Twice as many companies could start using a medical trust rather than
medical insurance to provide private healthcare benefits, it was claimed this
week.
From 6 April, employers pay National Insurance contributions (NICs) on all
staff P11D (taxable) benefits, including private healthcare costs. This will
add 12.2 per cent on top of the 5 per cent Insurance Premium Tax (IPT) already
payable to the Government, and which many expect to go up in this or next
year’s Budget.
Experts say this could push some employers to consider medical trusts.
"Paying employers’ NICs on all P11D benefits will hit many employers
hard," says Andy Dean, sales and marketing director at Bristol-based
health trust manager Medisure, part of the giant Marsh McLennan Companies.
"But a properly designed medical trust can actually cut costs and
experience over the years proves that they really do work. Although they don’t
affect the NICs position, they do avoid IPT and overheads are lower."
Medical trusts, which are marketed by third-party administrators and some
medical insurers, use a specially constituted trust funded by the employer to
pay for the cost of private healthcare in the same way an insured scheme would.
As there is no insurance element, no IPT is payable.
Although such arrangements are growing in popularity, now making up around
10 per cent of the £1bn a year company-paid private healthcare market, they are
not suitable for everyone, warns Tim Baker of Norwich Union Healthcare, which
offers trusts alongside its insured schemes.
They are unsuitable for smaller companies, due to the set-up costs involved,
while the three months it typically takes to establish a trust can also be a
deterrent. Care has to be taken too to ensure that the trust is set up
correctly.
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More than 7 million people in the UK have private healthcare, with
two-thirds being paid for by employers. Medical trusts have 10 per cent of that
market.
By Andy Couchman
