In the Autumn Statement, the chancellor announced the increase in Insurance Premium Tax to 12% from June 2017. Thankfully, in the March Budget, Philip Hammond didn’t announce a further increase – although the more pessimist commentators still expect further increases, possibly in the Autumn Budget.
Since IPT now adds 12% on to the cost of Private Medical Insurance there is a growing interest amongst corporate clients in investigating alternative healthcare options which aren’t subject to IPT such as Healthcare Trusts.
Once the preserve of large corporations who could absorb the risk of self-insurance, Healthcare Trusts are now much more accessible to a wider range of clients.
In fact, even smaller businesses who are currently spending £250,000 plus on healthcare could potentially be able to utilise an Healthcare Trust to their advantage irrespective of the number of employee members, thanks to the growth of specialist Healthcare Trust providers who offer “end to end” packages incorporating trust wording, trustee services, administration, claims management and stop-loss insurance to cap liabilities.
Being a trust rather than an insurance, no IPT is payable. On healthcare costs of £250,000 this amounts to a tax saving of £30,000. The administration services under the Healthcare Trust are Vatable but, unlike IPT, in most cases clients are able to reclaim the VAT charge.
Although saving on IPT is a valuable benefit there are additional advantages associated with Healthcare Trusts.
Firstly, as a discretionary trust there is almost complete flexibility in terms of scheme design. It is possible to include benefits which aren’t normally found in PMI schemes, for example: private GP benefits, maternity, chronic condition management, health-checks and wellbeing programmes. In addition, it’s possible to introduce increased claims management and control by introducing NHS care pathway navigation. This will provide members with a seamless service using both Private and NHS facilities to ensure fast-track diagnosis, treatment and follow up. Potentially this not only provides the best clinical outcomes for members but also cuts claims costs to the benefit of the trust
Finally, unlike insured solutions where any underwriting surplus forms part of the insurance company profit with a Healthcare Trust any unused claims fund is retained by the Trust. This allows good claims years to help fund poor claims years, helps to reduce contributions in future years, or even provide contribution “holidays”.
Designing and building a Healthcare Trust solution will usually involve an audit of any existing healthcare schemes and discussions on how future health and wellbeing benefits should be structured. The sooner this process can start in advance of the renewal the better.
- Edward Watling, Healthcare Business Development