You need to read this if you’re:
- Fed up with the lack of budget & resources for health & wellbeing
- Facing unsustainable annual PMI increases & inflexible product design
- Wondering how on earth you’re going to ensure your benefits support a culture of diversity & inclusion
Cost is probably the biggest barrier to growth of the Private Medical Insurance (PMI) market. It’s not only the rises in Insurance Premium Tax (IPT) that have taken their toll. When you consider the huge impact on scheme premiums that one cancer claim can have these days it’s hardly surprising that employers baulk at extending cover beyond the upper echelons.
Even there, most HR Managers are just sitting tight and keeping their fingers crossed that a big claim doesn’t hit. And removing that benefit isn’t generally an option. That would only serve to do more harm (reputationally speaking) than good. Sound familiar?
The alternative to PMI
Healthcare Trusts represent the traditional alternative to PMI. They deliver the ultimate in control and flexibility. Yet take-up is low: just 6% according to Gallagher’s latest benchmarking survey.
This is because they’re generally viewed as being accessible to only the biggest corporations. With the new model of a Healthcare Master Trust, however, employers with annual premium spend of just £250,000+ can get in on the act.
And the great thing is that, unlike PMI, any suplus’ at the end of the year are reinvested into the fund, instead of disappearing into the insurer’s coffers. These surplus’ could even be earmarked for targeted wellbeing initiatives, where this capability is written into the trust rules.
What’s more, a Healthcare Master Trust is easier to set up and manage than a traditional healthcare trust: the amount of legal & tax advice required at the start is much reduced; you don’t need to set up a trust bank account; plus, you’re relieved of ongoing governance obligations and responsibilities.
Where company-funded PMI is offered, 99% of organisations purchased it for their top execs. Only 50% offered it to their operatives.
Source: Benefits Strategy & Benchmarking Survey, Gallagher, 2018/19
Tax efficiencies are maximised
Whereas PMI can be somewhat inflexible, a Healthcare Master Trust gives you full flexibility and control over the benefits you choose to provide to employees. Benefits can be remodelled and specific Stop Loss insurance built in, if required, to guard against any big claims in the future.
The Stop Loss element represents the only component that will attract IPT, if the trust is properly structured.
Claims and service aspects are handled by the product providers, relieving you of potentially emotive decision-making responsibility. VAT applies to these administrative services and, in most cases, is recoverable.
It’s also worth noting that payments into the trust are typically a deductible expense for corporation tax purposes.
Finally, the experienced providers will manage a hassle- free set up or transfer from an existing trust or insured scheme. Trustees will run the trust on your behalf according to the Trust Rules, agreed with you in advance.
Don’t feel stuck in a PMI rut!
If you’re in the process of renewing or reviewing your PMI, just remember there is another way. You don’t have to face a potential unlimited liability. And benefits can be tailored to the unique requirements of your business and your employees.
Want to know more? To find out more, please get in touch with your usual Gallagher representative or call +44 (0)20 7204 8987
