The rise of IPT is highlighting the value of employee cash plans says Stephen Duff, managing director of HSF health plan
The announcement in last summer’s Budget that insurance premium tax (IPT) would rise from 6% to 9.5% took most people in the health insurance sector by surprise. There had been rumours around such a rise a few years ago, but talk had died down and it seemed as if this was no longer on the cards.
A few years ago many insurers simply absorbed the extra cost of a rise in IPT but margins these days are so tight that providers have had no choice but to reluctantly pass this on to their customers. It’s too early to say just what impact this will have on people who currently use cash plans but most of our schemes are voluntary and are run through payroll, so it’s the employees that will have to pick up the tab for any increases.
Cash plans are no longer the preserve of those on low pay, but many of the 3 million people who use them are not well paid either. Some who are currently enrolled in higher-value plans might be thinking about downgrading, running the risk of not getting the amount of money they need to cover their full costs over the course of the year. Where employers sponsor the scheme, they often do so at a low level and give employees the option of increasing cover themselves; it’s possible we might see a move away from employer-funded plans altogether in the wake of this increase.
I have no doubt that George Osborne’s intention was to target purchases such as home or motor insurance, rather than a sector that plays a vital role in ensuring people are able to afford to take care of their health in areas that are not covered by the NHS such as dental and optical. Cash plans ensure people have regular check-ups and do not ignore issues which can then lead to more serious problems – and put additional strain on the NHS – further down the line. Providers such as ourselves now even offer GP helpline services too; again easing the load on the NHS.
The industry has always struggled to raise awareness around the value of cash plans, among both the general public and politicians. They don’t realise the role such schemes play in helping people with their primary healthcare and complementing the NHS, and if they did they wouldn’t be penalising people who are taking responsibility for their own health. HSF health plan is owned by a charity, so all our profits are channelled back into health initiatives through a number of other charitable bodies. Raising the cost of cash plans ultimately takes money away from this. We would like to see an exemption for cash plans from any kind of IPT, to reflect the role they play in promoting health in the community, as is the case in some European countries.
VALUE FOR MONEY
Despite the rise in IPT, cash plans remain excellent value for money, with some starting from as little as £1.10 a week, and employers can help by stressing the benefits for their employees. Many are looking primarily for support with dental and optical cover, but plans can also cover the cost of personal injury treatment, hospital stays – as many people who use cash plans work in sectors where if they are ill they do not get paid – and also alternative treatments such as reflexology, osteopathy, chiropractic, acupuncture and homeopathy.
At HSF, we also have our Assist package, where employees can access a GP advice line and a virtual doctor service, and can have prescriptions sent out to their home or workplace, avoiding the need to take time off work for appointments. Most providers will extend cover to children, and we also extend this to partners for no additional cost.
There are, therefore, good reasons why employers and staff should continue to fund cash plans, despite the additional costs. But the real concern for us and the rest of the industry is that the sector is seen as a soft touch, and IPT is raised again in future budgets, potentially to as high as the level of VAT. This would be a disaster for the sector and would impact negatively on the health of millions of people, particularly those who are in work but earn just over the threshold where they don’t get any assistance from the state, so they have to foot all bills themselves. It’s important providers, employers and staff make the case against this, and help to safeguard a vital employee benefit that brings with it much broader societal and economic advantages.