Healthcare Trusts - are they a viable alternative to PMI and how does this affect IPT?

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Advance corporate health insurance helps keep your employees fit, well and working, with fast access to expert treatment and support when they need it.

Corporate health insurance

Since November 2015 Insurance Premium Tax (IPT) has been steadily on the rise, doubling from 6 per cent to 12 per cent in a little over 18 months.

These changes mean that, for organisations negotiating health insurance contracts from June 2017, prices are more likely to increase again. This is compounded by the continuing upward pressure on private healthcare costs that has seen the cost of providing cover steadily increase for the last 20 years. Considered against the pressure employers are facing to manage payroll costs, PMI could find itself taking an even larger share of an organisation’s available benefits budget when the IPT hike is factored in.

While this may, on the face of it, present a less than rosy picture, it doesn’t have to be this way. Whether you have the support of an adviser or confident to search for alternatives yourself help is at hand for larger organisations where the rise in IPT can prove to be a considerable rise in cost, in the form of a Health Trust.

So what do Health Trusts have to offer?

Unlike traditional PMI, Corporate Healthcare Trusts are not contracts of insurance. Rather, they’re more akin to a pension scheme for administration of health benefits to scheme beneficiaries – the employees of the company. Health Trusts are separate legal entities, managed by Trustees (generally appointed by the employer) who manage the fund’s costs and spending on behalf of beneficiaries. Importantly, as benefit provision is not predicated on a contract of insurance, the arrangement is not subject to IPT, thereby making recent increases in IPT largely irrelevant.

Giving you more control over your employee health and wellbeing services

Healthcare trusts can offer larger organisations a creative and flexible way to meet their employee health and wellbeing needs. They allow you greater control so that you can deliver your health and wellbeing strategy with tax efficiencies meaning more of your funding actually goes towards supporting employee wellbeing.

• Take full control over the employee benefits you choose to provide
• Maximise tax efficiencies
• Choose an option that gives the certainty of setting your maximum financial liability
• Work in partnership with the administrator from set up and when monitoring the performance of your plan

What’s required?

There are, of course, some financial costs to setting up a Health Trust. They are discrete legal entities and organisations will need to understand the regulatory requirements they will have to meet in order to set up and administer their healthcare trust. It’s an undertaking that can require a considerable commitment of time and effort on the part of Trustees and should, therefore, be a consideration for employers who are minded to take this on for themselves.

In addition there are a number of alternatives to the employer ‘owned and operated’ approach to setting up and running a Health Trust. For example, a ‘turnkey’ approach is available whereby employers engage their administrative services provider to undertake these tasks on their behalf, thereby removing the need for employers to appoint their own people to serve as Trustees (and, it follows, take responsibility for meeting the regulatory requirements this entails).

Whatever the benefit levels and however the Health Trust is administered, the cost savings are clear when compared with a standard PMI contract. In comparison with traditional full insurance, providing employee health benefits through a turnkey Health Trust managed by a provider could generate around a 4 per cent saving and, for employers who are able to recover VAT, a saving of over 6 per cent can be attained.

Is it an alternative to PMI?

In short yes, but considerations need to be made in respect of the size of your organisation, the numbers of employees you wish to cover and benefits you have in place, as well as the legal factors and costs in setting up a trust. So, if the rising cost of private health insurance is having a considerable impact on your bottom line and ability to provide valuable health and wellbeing benefits to your employees it’s worth looking into.

As one of the UK’s largest healthcare trust providers many organisations choose AXA Health to administer their healthcare trust. For more information on AXA Health’s healthcare trusts simply call your Account Manager who would be happy to help