Heathcare trusts are a well tried and cost effective alternative to standard corporate private medical insurance – they are best suited to companies insuring typically more than 750 employees. They differ from traditional private medical insurance in that, while an insurance company is still involved, its role is to administer benefit payments on behalf of your appointed trustees. Instead of paying premiums, you make regular ‘contributions’ into a ring fenced healthcare trust fund which your insurer manages.
The rules and benefits of a healthcare trust can be tailored to a much greater degree than in fully insured and cost plus contracts, so you can introduce variations that you feel work better for you.
Your fund is topped up on a monthly basis, in the same way as a cost-plus contract, but funds held in trust can only be used to pay beneficiaries and can not easily be taken back out if the fund is in surplus.
Funding operates on the same basis as a cost-plus contract, but as a trust is not an insured contract there is no Insurance Premium Tax charge. Your insurer acts as a benefits administrator, so their administration fee will include VAT, but unlike IPT, this applies to a much smaller portion of the arrangement.
Things to consider:
v Sets an acceptable and appropriate level of risk for the company.
v Enables a lower premium and the company benefits from savings made in the lower claiming years.
v The company's total liability can in theory be open-ended, but stop-loss insurance can be included to cap this (like a cost-plus contract).
v You pay VAT on your insurer’s admin charge, but you avoid IPT on the greater portion of the contract – because a Trust is not an insured contract.