Dropping private healthcare for employees because of rising costs can do more harm than good to a company's finances, according to Gallagher Employee Benefits.
The intermediaries found that year on year medical inflation is anywhere between 7% and 10% per annum compound.
Yet firms that do not provide private medical benefits, or allow staff to opt out of company-sponsored healthcare plans, are particularly vulnerable when an employee takes a long leave of absence because of illness.
However, Michael Brown, managing director at Gallagher Benefits Consulting, noted there are ways for employers to soften the blow.
"Precious few employers genuinely understand the cost of absence linked to illness," added Brown.
"We had an employee who would have been unable to work for 14 weeks as he waited for NHS treatment. The cost to the company would have been some £24,000," said Brown.
"If he'd had private medical benefits his procedure could have been carried out in three weeks slashing employment costs to just over £5,000. After the cost of the surgery that's a saving to the employer of £12,000,"he said.
Gallagher's gave potential solutions to a funding crisis:
• Altering the benefits payable so that they harmonize with the NHS to best effect
• Re-designing health care plans to better reflect the needs of the employer and the people covered without being shoe horned into an insurance company's standard policy
• Introducing screening for new members to cut down on the number of large claims
• Using pooled arrangements allowing smaller firms to enjoy the buying power of a larger group and removing volatility of costs
• Larger employers exploring self-funded healthcare trusts.
The Confederation of British Industry put the cost of absence at £17bn a year for UK firms. An employee in the private sector will, on average, be absent for 5.9 days a year rising to 8.1 days for public sector staff.
