As we all strive to create an inclusive and caring work environment, the provision of health and wellbeing related benefits has become essential. 

However, the rising medical inflation in PMI schemes poses significant challenges to organisations attempting to introduce a fairer approach to health benefits. So, what is the reason behind the escalating medical costs and what impact is it having on employee benefit strategies which help foster better health benefits for their valued employees?

The Challenge – Balancing Cost vs Benefits  

Employers recognise the importance of providing comprehensive health and wellbeing benefits to attract and retain talent. However, these benefits come at a cost and with medical inflation on the rise, we are seeing PMI premiums rocket across the board. The continuous increase in medical costs has made it increasingly challenging to strike a balance between offering valuable health benefits - in times where the NHS is struggling - and managing budgetary constraints effectively.

What’s driving medical Inflation?

There are a number of factors which are contributing to the rising medical inflation and understanding these factors can provide valuable insights into how you can navigate this complex landscape.

  • Advances in technology - Although medical advancements have significantly improved patient care and outcomes, these innovations often come with a heavy price tag. Cutting-edge medical equipment, drugs, and procedures contribute to escalating healthcare costs, making it harder for organisations to keep pace.
  • Ageing population - With an ageing population across the UK, there is an increased demand for healthcare services. Chronic diseases and age-related conditions require ongoing medical attention, leading to higher medical expenditure and bigger impacts on claim funds overall.
  • Increased utilisation of healthcare - People are seeking medical support and interventions more frequently due to increased awareness, preventive care initiatives, and improved diagnosis. This surge in the utilisation of healthcare services drives up costs in the PMI sector.

With the above in mind, these challenges are making it harder for all employers striving to introduce a fairer approach to health benefits within their organisations, causing the following issues:

  • Budget constraints – Escalating costs from across every organisation strain the financial resources of Reward, forcing them to make difficult decisions. This can include the level of coverage they can afford to offer their employees, especially when premiums are on the increase, resulting in ringfencing benefits or increasing employee excesses, which in turn negatively impacts the objective of fairer health benefits. 
  • Limited coverage - Rising medical inflation may limit the coverage options, examples such as the removal of oncology or limiting mental health support within PMI schemes. Services such as EAP’s are relied on more heavily, but can lead to gaps in cover or incomplete health coverage.
  • Difficulty with ensuring long term sustainability - Employers want to offer sustainable health benefits that can adapt to changing market dynamics. However, skyrocketing premiums can compromise the long-term viability of these plans, making it difficult to ensure continuity and fairness in benefits.

So, what can an employer be doing to mitigate the impact? 

While the challenges posed by rising medical inflation in PMI schemes are significant, employers can adopt several strategies to mitigate the impact and design fairer health benefits: 

  • Cost containment measures - Employers can explore cost containment measures such as negotiating better rates with healthcare providers, by working with your Broker to ensure competitive terms are being provided. Promoting preventive interventions within their benefits offerings such as gym membership and health assessments can be a great way of ensuring employees look after their health and wellbeing. Employers should also encourage their employees to make more informed healthcare choices by utilising the Employee Assistance Program (EAP) or Online GP in the first instance rather than just relying on the PMI scheme, helping to alleviate some financial burdens associated with increasing premiums. 
  • Work closer with your insurers and providers - Employers can collaborate with Insurance providers and healthcare providers to design customised health benefit plans that balance cost-effectiveness with comprehensive coverage. This collaboration can help employers leverage the expertise of industry professionals to create fair and sustainable health benefits.

By understanding the driving factors and implementing strategic measures to mitigate rising premiums, employers can navigate challenges while offering valuable coverage to their employees in times of need. Finding a balance between cost control and comprehensive coverage is essential to ensure the long-term sustainability of health benefit plans, fostering a healthier and more productive workforce. 

If you want to explore any of the above, please reach out to us to have a discussion.

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