What is the difference between a Group Private Medical Insurance Scheme and a Cash Plan?
Group Private Medical Insurance (PMI) and a Health Cash Plan are two types of healthcare benefits that employers may offer to their employees, but they serve different purposes and offer distinct types of coverage.
Group Private Medical Insurance (PMI)
Purpose:
Comprehensive Coverage: Group PMI provides employees with access to private healthcare services, typically covering more significant medical expenses. This includes inpatient and outpatient treatments, surgeries, specialist consultations, diagnostic tests, and sometimes prescription medications. PMI covers Acute Conditions, and so diseases, illnesses and injuries that are likely to respond quickly to treatment, as opposed to long-term chronic conditions.
Key Features:
Access to Private Healthcare: Employees can receive treatment at private hospitals or clinics, often with shorter waiting times compared to public healthcare systems.
Specialist Care: PMI typically covers consultations with specialists and advanced treatments that might not be readily available in the public healthcare system.
Hospitalisation: Inpatient care, including hospital stays and surgeries, is a primary component of PMI.
Flexibility: Employees often have a choice of healthcare providers within the network covered by the insurance plan.
Ability for Employees to add Dependents: Employees are usually able to add family dependents to the policy at their own cost.
Benefit to the Employer
Staff Retention: Evidence shows that employees are more likely to stay with an employer because of the employee benefits package that is provided for them1, and the majority of employers now offer employees private medical cover2.
Improved Staff Productivity: Many PMI schemes come with access to things like a Virtual GP service and allowing self-referral for diagnosis and treatment. Both of these reduce the time and stress associated to accessing care, and mean that employees hopefully return to full health quicker, so that any absence from work is reduced and they are more productive in the workplace.
Benefits to Employees:
Comprehensive Care: PMI provides access to extensive medical care, including major procedures and treatments.
Reduced Wait Times: Employees often experience shorter wait times for treatment in the private sector compared to public health services.
Cost to the Employee:
Premiums: Premiums for PMI are usually higher than those for a health cash plan due to the comprehensive nature of the coverage. Any premium paid by an Employer will be treated as a benefit in kind.
Excess: There may be an excess (deductible) that employees must pay out-of-pocket as part of the acceptance of any claim, with the remainder of the claim covered by the insurer.
Health Cash Plan
Purpose:
Reimbursement for Everyday Health Costs: A Health Cash Plan is designed to help employees manage the costs of everyday healthcare expenses by reimbursing a portion of these costs. It is not meant for major medical procedures but for routine health expenses.
Key Features:
Coverage of routine expenses: Health Cash Plans typically cover costs such as dental check-ups, eye tests, prescription glasses, physiotherapy, chiropractic care, and sometimes alternative therapies.
Set Limits: Each type of expense has a specific limit up to which the employee can claim reimbursement within a given period (e.g., annually).
No Specialist Care: Unlike PMI, cash plans do not cover specialist consultations, hospital stays, or surgeries.
Ability for Employees to add Dependents: Employees are usually able to add family dependents to the policy at their own cost.
Benefit to the Employer
Lower Premiums: In comparison to PMI arrangements, Health Cash Plans usually have lower premiums.
Assistance with Cost of Living Pressures: For a relatively low monthly premium, an Employer is able to provide its employees with help accessing health related services easing the pressure on their own personal finances.
Benefits to Employees:
Affordability: Cash plans are a cost-effective way for employees to manage routine healthcare expenses.
Ease of Use: Reimbursement is straightforward, and the plan covers a wide range of everyday health costs.
Preventive Care: By covering regular check-ups and treatments, cash plans encourage employees to maintain their health.
Cost to the Employee:
Lower Premiums: Any premium paid by an Employer will be treated as a benefit in kind.
Claim Reimbursements: Employees pay for the service upfront and then submit a claim to get reimbursed for the covered amount.
Summary of Differences:
Scope of Coverage: PMI is designed for more serious and comprehensive medical needs, including private hospital care and specialist treatments. In contrast, a Health Cash Plan covers routine healthcare costs, such as dental care, optical expenses, and physiotherapy.
Cost: PMI is typically more expensive, reflecting its broader coverage, while Health Cash Plans are more affordable, with lower premiums.
Reimbursement vs. Direct Payment: PMI often pays healthcare providers directly (after any applicable excess), whereas with a cash plan, employees pay out-of-pocket first and then claim reimbursement for eligible expenses.
In essence, PMI is suited for covering significant medical needs, providing access to private healthcare facilities and specialists, while a Health Cash Plan is better for managing everyday healthcare costs through reimbursement of routine expenses.
The above is a brief summary of the differences between a Group Private Medical Insurance Scheme and a Group Cash Plan. Within both scheme types an employer has a choice regarding the level of cover that can be provided as a core benefit structure. Both scheme types can also come with a range of additional ancillary benefits that would be included within the policy for free. Given the range of choice and taking account of matters such as the budget of the employer, rather than provide a PMI or a Cash Plan arrangement for all staff, it can be the case that both arrangements can be used in conjunction with each other to tailor the health benefit offering from the employer to the needs and priorities in respect of different cohorts of employees.
If you would like assistance in choosing a suitable Scheme for your employees or would like to review an existing scheme to ensure it remains suitable and the premium competitive, then MWM Employee Benefits Limited is able to help.
1 https://employeebenefits.co.uk/statistics-show-the-importance-of-employee-benefits/
Disclaimer:
The information provided is for general information only and is not intended to address the particular requirements of an individual or business. It does not constitute any form of advice or recommendation by MWM Employee Benefits or Menzies Wealth Management Ltd and should not be relied upon by individuals in either making or refraining from making any financial decisions. Where necessary, you should seek appropriate professional advice before acting on any of the information provided.
MWM Employee Benefits is an appointed representative of Menzies Wealth Management who is regulated and authorised by the Financial Conduct Authority (FRN 486548).
Menzies Wealth Management Limited is registered in England and Wales under number 06597008. Our registered office is at 1st Floor, Midas House, Goldsworth Road, Woking, Surrey GU21 6LQ.
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