Open referrals – where the GP does not specify a particular specialist – have always featured in the claims received by all insurers; in 2012, almost one in five of Aviva’s claims was on an open referral basis. But while insurers have always offered it, four – Aviva UK Health, Axa PPP healthcare, Bupa and Simplyhealth – have now launched it as a product option.
All will direct policyholders to a specialist, but the approaches offered do vary. For example, Bupa gives its policyholders a choice of two or three consultants when they use its open referral process. Axa takes a similar approach, but Aviva takes a slightly different tack on its large corporate product GuideWell, referring policyholders to just one of its 10,000 recognised specialists unless there are several available.
Simplyhealth’s Connections product also uses an open referral model but rather than recommend specialists, it refers policyholders to a hospital within its network, where they are able to discuss a suitable specialist.
Additionally, while the other insurers have focused on large groups, Simplyhealth is aiming more at the smaller end of the market. It launched Connections to SMEs at the end of April and has soft launched it to individuals, with a formal launch expected later this year.
Open referral benefits
Although their approaches vary, all offer policyholders the opportunity to save money. Having control over the specialist a policyholder sees means insurers are able to negotiate better deals, which can be passed on to policyholders.
Just how much of a saving this can mean varies depending on the insurer and the type of business being written. While some will offer a reduced premium upfront, others point to long-term savings as an incentive to move to open referral.
For example, Simplyhealth offers its Connections customers a lower premium, with SME business enjoying a saving of roughly 10 per cent. Axa PPP healthcare takes a different stance; rather than offer a discounted premium, its corporate clients enjoy a rebate of 6 per cent of their healthcare spend at some of Axa’s partner hospitals.
Convenience is another major selling point. Leaving the specialist decision to the insurer means they can select a hospital in a location that is convenient for the policyholder. For example, Axa PPP healthcare provides a fast track appointment service, booking an appointment for the policyholder with an appropriate specialist near to their home or work.
Open referral also means that, as fee levels are agreed as part of the insurers’ specialist approval process, there is no risk of a shortfall. These occur where the specialist’s charge exceeds the cost of the treatment accepted by the insurer. Although this only occurs in a small number of claims – for instance just 3 per cent of the fees submitted to Axa PPP healthcare are not paid in full – they can be a major cause of customer complaint.
Objections
While there are benefits to this approach, not everyone believes this should be the way the medical insurance market develops. Charlie MacEwan, corporate communications director at WPA, questions whether insurers should be making decisions about who treats their policyholders. “Decisions about medical treatment should be made by medical people not insurers with commercial incentives,” he explains.
To support this, WPA carried out research among doctors to gauge their views of open referral. It found that 87 per cent believed it would result in worse treatment with 96 per cent saying it would lead to less – or no – choice for patients and only 3 per cent saying it represented better value for patients.
In their defence the insurers argue that they are able to use their claims data alongside information on specialists to inform their choices. For instance the consultants available through Bupa’s open referral all have at least seven years’ experience and are selected with reference to clinical evidence.
The other key criticism of open referral is that it limits choice. Although two or three consultants are usually put forward, a policyholder may find that a specialist they have used in the past or someone recommended by a friend or their GP is off limits.
This restriction is recognised by some of the insurers offering open referral. For example, while Aviva has launched its product to large corporate clients, its medical director Dr Doug Wright is adamant that, although it could be offered as an option to individual policyholders, it would not be rolled out on a mandatory basis. “People buy medical insurance for different reasons,” he explains. “Controlling cost is important to corporate clients but choice is important to individuals. They want to do their own research and make their own decisions about who they see.”
So far take-up of open referral has been mixed. While Bupa and Axa PPP Healthcare claim to have made solid inroads into their group business (eight out of 10 of Bupa’s corporate clients had taken up the option by the end of 2012) other insurers admit that take-up is low.
Among these is Simplyhealth. Its PMI performance director James Glover says the perception of open referral is hindering sales. “The industry has not done a good job explaining open referral,” he says. “With the insurer selecting the specialist, customers see it as a reduced level of cover. We need to do a better job at explaining the benefits.”
Changing dynamics
In addition to a more focused education exercise, the healthcare landscape is likely to change to make open referral more acceptable. Key to these changes is the Competition Commission’s review of the private healthcare market. This seeks to address several concerns about the way the market operates including the lack of easily comparable information available on the quality and costs of private healthcare services.
Many expect this will lead to the mandatory publication of data on the quality of private healthcare providers. Stuart Scullion, managing director of The Private Health Partnership, says this would make a big difference to take-up. “If policyholders can see data that shows their specialist has been recommended on the basis of the quality of their treatment this will give policyholders greater confidence in open referral,” he explains.
Changes in the NHS could also make open referral a more widely accepted model. If the UK shifted to the style of healthcare funding seen across the rest of the EU, where individuals supplement the state system with compulsory insurance, an element of direction around the specialist they saw would be welcomed.
This approach is already acceptable in other insurance lines. For example policyholders will often have repairs carried out by the garage recommended by their motor insurer or use a builder approved by their home insurer.
Additionally, while choice is one of the primary motivators behind the purchase of medical insurance, especially in the individual market, the increasing cost of cover will make price sustainability more important to policyholders. “Clients want to be able to afford medical insurance long term but they are not being given enough information about the potential savings this approach will deliver,” says Claire Linaker, a director at JLT Employee Benefits. “Insurers need to demonstrate the savings otherwise consumers do just think their choice is being restricted.”
As open referral becomes more established in the medical insurance market, this type of data coupled with shifts in healthcare will make it much more commonplace. However, although its popularity is set to grow, with choice still an important reason for buying medical insurance, the more traditional model will remain an option too.
