The availability of real-world data (RWD) and the recognition of its value are on the rise, both in the UK and overseas. RWD is described as data relating to patient health status or the delivery of healthcare collected during the course of clinical care and captured in a variety of data sources, such as administrative claims, electronic health records and product and disease registries.
Real-world evidence (RWE) is generated through the analysis and/or synthesis of RWD and can identify the effects of healthcare interventions, such as benefits, risk or resource use, that are not routinely collected during randomised control trials (RCTs). RWE may enable research that is not possible to model using RCTs but that may be possible through RWE and pragmatic trials.
When considering the use of RWD, a number of questions
should be kept in mind from the outset and initial decision-making phase on
whether or not to use RWD right through to the analysis and producing results.
This paper by Milliman’s Joanne Buckle and Tanya Hayward outlines some of these key considerations associated with using RWD to widen the evidence base in economic evaluations. These considerations are discussed with a focus on the English National Health Service (NHS) but apply more generally to any healthcare system considering the use of RWD.
Before we consider the impact of potential changes in regulation for the PMI industry, we review the manifestos of six parties for their views on the UK healthcare system and consider the implications for the UK PMI industry. The commentary around healthcare is fairly high-level in all manifestos. We present the sound bites for context and interest, along with our thoughts on what this may mean for the UK PMI industry, in the table below.
Political Party Manifesto Claims
Potential Implications for UK PMI
‘Labour will protect our public services, like the NHS, from being opened up to further privatisation.’
– A Labour Party government could mean increased taxes and fewer opportunities for the National Health Service (NHS) to collaborate with the private healthcare sector.
– Though not explicitly written in the Labour manifesto, Jeremy Corbyn has made a number of claims on increasing funding for the NHS through various methods, including raising the insurance premium tax. This could directly increase premiums and reduce demand for PMI products.
– It seems unlikely that pilot programmes to use private sector hospital capacity for NHS patients will be expanded, meaning a lost source of revenue for private hospitals. This will further lower private hospital occupancy rates and may lead to increased tariff rates for insurers.
‘We will increase NHS spending by a minimum of £8 billion in real terms over the next five years.’
– The perception of increased spending on the NHS will likely result in reduced demand for PMI products, even if the increased spending is wholly insufficient to create more capacity in the context of an expanding and ageing population. The King’s Fund has suggested that a real-term funding increase of approximately £30 billion a year is needed over the next five years to maintain current services3, much more than the £8 billion promised in the Conservatives/Tory manifesto, as well as the £20 billion a year promised by Theresa May in the budget speech last year4.
‘We will ensure that the NHS and social care system have the nurses, midwives, doctors, carers and other health professionals that it needs…Last year we announced an increase in the number of students in medical training of 1,500 a year; we will continue this investment, doing something the NHS has never done before, and train the doctors our hospitals and surgeries need.’
– The BBC reports that 1,500 additional students a year is potentially not enough to meet the growing demand, and replace all those who may be quitting or retiring from the NHS5.
– In 2018 it was reported that an additional 3,000 places on midwifery training courses will be created over the next four years, but there were concerns on whether this would be enough to guarantee that the midwife workforce would grow6. With numbers leaving the NHS reaching 8,900 over a period of five years, the increases that are proposed may still fall short of that required by the NHS to meet growing demands.
‘We will ensure that the NHS has the buildings and technology it needs to deliver care properly and efficiently.’
– If more NHS buildings and facilities are created, the use of private medical facilities by the NHS will reduce. This will take a number of years to create though and, given the lack of ring-fenced funding for this development, seems unlikely to be achieved due to other competing priorities.
‘For a country to remain stable, an economy to be strong, a society to stay healthy, we need a partnership between the individual and the wider nation, between private sector and public service, and the strong leadership only government can provide.’
– The Tory party is more open towards people using the private sector, though it does not speak specifically about the healthcare system. It is less likely to suggest the use of policies that would directly harm the PMI industry. It is not clear exactly what role it expects the private sector to play in healthcare from the vague manifesto statement.
No manifesto, but a quote from Nigel Farage: ‘We need to move to an insurance-based system of healthcare.’
– A host of possibilities exist depending on the type of insurance system proposed and accepted by parliament. Options include a social insurance scheme, mandatory private insurance scheme or a hybrid model.
– Even in a fully insurance-based system, the government may decide to retain some responsibility for providing healthcare, in which case private healthcare facilities may compete alongside public facilities for insurance reimbursement. This will increase utilisation and limit cost inflation among private healthcare facilities.
– Any insurance plan (social or private) would have to have a defined set of benefits which may be substantially more limited than today. This may encourage the development of complementary and/or supplementary insurance products. This could vastly transform and expand the PMI market. However, our experience from other social insurance schemes is that the benefit package is constantly under pressure due to budget constraints and resetting the benefit package each year is a highly political process.
