Susie Morris, director of trust sales at Healix Health Services, examines the role of healthcare trusts as an alternative option to private medical insurance for employers
Employee medical cover is an invaluable benefit, protecting the wellbeing of employees and helping companies to attract and retain the best talent.
The last year has proven this beyond doubt, with the pandemic causing health concerns to shoot up the list of priorities and showing employees the tremendous value of healthcare benefits.
It's a win for employers too, since such an offering will also help to keep staff absence down and improve productivity.
Wellbeing and true flexibility are going to be central to any offering and the ‘one size fits all’ approach offered by traditional PMI might not cut it in a post-Covid world."
Even so, the financial pressures felt by businesses in recent years are making some employers think twice about offering or maintaining their private medical insurance (PMI).
But companies may be ignoring a viable alternative - one that maintains the benefits to employees and to the business, while providing greater cost control and medical cover that is better suited to the needs of their workforce.
What is a healthcare trust?
Healthcare trusts are an HMRC-approved alternative to PMI. Rather than paying premiums to an insurer, the money is paid into a tax-efficient fund that is then used to help meet claims as and when they arise.
At the end of the year, any remaining fund balance can be saved to help meet claims spend in the future, rather than being lost in huge premiums, making them much more cost-efficient for the employer.
They also ensure better provision for staff. The types of issues that can be covered by a trust are much more wide-ranging than PMI alone. Medical advice on women's health, including advice on fertility, menopause and endometriosis, can be included when it wouldn't typically be part of a PMI package.
Other issues, such as Long Covid or counselling, can also be covered as part of the offering, meaning a trust is a way for staff to get all, if not greater, benefits of PMI while being more cost-effective and flexible for the employer.
However, companies - and brokers - often rule out a healthcare trust as an option, perceiving them to be complex, hard to set up and less easy to control. But are these concerns valid?
Setting up a healthcare trust can be very straightforward. Trust providers can help administer the process, making it simple to get off the ground. A provider can help a company migrate from an existing PMI solution to a trust and will be able to help manage the ongoing operation of assessing and meeting claims.
Large companies can often make significant cost savings from such an arrangement, but smaller businesses can also take advantage of healthcare trusts by joining a trust that pools the resources of more than one company.
Another common concern that brokers may hear from their corporate clients is that a healthcare trust model will give the employer less control. In fact, the reverse is true: a trust can be set up to provide tailored benefits and this flexibility provides greater cost control, but it also allows the employer to shape the benefits available to suit their business model and workforce.
Brokers can play a key role here to highlight the value of healthcare trusts in providing the flexibility to develop a healthcare plan based solely on a company's own unique and diverse needs. Broad-based PMI solutions may provide a general level of cover, but they cannot easily be tailored to address the health benefits that an employer and its employees need and want most. Tailoring benefits gives employees the benefits they really need, while being more cost effective than a one-size-fits-all PMI policy.
Such flexibility and choice can often reduce the cost of employee health cover. This is partly due to tax efficiencies, but also because the cover is targeted to the needs of the workforce and because the best treatments can be selected from wherever is most cost effective. As a result, healthcare trusts typically deliver cost savings of 10% compared to corporate PMI premiums.
Another common myth is that healthcare trusts make employee benefits dependent on the NHS. NHS Centres of Excellence provide leading-edge treatments and services in their specialist fields and trusts can opt to use the NHS when and where it offers the best possible health provision, but they are not limited to doing so.
In reality, the flexibility of a trust means that its funds can be used to provide whatever private healthcare is most appropriate for each claim.
Corporate healthcare trusts are not the solution for every company, but they do offer many key benefits. The last year has brought with it a shift in employee priorities when it comes to their benefits. Wellbeing and true flexibility are going to be central to any offering and the ‘one size fits all' approach offered by traditional PMI might not cut it in a post-Covid world.
As such, brokers should be considering a trust for all clients looking to spend over a certain amount on their medical benefits and having all the information to hand about trusts enables them to deliver a more consultative approach to suit the changing needs of their clients.
Susie Morris is director of trust sales at Healix Health Services
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