Older people shun private medical insurancePosted on: 01 August 2012 by Gareth Hargreaves
Removal of tax relief for over 65s responsible for stagnation in PMI take up.
What's on your mind at the moment? Maybe your work, your money or your health are. If you own a business and you're an employer it's likely those matters are on your mind most of the time. They're some of the most pressing things to most of us and it's very difficult to disconnect them.
We've had work, health and finance on our minds recently; in particular, how we can get all three working in harmony. Because of that, the following news items (which have appeared in the Trade Press and National Press in recent months) caught our eye.
Tax Breaks for lower paid Workers – proposals to offer employers tax breaks for providing benefits for Lower Paid Workers (1)
Private sector referred to Office of Fair Trading (1)
Think tank proposes end to Private Practice – NHS consultants to be banned from Private Practice? (1)
NHS routine waits up 6% - Non-urgent waits increase during 2011 (1)
The overall picture, judging by the above news stories, is that private medicine is back in the news and back as a topic of discussion amongst many people, not just those in the health service. It's an important and far-reaching conversation, which also raises a number of important issues for the Employee Benefits sector, particularly when it comes to health benefits.
In particular, Private Medical Insurance (PMI) has been suffering from a prolonged period of stagnation in take-up. The cause of this is reckoned to be a number of factors, including the removal of tax-relief for the over 65s, rate increases well above the rate of inflation, the uncertain economic climate, punitive tax liabilities (the P11D tax document) for employees and the perceived improvement in NHS waiting times.
The P11D issue merits a closer look. If you're not familiar with it, it's a document employers must draw up for any employee who is in receipt of certain benefits which are in addition to their salary e.g. a company car or PMI. Details of these benefits are sent to the revenue and assessed for tax purposes, with the employee being liable for any additional tax at whatever tax rate they are on. This can discourage both employers and employees to take up these benefits.
Currently, employers can offset the costs of providing PMI against tax and a recent suggestion to allow further tax breaks for lower paid workers (exactly how low-paid is as yet unspecified) would reduce this cost further. (1) But this suggestion does not address the issue of the tax liability for the employee.
The whole Private Medical Sector has been referred to the Office for Fair Trading to look at, in particular, quality of care and costs. (1) This move has been broadly welcomed by the private sector as it will provide answers to the most commonly levelled criticisms – particularly highlighted by the proposal from The Bevan Foundation to prevent NHS consultants from undertaking private practice. (1)
The perceived improvements in NHS waiting times have also been challenged by the reported 6% increase in waiting times for non-urgent NHS treatment during 2011. (1)
So what does this all mean?
It would suggest that the climate for Private Medical Insurance to grow again is improving, however a note of caution to accompany this is the contraction in the number of Providers, which has been caused by various acquisitions and mergers (for example, Pru Health’s take over of Standard Life Healthcare and Simply Health’s merger with Groupama which completed last month) which could lead to an increase in the cost of premiums, thus slowing down growth. (1)
However, the response to this could be the growing number of traditional cash plan providers who are introducing new products to bridge the gap between the two plans – watch this space for more details! (1)
In any event, it seems like the ideal time for companies to review their provision. Taking the time now to ensure your employee benefits are still right for you and your employees could well pay dividends in the future.
1. Health Insurance Magazine
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