How Tech Companies Can Navigate The Spiralling Cost Of Private Health Insurance‍

By Tech East 4 minute read

As employee expectations for wellbeing benefits continue to rise, so do the associated costs for employers

Last week, I was having a conversation with the Head of Finance at a well-known Tech SME. The chat largely centred around the obscene rise in insurance premiums his firm was facing. It mirrored a number of conversations I’d had with other companies. 30%, 50%, 100% annual increases with more expected next year. One prominent charity was forced to cancel their contract with a leading provider, causing a lot of upset amongst its staff.

We’ll explore this trend, discuss why premiums are rising so quickly, and strategize as to what companies can do to mitigate it.

What is Health Insurance?

Health insurance is a type of coverage that pays for medical and surgical expenses incurred by the insured. It can also provide coverage for other health-related expenses, such as prescription drugs and preventive care. Employers often offer private health insurance as a benefit to attract and retain employees, providing them with access to a range of medical services and reducing out-of-pocket costs.

Why is Health Insurance Becoming Prevalent Among Employers?

Employers, particularly small and medium-sized enterprises (SMEs), are increasingly offering private health insurance to their employees. This trend is driven by several factors:

  1. Attracting and Retaining Talent: In a competitive job market, comprehensive health insurance packages are a significant draw for top talent. According to a report by Forbes, 80% of employees value health insurance as an important benefit.
  2. Employee Wellbeing: Employers recognise the importance of maintaining a healthy workforce to boost productivity and reduce absenteeism.
  3. Government and Public Health System Limitations: With the UK’s National Health Service (NHS) facing significant challenges, private health insurance ensures quicker access to medical care for employees.

What About Tech Firms?

Tech firms are particularly inclined to offer private health insurance for several reasons:

  1. High Competition for Talent: The tech industry is known for its fierce competition for skilled professionals. Comprehensive benefits packages, including health insurance, are essential to attract and retain top talent.
  2. Stress and Burnout: The tech industry is notorious for high levels of stress and burnout. Access to mental health services through private insurance is crucial for employee wellbeing.
  3. Younger Workforce: Many tech firms employ a younger workforce that prioritises health benefits as part of their employment package.

Why Are Premiums Increasing?

The rising costs of health insurance premiums can be attributed to several factors:

  1. Increased Claims: There has been a significant rise in the number of claims made, as highlighted by Aon’s report of a 50% increase in private medical insurance claims.
  2. Healthcare Inflation: The cost of healthcare services continues to rise, driven by advancements in medical technology and treatments. According to ActiveQuote, there was a 10% jump in PHI premiums in 2022, with further increases expected in 2024.
  3. Aging Population: As the workforce ages, the demand for healthcare services increases, leading to higher premiums.
  4. Economic Factors: Inflation and economic uncertainties contribute to the overall increase in insurance premiums.

What Can Be Done to Lower the Costs?

To mitigate the rising costs of health insurance premiums, companies can implement several strategies:

  1. Invest in Wellbeing Programmes: Focusing on preventative, personalised, human-centred, and holistic wellbeing programmes can reduce healthcare costs in the long term. For example:
    • Personalised Health Plans: Tailored wellness programmes significantly impact employee engagement and overall wellbeing, resulting in increased participation and better health outcomes. Research by Virgin Pulse & Human Capital Institute shows a 56% increase in engagement and a 46% improvement in overall wellbeing with personalised programmes.
    • Human-Centred Support: Investing in resources such as therapists, personal trainers, nutritionists, and financial coaches can improve employee wellbeing and reduce healthcare costs.
  2. Self-Funded Insurance: Companies can consider self-funded insurance to gain greater control over costs and tailor benefits to their workforce.
  3. Avoid Generic Wellness Solutions: One-size-fits-all wellness programmes have low engagement rates. Personalised wellness programmes are more effective and result in better health outcomes. A study by the University of Illinois at Urbana-Champaign found a 35% improvement in health outcomes with personalised wellness programmes compared to a 7% improvement with generic ones.
  4. Engage Employees: Ensure that wellbeing benefits are personal, holistic, and actively drive engagement. Selecting providers who emphasise these aspects can enhance the effectiveness of the programmes.

Conclusion

Employers must act now to address the urgent crisis of rising health insurance premiums. By investing in personalised, human-centred wellbeing initiatives that cater to employees’ unique needs, businesses can reduce healthcare costs, improve productivity, and create a healthier, more engaged workforce. The cost of ignoring these trends is far greater than the investment required to implement effective solutions.

Jamie Humphrey