Could Private Health Insurance be the key to staff retention?

Absence is the biggest disruptor

Post-pandemic exhaustion, a rise in the cost of living and increased demand on time poor workers is contributing to resignations, burnout, and physical and mental health issues that continue to drive gaps in the workplace.

As we adjust to a ‘new normal,’ it’s important that employers are aware of how this transition could affect them and their employees.

Absence from physical or mental sickness is the major cause of business disruptions and can come with a hefty financial burden for employers if not addressed appropriately. Corporate private health insurance is just one lever organisations can use to help solve absenteeism.

An uptake in private health insurance

To attract and retain staff, more organisations are understanding the value of private health insurance and how it might be beneficial to both employee and employer. Through internal Employee Benefits surveys, we found that some employees rank private health insurance as their most highly valued employee benefit (particularly in times of financial distress).

In a report undertaken by Lockton – Private Health Trends 2022, 8 key considerations for organisations were identified. These explore how private health insurance is evolving within the corporate space, the emerging needs of employees, and how employers can align their private health offerings to these needs.

1. Get ‘more for your buck’ with a health partner

A corporate private health plan goes way beyond the traditional benefit of discounted private health insurance. Whilst any savings in private health insurance premiums are rated highly by employees, a program with the best health insurance discount is no longer necessarily viewed as the best program.

Health insurers are rapidly evolving as health partners and providing employers with preventative health programs and initiatives across mental, physical, social, and financial health to support employee and organisational health.

2. Adopt a cost-share model

Although private health insurance is highly sought by organisations it can be costly.
By adopting a cost-sharing model, employers can offer employer funded private health to their staff whilst maintaining a manageable budget. The following are some examples of different cost-share models.

  • subsidising an employee's family private hospital cover premiums, where the employee tops up with optional extras cover at their own cost.

  • subsidising singles cover premiums, and the employee tops up to family cover at their own expense (essentially halving the cost of family cover for the employee); or

  • subsidising an employee's cover to a maximum annual set dollar amount, and the employee pays for the remainder.

3. Provide a voluntary health plan

Employers who are unable to provide financial assistance to employees towards the cost of private health cover should not underestimate the value of providing a voluntary (employee-funded) corporate health plan. A voluntary program can provide employees with discounted private health insurance, dedicated corporate products, and most importantly health and wellbeing, and mental health support.

4. Timing is everything - act now

The average industry annual premium change effective 1 April 2022 of 2.70% is the lowest in over 20 years. As a result of the COVID-19 pandemic health insurers have provided Australians with financial assistance, via initiatives including delaying the 1 April premium change by up to seven months.

This can translate to the delayed premium increases which will take effect around October 2022 being quickly followed by the next industry annual premium change only 6 months later in April 2023. For employer funded private health plans, some insurers have fully extended the delay by 12 months. As a result, these double or combined 2022 and 2023 increases can also place unexpected and unknown pressure on budgets for employer funded health plans depending on how the increases are applied at an employer level.

As a result, this can also place unexpected and unknown pressure on budgets for employer funded health plans depending on how the increases are applied at an employer level.

Given the above, organisations should be taking this as an opportune moment to review their private health plan and employer funding model to ensure they have in place the right operating and funding model to withstand significant shocks to the budget. A review can also ensure organizations are taking advantage of significant product, pricing, servicing, and health and wellbeing support services available in the current market.

5. Support for Gold Hospital Cover

Since April 2018 health insurers have allowed people to upgrade their hospital cover to Gold, without serving the usual two month waiting period to access in-hospital psychiatric treatment. Whilst this positively supports greater access to mental health services, the growing demand and more regular use of hospital psychiatric services can disproportionately increase claims costs and therefore premiums on Gold cover comparied to the average industry annual premium change.

To support employers with budgeting the ongoing funding of Gold hospital cover, there are various alternative funding models for organisations to explore for example introducing a set dollar amount that contributes to an individual’s private health insurance, equivalent to the cost of Gold Hospital Cover. This provides a cost-effective option for budgetary management and organisational cost containment and provides the employer with choice and the option to cost share any future premium increases with their employees.

6. Greater support for SMEs

Typically access to group discounted private health insurance and dedicated corporate products have been an employee benefit offered within large organisations, with high staff numbers.

However, as the corporate private health insurance market transitions to more of a focus on prevention, and health and wellbeing support, SMEs will also have greater access to corporate health plans in the same way as larger employers. As a result, SMEs will also play a greater role in building healthier communities, with greater access to health and wellbeing programs through a corporate health plan.

7. Promoting the benefits of your plan

With flexible working and working from home being a given these days, it’s even more challenging for employers to communicate effectively with all their staff at any given time around the employee benefits available to them.

The starting point is the development and implementation of a private health employee engagement activity plan and/or marketing and communication strategy that aligns with an organisation’s overall benefit communication and activity plan.

Practical tips:

  • Varied communication tactics, especially storytelling as people tend to remember stories.

  • On-site meaningful engagement forums such as health and wellness days encourage staff to return to the office.

  • Bitesize data and statistics are easier to digest.

8. Respond to organisational health data

Whilst a private health plan brings great benefits to employees, it is important for employers to understand the return on investment from deploying these strategies.

Reviewing private health and absence data as a workforce rather than identified individuals, provides employers an insight into how employees access their benefits program. Through analysis, they can identify trends, and areas that require the most attention - from which a health strategy can be designed, implemented, and measured. Once in place, understanding the impact of this programme on all absence drivers will better inform employers on how and where to invest valuable resources to help staff better manage their own health.

Now is the time to challenge the market, ensure you have access to the right health partner offering the best corporate private health insurance and employee benefits program for your employees and organisation.

For more information on the above trends, download our Private Health Trends Report 2022.

Click the download button (located on the right for desktop users and at the bottom for mobile users) and fill out the form to access the report.

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Corporate Private Health Trends Report 2022