Many larger companies are now using Healthcare Trusts. As well as providing employers with more control and choice over the healthcare benefits, Trusts are a tax efficient way to pay for employee healthcare benefits particularly when compared with paying for health insurance. Insurance Premium Tax (IPT), has doubled to 12 per cent since 2015.
Employers that set up a Healthcare Trust are not buying ‘insurance’ and so are exempt from IPT leading to significant savings. Employers also have the flexibility to design benefits that suit their business, rather than buy ‘standard’ policies from insurance companies.
However, Punter Southall Health & Protection warns there are risks if companies rely solely on their healthcare provider to monitor and govern the Trust. The company urges employers to carry out an independent review every three to five years
Cheryl Brennan, Head of Corporate Healthcare Consulting at Punter Southall Health & Protection says,
“While it’s essential that companies have a direct and collaborative working relationship with the Trust’s administrators, there is significant value in conducting an independent review from time to time to ensure they are getting best value and they are up to date with relevant market and legislative market considerations
“Many companies don’t fully understand how the Trust operates or know the right questions to ask the Trust provider. We recommend they undertake a full independent review every few years to ensure good governance, legislative compliance and that the Trust delivers the best solutions for its members,”
Top tips to ensure your Healthcare Trust is delivering the best outcome:
• Is the pricing competitive? The full independent review should check the pricing and consider if there are any added value services which could help improve engagement levels. A review will often provide opportunities to improve cost or value.
• Companies should seek independent advice to ensure the appropriate claims fund is set each year. If funds are set too high, companies run the risk of building a large surplus as well as charging members too much tax. The fund should reflect likely claims costs based on a full understanding of claims experience, changing demographics and inflation.
• As well as reviewing the administrator and their management agreement, it is important to also review the Trust Deed to ensure it is still fit for purpose and up to date.
• Ensure the administrator is managing the overall claims costs for the Trustees at both a macro and micro level. At macro level, the administrator should have in place robust agreements with hospital chains.
• From a governance perspective, it is important to audit how the administrator is managing approval for out of network claims to ensure a consistent and non-discriminatory approach.
• At a micro level, the evaluation of any speciality care management services and mental health/MSK care pathways should be reviewed and compared with other providers.
• Stop loss insurance may or may not be required, but it is advisable to evaluate the situation each year as part of the renewal process and assess which model and supplier is the most appropriate.
• Beneficiary communications and literature also need to be reviewed to ensure they are fit for purpose and reflective of recent changes in benefits, rules and any enhanced services.
Cheryl Brennan adds,
“More of our clients are asking us to carry out reviews and to check that their Trust is performing as best it can. A review is vital not only to check that the beneficiaries are getting a good administration service, but that the Trust is offering good value in the current market place and remains competitive and up to date.”