Company healthcare schemes under threat

Jan 14 2003 by Brian Amble Print This Article

The Soaring cost of providing healthcare plans for UK workers could see them suffer the same fate as "final salary" pension schemes, according to a leading firm of experts.

UK business faces and additional £1.1bn bill for private medical benefits in the next five years, a 70 per cent rise on the current £1.6bn cost, according to Buck & Willis Healthcare, an international firm of business employee consultants.

Its warning suggests that healthcare provision in the UK could follow the trend in the US, where rising costs have forced companies to restrict how much they are prepared to pay towards such schemes.

The consultancy predicted underlying medical inflation - currently 11 per cent a year - would lead to the average annual cost of £550 per employee, for companies with 100 or more staff, rising to £930 over the next five years.

Adrian Norris, managing director of Buck & Willis, said: "Employers need to take action now to prevent the cost of medical benefits escalating out of control...These spiralling liabilities could see medical plans going the same way as final salary pension schemes."

Soaring medical costs in the US have started a move towards employers capping liability by providing a fixed "pot" of cover, which employees can supplement out of their own pockets.

About 4.5m people in the UK have private medical cover for themselves and their families, of whom about 60 per cent are company-paid and a further 10 per cent are company-sponsored, with employees making contributions.

Mr Norris said there was so far little evidence of companies completely withdrawing such cover, but employers had been increasing staff contributions and imposing excess rules, so that individuals paid the first £100 of any claim.

Buck & Willis said it expected the next stage for employer-funded private medical benefits would be "defined liability" healthcare plans.