Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Private medical insurance

Structuring corporate health insurance schemes more effectively

by Personnel Today 18 Feb 2010
by Personnel Today 18 Feb 2010

Many commentators in the private medical insurance (PMI) field are predicting that the January 2011 rise in Insurance Premium Tax (IPT) from 5% to 6% is only the beginning of a trend that will see the tax reach 10% by the end of the current Parliament. After all, our IPT rate is still relatively low by European standards. But, thanks to a recent innovation by WPA, employers can now greatly reduce the amount of IPT they pay without having to effect a corporate healthcare trust.

The Corporate Deductible, which only became available as an option this May, slashes the IPT liability by essentially treating a large part of the risk as an excess, so that the insured element becomes minimal.   Although the approach – which can work especially well for partnerships, LLPs and smaller companies – can at first glance appear too good to be true, WPA has obtained HMRC approval, and specialist intermediaries commonly observe that it has no real downside. Indeed, some volunteer that the idea is so simple and effective that they can’t understand why nobody had thought of it before.

As with a fully insured scheme, a claims fund is calculated and an administration and insurance charge is derived as a percentage of this to arrive at an overall insurance premium. A proportion of the claims fund – typically 70%% to 80% – is then taken as a Corporate Deductible. This is the “risk-free” portion of the premium because it is virtually guaranteed to be used up in meeting the annual claims payments.

Because the insured premium has shrunk dramatically, the only charge being made is for the scheme administration, including the deductible, and for the comparatively small risk premium.  With a £1 million claims fund this could, for example, save an employer £60,000 in IPT at the 6% rate and a further £7,680 in employer’s National Insurance – which is currently payable at a rate of 12.8% on the insurance premium and IPT. Realising such a saving in the current economic climate could make the difference between being able to retain and having to lay off a relatively senior member of staff.

A further notable benefit of the Corporate Deductible is that it avoids the individual partner’s tax liabilities which can occur with a corporate healthcare trust. This means that both employees and partners can be members of the same scheme with the same ease of set up as a fully insured scheme.

 Several of WPA’s existing customers have already transferred to the Corporate Deductible route and realised annual savings of between £25,000 and £150,000, and it would be no surprise if the approach started to catch on like wildfire in the market as a whole once other insurers wake up to the benefits and start to offer it themselves.

Unlike with a corporate healthcare trust, however, the employer does not have the full flexibility to cover exactly what it wants to because it is the insurer that continues to decide, within reason, what is and isn’t covered. A corporate healthcare trust could therefore still be preferable for employers who are determined to extend cover to conditions that are normally excluded by standard PMI schemes.

There are also inevitably some experts who point out that the Government needs every penny of revenue it can raise and that it could perceive the Corporate Deductible as a tax loophole that needs clamping down on, and could therefore effect changes to the current regulations. Nevertheless, it should be pointed out that similar speculation has for years surrounded the possibility of the Treasury clamping down on corporate healthcare trusts, without it ever actually doing so.

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.


mktoMunchkin(“589-ITG-580”);

Avatar
Personnel Today

previous post
Employing ex-soldiers in the workplace
next post
Banking HR professionals don’t have the clout to influence pay or reward for high earners

You may also like

How can HR help staff get through the...

4 Nov 2021

Coronavirus only proves that SMEs need employee benefits

24 Sep 2020

Employee benefits: Why data is king

12 Mar 2020

Aon buys Willis Towers Watson in £23bn deal

9 Mar 2020

Global mobility and HR summit comes to London

23 Oct 2019

How businesses can support the NHS and help...

24 Jun 2019

Uber to give drivers medical cover, sick pay...

24 May 2018

Wellbeing technology in the workplace: trending now and...

4 Jan 2018

10 benefits to include in a flexible benefits...

24 Aug 2017

Healthcare trusts: Watch out for tax rule changes

6 Jun 2017
  • NSPCC revamps its learning strategy with child wellbeing at its heart PROMOTED | The NSPCC’s mission is to prevent abuse and neglect...Read more
  • Diversity versus inclusion: Why the difference matters PROMOTED | It’s possible for an environment to be diverse, but not inclusive...Read more
  • Five steps for organisations across the globe to become more skills-driven PROMOTED | The shift in the world of work has been felt across the globe...Read more
  • The future of workforce development PROMOTED | Northumbria University and partners share insight...Read more
  • Strathclyde Business School expands its Degree Apprenticeship offer in England PROMOTED | The University of Strathclyde is expanding its programmes...Read more
  • The Search for Talent: Six Major Employer Pitfalls PROMOTED | The Great Resignation continues unabated...Read more
  • Navigating the widening “Skills Confidence Gap” in 2022, and beyond PROMOTED | Cornerstone OnDemand conducted a global study...Read more
  • Apprenticeships are the solution to your recruitment problems PROMOTED | Apprenticeships have the pulling power...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+