The pros and cons of introducing a health trust – and why it matters
Increasingly, large, sophisticated employers are moving from private medical insurance (PMI) to providing employee healthcare benefits through a medical trust to improve absence management.
Here, professional trustee Kevin Clark explores the benefits and the drawbacks of this approach, as well as what appointing an independent trustee can bring to your employee health trust.
The pros:
1. Tailor benefits and lessen HR’s risk exposure
With a health trust, HR can vary the benefits provided by the trust on an annual basis. They can directly respond to the employer’s need to modernise its benefits and meet demands for bespoke benefits, which makes them more competitive for both current staff and when recruiting.
Managing employee healthcare claims can be emotive and time-consuming. That only gets more complicated when there are multiple queries or complaints. If a difficult decision needs to be made, both employees and HR professionals alike can be put in an uncomfortable position. However, introducing a health trust allows for outsourced claims management that is both objective and more efficient than handling the claim internally.
2. Drip-fed contributions ensure smoother funding
The level of funding needed for employee healthcare claims can fluctuate. Naturally, some months require lower contributions, while others require more due to an increased number of claims or claims that are particularly costly.
Under the traditional approach, this can lead to the premium being paid to the insurance provider being too high or too low. These premiums can only be reviewed annually, reducing flexibility and tax efficiency.
Introducing a healthcare trust directly matches expenses (paid into the trustee bank account by the employer) to healthcare claims to be released when agreed each month for medical expenses. This ensures the right amount of money is afforded to monthly healthcare claims, removes guesswork and manages employees’ benefits-in-kind tax.
3. Greater versatility provides employees with the right care
Another advantage of introducing a health trust instead of managing your employee’s healthcare claims through an insurer is flexibility. A health trust allows employers to select their own healthcare service providers and advisers. This in turn allows them to tailor the services provided to the specific needs of their workforce, without paying for unnecessary bundled services.
The cons:
1. High initial costs for long term benefits
The cost to introduce a health trust can feel offputting. Policies need to be adopted for compliance reasons, such as the initial governing trust deed, as well as ongoing legal, governance and administration costs. Finally, while health trusts largely represent a move away from PMI, stop loss premiums still need to be paid. Although these can be expensive, they protect the employer should healthcare claim costs rise massively.
However, for larger employers, the cost/benefit analysis of introducing a health trust is positive and they enhance employee benefits. The trustee board provides a flexible, efficient and cost-effective healthcare claims process that passes value on to the employer and its employees.
Why appoint an independent trustee to your employee medical benefits trust?
1. Efficient claims management eases headaches
An independent trustee with wider health trust experience uses their expertise to ensure claims are managed efficiently, even in complex cases. In what can be a difficult time for the employee, having a professional trustee making sure claim decisions are made swiftly and right first time is massively valuable.
2. Access to the best service providers
A health trust allows for greater choice in healthcare service providers, but being presented with a range of options can leave trustee boards unsure who to select. An independent trustee who specialises in healthcare trusts can use their market knowledge of providers and advisers to secure services that are both high quality and value for money, leading to positive outcomes for beneficiaries.
3. Expertise brings confidence
Whoever makes the decision to transfer to a health trust, the sponsoring employer needs to be certain the process is handled effectively. Appointing an independent trustee allows trustee boards to provide that reassurance. An independent trustee can manage the transition from healthcare being provided by an insurer and ensure the employer meets its HR and financial goals. Meanwhile, it also also strengthens the trust’s governance through their best practice knowledge, managing potential risks and delivering tight third-party agreements and the appropriate stop loss cover.
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