– Private insurers could redefine their roles as third-party administrators for social insurance schemes, even if they were not taking on any insurance risk directly.
The Liberal Democrat manifesto is solely focused on remaining within the EU and includes a host of reasons for this, including noting the contributions the EU makes towards healthcare and pharmacy within the UK. Some areas highlighted in the manifesto:
‘The EU also makes it easier for people such as doctors, nurses, vets and architects to work abroad by ensuring that their qualifications are recognised across Europe.’
‘The EU funds research into new treatments for diseases and gives the UK access to cutting-edge treatments at the earliest opportunity.’
– Leaving the EU could cause the prices of certain treatment options and drugs that are accessed from the EU market to increase if there are additional levies or taxes added.
– Under a Liberal Democrat rule, and if Brexit is cancelled, the PMI industry should largely remain similar to the status quo, based on the current pledges within the Liberal/Democrats manifesto. This does not however mean they would not introduce policies that could impact the PMI industry in the future.
Independent Group for Change (previously Change UK8)
Similar to Liberal Democrats, the Independent Group for Change Party is focused on the benefits of remaining within the EU: ‘Brexit will be a disaster for our hospitals, science and research, social care and public health. It will be bad for our health workforce – if they leave the UK, patients and those who are dependent on care will bear the brunt. It will be bad for getting the medicines we need, which have a short shelf-life and which we risk losing if we leave the EU without a deal.’
– Like the Liberal Democrats the preference is to remain within the EU, indicating the PMI industry would likely remain similar to the status quo.
‘Roll back privatisation of the NHS to ensure that all health and dental services are always publicly provided and funded, and free at the point of access, via the introduction of an NHS Reinstatement Act. Scrap NHS Sustainability and Transformation Plans.’
And ‘Close the NHS spending gap and provide an immediate cash injection, to ensure everyone can access a GP, hospitals can run properly, and staff are fairly paid.’
– The use of private healthcare providers for NHS-funded admissions would be expected to reduce or potentially end. It is not clear how the increased public provision will be funded, particularly in some areas where there is heavy private provision of NHS-funded services, such as psychiatry.
– Expanding NHS coverage for all health and dental services may dramatically reduce the requirements for some health insurance. The general perception of increased NHS services would deter people from buying PMI and cash plans or encourage existing customers to lapse their policies.
– Under a properly funded NHS many services that are currently paid for by the user, such as dental and optical, would be provided for free. This would likely impact the cash plan market, reducing demand for these products.
– It is not at all clear which funding gap is being referred to, or the cost of this pledge, but it’s likely to be substantial.
‘Major investment in social care for the elderly and all those who need it.’
– This suggestion is likely to reduce the current pressure on NHS services, but it does not have obvious implications for PMI.
We expected more detailed and explicit
views towards healthcare in the manifestos and ultimately it is difficult to
determine the likely steps each party would take if they have the power to action
their pledges. For many parties Brexit remains the main focus, with little
thought or attention to healthcare within their manifestos.
Over the coming weeks we will keep a close
eye on the campaigns of Boris Johnson and Jeremy Hunt for updates and changes
in statements relating to healthcare and the PMI industry, following up with
our findings in our forthcoming blogs.
Our next blog looks at the impact of potential changes in regulation following Brexit for the PMI industry. Please see our previous blogs on the impact of changes in the market size and medical inflation on the PMI industry.
Medical inflation generally refers to the annual increase in the cost of medical treatment per insured life. It encompasses both changes in the average cost of treatment for the same basket of services and changes in the frequency of seeking treatment for a steady-state portfolio. It is impacted by anything that will change the cost per insured life for the same services, ranging from technological medical advances to shifts in costs and from social and national healthcare systems to private insurance payers. A change in the mix of services will impact the relative weights that each service contributes to the ‘basket’ of goods (similarly to a calculation of RPI). Using risk adjustment as a true measure of inflation, the effects of a change in the mix of lives in a portfolio would be stripped out, although most cited measures do not remove this element and instead quote inflation inclusive of mix changes.
Continuing from our first blog, which focussed on the potential impact of Brexit on PMI market size, in this blog we examine factors that will impact the average cost of treatments through the supply of medical professionals, cost of drugs, changes in general inflation and the economic health of the UK.
The figure below summarises how the topics we cover impact medical inflation.
Brexit and its eventual impact on the British economy remain nearly as uncertain today as on the day of the referendum. In this blog series, we consider the effect of Brexit (in its various guises) on business drivers for insurers within the UK private medical insurance (PMI) industry.
In this first post, we consider some of the key factors that affect demand for PMI policies and how they impact the average risk cost per life for an insurer.
