The importance of a healthcare strategy

(published 2006)

By Rebecca Pool

Pension scheme arrangements are all very well, but if a company doesn’t have a successful strategy for managing the health and wellbeing of their work force – a generous pension benefit upon retirement could be irrelevant.

This has become the realisation for a large number of employers, whose attitude towards employee health is changing.  No longer is the company private medical insurance scheme viewed as a perk offered only to senior executives.  Nowadays, the forward thinking employer acknowledges that providing employees with access to treatment and support through an integrated package of healthcare benefits and services is not only key to managing sickness absence within the workplace, but can also serve to significantly improve employee productivity as well as satisfying legal obligations and minimising the risk of litigation.

This change has come about for a number of reasons.  Firstly, we now have a wealth of evidence to clarify the cost of sickness absence for UK businesses, which serves to quantify the problem.  The direct costs from covering sick pay, resulting overtime and temporary cover, and lost service or production time is estimated at £13 billion or £531 per employee (CBI Absence Survey 2006) whilst indirect costs on a business such as on-going benefits, training and recruitment cost of new staff, loss of valuable customer relationships, low morale in remaining workers and higher insurance premiums are possibly not so measurable.

Companies now realise that the first step to understanding the cost of absence on their business is through a robust recording process (be that through an IT solution, outsourced to a call centre or through a structured internal process) and a health risk audit.  Once this data is collated, justifying the cost of putting in place remedial actions such as a full absence management programme, additional employee/employer benefits or a health promotion programme becomes easier, and enables a company to understand their return on investment.

Research recently undertaken by vielife, conducted with a sample of employees from Unilever Plc was able to show that improvements in health brought about by putting in place a corporate health promotion programme lead directly to improvements in work performance, with the return on investment being £3.73 for every £1 spent on undertaking the programme.

With the Wanless Report on Securing Good Health for the Whole Population (Feb 04) and the subsequent Department of Health white paper on Choosing Health (Nov 04), the Government has also played a role in the heightened awareness of the influence the work place can have on people and the ability of the environment in which we work to positively influence the choices people make with regards to their health.

Finally, the market has recognised the problem facing employers and has started to develop solutions accordingly.  Providers such as Norwich Union and the Simplyhealth Group (including HSA and BCWA) have both recently purchased Occupational Health companies to compliment their Healthcare and Cash Plan businesses.

Numerous providers such as Cigna, BUPA, First Assist, Unum and Canada Life have all developed Absence Management services, working on the basis that intervention and rehabilitation at the earliest possible stage is crucial in effecting a successful return to work, given that of the one million people who report sick each week, 3000 of these will remain off work at six months and 80% of those will not work again in the next five years.

Pru Health – the newest provider in the PMI market has designed an innovative approach to health insurance, whereby members are encouraged to actively improve their health, incentivised through significant discounts off health and wellbeing products such as gym membership and health screenings, and rewarded with cash back payments at year end to all non or low claimants on a scheme.  The advantages to the employer being a healthier more productive workforce, lower sickness absence costs and ultimately lower premiums due to the reduced claims spends.

Obviously, the challenge for a business remains the ability to tailor their policies and benefits to work in union and in line with their corporate objectives, whilst at the same time achieving value for money and providing the flexibility that is increasingly demanded by employees.

Punter Southall now has a specialist division who can provide advice on all aspects of Healthcare and Risk benefits, from simply consulting on an existing PMI or GIP scheme, to implementation of a full Health/Risk strategy.

For further details contact Rebecca Pool on 01483 544 661 or email rebecca.pool@psfm.com