1 February 2017
Many switched-on companies have realised that it's well worth
offering group private medical insurance (PMI), which can enable
employees to avoid the NHS queue and enjoy treatment in a private
room at a time convenient to them and their work colleagues.
The cover can both reduce absenteeism and act as a potent
recruitment and retention tool.
Nevertheless, such employers are often failing to offer the most
appropriate forms of underwriting for employees and their
dependents, and they could benefit from considering different
options available to them.
The most common mistake is to have a scheme that uses a
moratorium basis, effectively doing the underwriting at the claims
stage. Fortunately, virtually none of our clients use this approach
as we are loathe to recommend it.
Moratorium underwriting will automatically exclude pre-existing
conditions from the last five years for a set period, typically for
two years on a rolling basis, but may include them after that if
you have been symptom free.
The one real advantage of a moratorium scheme is that it can be
implemented immediately because employees do not have to fill in
health questionnaires but the potential downsides invariably
outweigh this. The essential snag is that employees rarely know if
a condition is covered until they actually make a claim, and it can
create considerable ill-will if they find that they aren't.
Indeed, we have come across cases where an employee being
refused a claim as a result of having a pre-existing condition has
led to an exodus of other employees from the scheme, even to the
extent that there are not enough remaining members to secure
worthwhile premium rates.
Having a scheme that uses full medical underwriting at outset
avoids this problem because, although pre-existing conditions are
excluded, at least employees receive a certificate spelling out
exactly what they are and are not covered for.
However, nowadays even full medical underwriting rarely
represents the most effective solution. Problems can arise in
recruitment, especially when employees or their dependents have
conditions they have been treated for under their existing plan
which would be excluded under a new scheme as a result of
constituting pre-existing conditions. We have seen several
cases of potential employees not accepting jobs for this
Employers should therefore be considering switching to a PMI
scheme at renewal that offers cover on a basis of medical history
disregarded. This will ensure that all exclusions are removed and
existing claims will continue to be paid. Employers also benefit
from reduced administration because no medical underwriting is
required at outset.
Although upgrading to medical history disregarded schemes can
cost somewhere between 20% and 30% more, this is likely to be worth
paying by almost any firms seeking to attract high-calibre
employees in today's marketplace. Many hedge funds and other small
firms looking to recruit from bigger competitors are in fact
finding that they cannot attract the staff they want if they don't
offer medical history disregarded.
Indeed, the approach is virtually now a pre-requisite for firms
involved with financial services, IT, law and most other
professions. High earners quite simply expect to have all their
pre-existing conditions covered.
Whereas medical history disregarded used to be restricted to
schemes with at least fifteen members it is now increasingly
available to those with only ten members. In fact we might even be
able to arrange it for smaller schemes with fast growing companies
that expect to have ten scheme members within the next six
Many employers who should have medical history disregarded never
had it brought to their attention at outset, as they were too small
to qualify, but have now grown to a size that makes them eligible.
So this is something they should be giving serious thought to at
renewal. In our opinion virtually any company that still uses a
full medical underwriting approach should at least be considering
quotes for medical history disregarded at renewal.
If you would like to talk to Chase de Vere about upgrading to a
medical history disregarded basis or need advice on any other
aspect of your group PMI cover please do not hesitate to contact us
on 0345 300