Impact from outwards migration
A significant number of reports show that a growing number of corporations are moving their headquarters abroad or rearranging assets to move substantial amounts out of the UK market. These companies range from Dyson and Sony to investment banks such as JP Morgan and Goldman Sachs. If large numbers of jobs and staff are relocated out of the UK, particularly from within the financial sector, PMI insurers may see the size of group policies reducing after Brexit, or potentially a total loss of some contracts if whole firms or subsidiaries are relocated. We can expect the majority of migrating employees will hold mid- to high-level positions, and as such would qualify for employee benefits such as group PMI cover.
Historically, when an overall corporate portfolio has been downsized, we have seen a spike in claims from employees who are aware that they may lose their cover imminently and seek to take advantage of accessing private care while it is still available.
As the British government spends more of its
budget on Brexit at a time of increasing public demand for National Health
Service (NHS) services, individuals may become frustrated with the increasing waiting
times and consider purchasing PMI to meet their healthcare needs.
The government is also currently reviewing the insurance premium tax (IPT) rate. This follows from insurers urging a review of the fairness of the tax, and the potential barriers it creates to accessing healthcare. Lower taxes could help make PMI more affordable and appealing to the public and we may reach a point where the government perceives that making PMI more attractive will remove some pressures from the NHS, leading to a growth in the PMI market. This has been a perennial hope of the PMI industry for 20 years, however, so don’t hold your breath.
Impact due to economic uncertainty
Given the supplementary nature of PMI, it does
not classify as a ‘necessity’ product for the majority, and, in the absence of
changes in government policy, economic cycles can impact demand for the product
If there is a recession, individual customers may find themselves reconsidering a PMI policy renewal and companies may be less inclined to keep the benefit at the expense of other more pressing costs, particularly if they have incurred heavy Brexit-related direct costs, such as exchange rate impacts, tariffs, or just additional internal compliance costs. Following the 2008 global financial crisis, the UK healthcare market for PMI cover reduced by 4.3%, as measured by change in the number of PMI-covered lives. The graph below highlights how, during the height of the global financial crisis (2007-2009), PMI market size and gross domestic product (GDP) growth rate exhibited nearly identical decreases in growth. In the years following the crisis, PMI market size has shown a slower growth rate than GDP.
In the individual market, lapses are more likely if policyholders are in good health and do not foresee use of their policies anytime soon. Those using their cover, or generally in poorer health, are less likely to lapse their policies. Therefore, insurers may experience an acceleration of the selective lapsing many have already been experiencing over the last few years, leading to an increase in medical inflation and overall reduction in total market size. Those who have measures in place to combat selective lapsing will tend to fare better than those who have less attractive offerings for healthier customers. These measures can include reward programmes with wellness benefits such as gym discounts and mobile health apps.
Corporate markets may also experience
increased utilisation, in a fashion similar to migrating employees, from
policyholders wishing to use their cover before it ceases.
The overall impact of all factors affecting
the demand for PMI services on the total market size is difficult to ascertain,
and the direction and magnitude of impact for each factor will certainly
Insurers may experience higher claims from policyholders
about to lose corporate cover, as well as the risk of overall reduction to the
market size due to smaller corporate books.
There is a possible silver lining if demand
increases as a result of tighter government budgets and more delayed access to
the NHS, coupled with possible reductions in IPT. However, the risks from
general market uncertainty are greater. Risks of uncertainty can leave people
less committed to their PMI cover, and companies with a higher risk of
In our next blog we look at key factors impacting
medical inflation, including the availability of medical practitioners and
nurses, as well as speculating on what might happen to the cost of drugs.
PMI market size in terms of PMI covered lives from Laing & Buisson, Health Cover, fourteenth edition. GDP growth rate from the World Bank Group resources, http://www.worldbank.org
Health insurers are relying more on advanced analytic tools
as they move from reimbursement services through to provider management, care
management, and care delivery services. The sheer volume and complexity of
healthcare data can create bias, hinder analysis, and impair decision making. Inadequate
data is costly because it is time-consuming to work with and often expensive to
Fortunately, data quality tools can identify specific areas of improvement to help actuaries and insurers carry out advanced operational and clinical analytics. In this paper, Milliman’s Joanne Buckle and Natasha Singhal highlight such a tool to assure data quality is properly vetted prior to actuarial analysis. The data quality tool was applied to data collected from five different private medical insurance (PMI) insurers in the United Kingdom. The authors also discuss ways that high-quality PMI data can be used to achieve decision confidence.
This analysis by Milliman consultants compares information provided in Quantitative Reporting Templates (QRTs) and Solvency and Financial Condition Reports (SFCRs) and draws conclusions about the balance sheets and risk exposures of 15 UK private medical insurance and health cash plan providers. The analysis also highlights noteworthy trends between the 2017 and 2018 publications.
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