When times are hard there is no point in companies shelling out more on private medical insurance (PMI) costs than they actually have to, and large organisations can make considerable savings as well as realising other advantages by looking beyond a standard insured arrangement and opting instead for a self-funded scheme written in a Corporate Healthcare Trust.
The costs involved with such trusts have been falling to such an extent that the approach can sometimes be suitable for employers with only a few hundred scheme members. While schemes with more than 400 employees/members should consider a trust, when schemes exceed 1,000 members it can often seem a “no brainer” because claims volatility should minimal and, in any case, can be safeguarded against by taking out stop-loss insurance relatively inexpensively.
Using a Corporate Healthcare Trust rather than paying for full insurance can cut out the insurer’s margin and is more tax efficient in terms of Insurance Premium Tax (IPT) liability, which is rising from 5% to 6% with effect from January 2011. Both can seem unnecessary to have to pay for to enjoy total certainty over costs when future premiums will rise in line with adverse claims patterns anyway.
Further more subtle – but no less crucial – financial benefits result from the fact that with a Corporate Healthcare Trust both management and employees tend to be much more conscious of the issue of claims costs. The Finance Director is writing out a monthly cheque to top up the claims fund as opposed to agreeing and forgetting about an annual premium until the next renewal. Through branding, employees see it as a corporate benefit provided by their company and are more conscious of the claims that they make – because they perceive the cost as being born by the company rather than by an insurer.
A further very real advantage of going the trust route is that employers have total control over the nature of scheme benefits and the way they are administered. They can therefore tweak benefits to include things normally excluded by insured schemes – even making chronic conditions eligible, if required – and can introduce their own guided pathways to manage choice of hospitals and consultants.
But the area continues to be surrounded my misconceptions. For example, some employers are put off by the idea that trusts can involve legal baggage, which is no longer true. Indeed, the trustees’ duties are far less onerous than they are with pensions.
Nevertheless, despite such a wealth of advantages available from using corporate healthcare trusts, it is essential to realise that different insurers can have very different attitudes towards them. Some of the major insurers, for example, claim to favour trusts but are clearly more intent on selling insured schemes because they realise they are more profitable.
Some of the more specialist players, on the other hand, are much more geared to promoting trusts when they feel they are in the client company’s best interests. WPA, for example, has become known for its ability to bespoke benefits and create value for employers but also for being prepared to recommend that trusts do not constitute the best approach when there is not the right cultural fit.
The surest way of determining whether a Corporate Healthcare Trust is suitable and ending up with the right provider is to buy through a specialist intermediary operating on a fee-paying basis. Because they will not receive commission, they will have no incentive to promote the insured route unless it is the best option.
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Edmund Tirbutt is a multi-award winning freelance journalist who specialises in health insurance and protection issues relevant to the workplace. He contributes regularly to specialist publications like Health Insurance, Corporate Adviser and Employee Benefits.
