; an Aon global survey on medical trend rates estimates that the average cost increase will rise by 9.3% in the UK this year.
Western advises that Healthcare Trusts have historically been targeted at the larger corporate but smaller corporate schemes should now seriously consider this style of funding. Development of trusts mean they are now easier to administer, making them particularly appealing to companies that do not have the infrastructure to do the work that was once necessary, especially around the provision of trustee services.