The benefits of a Healthcare Trust versus traditional PMI

Published Friday, November 13, 2009

As profits come under pressure could a healthcare trust provide a more cost-effective way to maintain staff loyalty?

The recession has brought increasing focus on the costs of employee benefits incurred by businesses, with a number of organisations looking closely at whether PMI can continue to be a tenable solution. But there are a number of unquantifiable risks for businesses that choose to stop PMI schemes.   Here we look at the possible alternatives as businesses continue to seek ways to manage costs whilst protecting the wellbeing of staff.

Over the last two decades, PMI has become well accepted as 'de facto' in employment packages, particularly where businesses are aiming to attract good quality people.  The removal of such a staff benefit is therefore, feared to probably have a direct impact on employee loyalty as well as make an organisation less attractive as an employer for future recruitment.   

There is also a considerable worry - especially in the current climate where less staff are often being expected to do more - that the lack of a health scheme of any sort could see absence levels increase.  Employees who are off sick or have medical issues that would otherwise be covered by a company scheme might take longer to get these resolved.  And it is generally accepted that the longer an employee is off sick, the less likely they are to return quickly.

But there is no question that businesses are looking at every area of their operations, with a focus on cutting back costs in order to not only survive the recession, but come out of it stronger.  And medical care and staff wellbeing is coming under the spotlight in a number of organisations, with FD's asking their HR directors to find lower cost options - or at the very least options that provide better control of costs.

A viable alternative

Certainly a blanket approach can't be taken and PMI definitely fulfils a role for some types of organisation.  But we believe that Healthcare Trusts could provide an eminently flexible alternative in a number of businesses -  taking care of employee wellbeing whilst putting greater control on costs in the hands of the employer. 

 Healthcare Trusts are a recognised alternative to traditional PMI schemes and operate in an almost identical manner.  Except that, with a healthcare trust, a business can set the rules, providing a high level of control on costs as well as ensuring employees are appropriately covered.  This level of control has made them increasingly popular amongst businesses looking for alternative ways of providing healthcare benefits for their employees.

However, we also recognise that there are currently a number of misconceptions surrounding Healthcare Trusts which may be deterring some companies from giving this option fair consideration. 

Dispelling the myths

Probably the greatest misconception that we encounter whenever we start talking to a business about their options is that setting up a healthcare trust is expensive for the employer; it is complicated and takes a long time to establish. But the reality is very different.

A reputable healthcare trust provider will not charge for the set up of the trust - there will only be an Administration Fee on the first anniversary of the Trust set up and this should only be in the region of £3-£5,000. And a reputable provider should also have all the systems and processes in place to make setting up a Trust quick and simple.

What employers also seem to fear is that the control over the Healthcare Trust - and the costs associated with it - will be in the hands of the provider.  This should simply not be the case.  In fact, through our work with a number of organisations, the control that we instill directly in the business has been a major benefit. 

The employer can set the parameters for cover with capped exposure, rather than be bound by standard insurance criteria. And they can also reap tax benefits.  Plus, a 100% stop-loss facility can protect a business from any financial exposure.

A no risk approach

It was the low start-up costs and high level of control over every aspect of a Healthcare Trust that particularly appealed to Aylesford Newsprint, a manufacturer of 100% recycled newsprint, working with local authorities and community recycling networks.  Replacing the company's previous PMI scheme, the Healthcare Trust for Aylesford offered a no risk approach and capped exposure.  And with a staff of 350 this was absolutely crucial, giving the business the ability to control annual claims spend - essential in the current difficult market.

Changing from a conventional PMI scheme to a Healthcare Trust also enabled Aylesford to tailor the benefits offered to staff to meet the business's own needs.  But for Martin Atkinson, Human Resources Manger at Aylesford, it was vital that there was absolutely no compromise on medical care for employees or their dependents.  And this is certainly another misconception as far as Healthcare Trusts are concerned.  Many employers fear that employees may not get the same level of healthcare as would be provided under a PMI scheme; that there may be delays in them receiving treatment; and that the focus will all be on cost rather than care.

The truth couldn't be more different.

The right medical care

Working with an organisation such as ours that has its foundations in medical care, and which has extensive medical expertise, means the right decisions are going to be made about treatment and care for employees swiftly.  Certainly financial considerations will be taken into account but absolutely not at the detriment of quality or speed of care.

It is important to be aware, however, that selective use of the NHS as part of trust management offers employees a way to access the most appropriate care as quickly as they could through the private sector whilst ensuring that the fund is capitalised at the right level.  Indeed, we firmly believe that a singular dependence on private healthcare networks is counter-productive to active cost management.  The risk is that providers will attempt to increase their costs to insurers or negotiate reductions in discounts to cope with the economic downturn and these costs will then have to be passed onto the employer. 

A nurse-led claims platform, which forms a central component of our service, means that we can provide care on the basis of where the most appropriate treatment is available within an acceptable timescale. This, coupled with personalised case management, means that employees can be confident that they will be dealt with professionally and as individuals at all times.

Panasonic, another organisation for whom we have set up a Healthcare Trust, covering 1,300 lives across three sites, has certainly seen employees value the quality of medical care offered.  A number have commented on how impressed they have been, being able to speak to medical professionals on the helpline from the start of the process.

Reducing costs

But, of course, the overriding question is going to be about costs.  Can a Healthcare Trust actually deliver savings over PMI?

We, typically, see savings of around 10% over corporate PMI premiums, with the business keeping any monies if claims are lower than anticipated, rather than an insurer taking extra profit. And the flexibility of a Healthcare Trust, allowing the employer to set the rules and decide when they want the fund to pay out, is also a key benefit for businesses, with bespoke administration services tailored to suit the organisation.  Added to which, we are so confident of our ability to control costs that our expense base acts as a buffer before the stop-loss facility is triggered.

We pride ourselves on being able to provide a specialised and expert service, whilst keeping a very tight control on costs and we are increasingly finding that this is appealing to businesses that had previously seen PMI as the only way to deliver benefits to their staff.


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