advo’s Nadiya Gregory gives a brief overview on underwriting options for an employer PMI policy.

When implementing or renewing an employee medical insurance scheme understanding the underwriting applied to your policy is a must. The choice can have both a knock-on effect to your employees as well as the premium you are paying, both at this renewal and also the longer-term.

As a starting point your choices very much depend on circumstances. Do you already have a plan in place? Are you implementing a new scheme? Are you looking to increase cover? Without knowing a range of intricacies, it would be foolish for me to give a one fits all answer to underwriting choices, and this is where the experience and technical advice of specialist support can really help.

Intricacies aside, let’s use the following scenario; you are fresh to the market looking to implement a brand new medical insurance scheme for your employees with nothing currently in place. So, what are your options?

In all options outlined below, brand new acute conditions, that occur after a policy has started, that have no previous history whatsoever will be covered within the terms and benefit levels of your chosen policy. There are a multitude of different benefit levels and choices, something we will cover separately.

Full Medical Underwriting (FMU)

The application form for this method of underwriting includes a series of medical questions, designed to enable the chosen Insurer to ascertain the applicant’s medical history. It is important that employees consider the questions carefully for each family member to be included on cover and answer in full. The information provided will then be sent to the Insurers’ underwriters to consider the basis on which to accept your application.

Any pre-existing condition that is likely to require treatment in the future will usually be excluded from cover along with any related conditions. Exclusions will then be shown on the employee’s certificate for the policy. Exclusions can be reviewed on an annual basis if it is felt the condition is no longer a problem. A doctor’s report will likely be required at the employee’s your own cost to support the application to have their specific exclusion removed. Withholding information may give the impression of full coverage, but in effect will result in claims being refused and potentially their membership of the policy being cancelled on the basis of non- disclosure.

Some insurers may be more lenient than others in specific conditions, so again specialist advise can be an advantage.

Pros

• An employee knows from the outset what is and isn’t covered.
• A lower cost underwriting option as removes risk from the insurer

Cons

• Longer application process for employer and employees
• Strictest form of underwriting resulting in permanent exclusions

Moratorium (MORI)

With this option employees do not need to complete a medical questionnaire. Instead, any pre-existing conditions for which the employee and any dependants to be included on their membership, had symptoms, medication, advice or treatment during the five years immediately before the policy started will be excluded.

However, if the employee or included dependants does not have any symptoms, is not taking medication, having advice or treatment for those pre-existing conditions and any related conditions for two continuous years after the policy starts, then the conditions will become eligible for benefit subject to policy terms and conditions. This two-year period is called the moratorium.

It is important to know that this type of policy will probably never cover long-term medical conditions which are likely to need periodic treatment, medication or medical advice. This is because each time you need any such treatment, the moratorium starts again, so it is unlikely that there would ever be 2 clear years during which you remain free of treatment.

Any new conditions which arise after the start of the policy will be covered immediately, subject to the terms and conditions of your policy. A GP report is likely required at point of claim, at the members own expense, to verify if the condition in question is pre-existing or not.

Pros

• Easy application process for employer and employee
• A lower cost underwriting option as removes risk from the insurer

Cons

• Potential longer claim process as more information needed at point of claim
• Can sometimes be confusion surrounding how this applies to certain conditions which have now resolved
• Employees still need to answer a health declaration

Medical History Disregarded (MHD)

This approach is the most generous form of underwriting available and is usually available for clients of 15 or more employees to be included on the scheme.

MHD means insurers accept any pre-existing conditions (subject to policy benefits, terms & conditions and general exclusions) a member has when joining therefore there is no concern for exclusions being applied for specific conditions

Pros

• Easy application process for employer and employee
• Cover for pre-existing conditions
• Easy to administer and understand

Cons

• Most expensive form of underwriting
• Leaves the policy open to more potential claims which could result in higher increase at renewal
• Members may feel the policy covers everything however general exclusions and insurer teams and conditions still apply

Businesses wishing to offer the ‘best’ level of cover may be tempted to offer MHD underwriting, but they may possibly be offering their employees a disservice in the longer-term. This is because policy renewal premiums are, in almost all cases, based on the claims usage during the policy year. Each insurer has their own way of looking at, and calculating renewal premiums, based on a premium paid to claims paid basis. An MHD policy is very popular with staff but will likely encourage more claims, perhaps from dependents, of which you may nothing of their health history, and thereby raising premiums higher than other options in the long term. A new popular benefit can then quickly become unpopular when a higher P11D payment is necessary. This is one of the many reasons an expert adviser should be an essential part of the decision making process when selecting the best for your employees.

I am only scratching the surface of the many implications of the routes to take and strongly suggest specialist advice when taking out a policy for the first time, renewing or changing benefits. Of course advo are here to help as one of the specialist advisory choices.