A healthcare trust is available to larger company schemes. It is not an insurance policy but is a cost-effective alternative to Private Medical Insurance as it saves the company money on Insurance Premium Tax. A simple way to look at a healthcare trust is to think of it as a pot of money that can be used to cover medical expenses.
The structure of a healthcare trust
The employer pays money into a trust which has employees (and possibly relatives of employees) as the beneficiaries. The trust will then pay for the eligible medical treatment as required or reimburse the employees their medical expenses.
The trust is administered by trustees or a trust company and some many providers will offer this service to the company. The trustees are responsible for deciding the benefits employees are entitled to (which makes a healthcare trust a flexible and controllable option), paying out benefits and arranging stop loss insurance.
What is stop loss insurance?
Stop loss insurance can be arranged to limit the employers liability, it can cover all claims cost in any one year, individual claims or both. It can be arranged at a fixed amount then any claims exceeding that amount will be covered by the stop loss insurance policy. It is an insurance policy and therefore by definition would attract Insurance Premium Tax.
How many employees should you have to make a healthcare trust viable?
Historically healthcare trusts were only set up for schemes with 3000 or more employees however, there are now schemes available to as few as 100 members. The set up and running costs of a trust really make it viable and beneficial to the larger corporate schemes.
The legal side of setting up a healthcare trust
As a trust does not have to be approved by anyone, it can just be established however it is a recommended process for a company to take expert legal advice before proceeding. Trust law is complex and if set up incorrectly this could result in payments being subject to tax or the trust could actually be illegal.
Are employees claims guaranteed to be paid?
Employees will receive benefits in line with the rules of the trust. These benefits are not 100% guaranteed for if they were, it would mean that the arrangement is classed as insurance. In practice however, it is rare for an employee not to get the treatment they expect to under a healthcare trust.
There are a few Healthcare or Medical trust experts within the UK and it is important that you ensure that you understand the whole concept of a healthcare trust before moving away from traditional private medical insurance.