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 private medical insurance (PMI) can continue to be a tenable solution.
But as businesses continue to seek ways to manage costs while protecting the wellbeing of staff there are a number of unquantifiable risks for those that choose to stop PMI schemes. However, there are also possible alternatives.
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 to work.
Controlling costs
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. Medical care and staff wellbeing is coming under the spotlight in a number of organisations, with financial directors asking their human resource (HR) directors to find lower cost options – or at the very least options that provide better control of costs.
Certainly a blanket approach cannot be taken and PMI fulfils a role for some types of organisation. But healthcare trusts could provide an eminently flexible alternative in a number of businesses – taking care of employee wellbeing while putting greater cost control 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, those in the industry must 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.
Misconceptions
Probably the greatest misconception an adviser will encounter is that setting up a healthcare trust is expensive for the employer; that 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 being set up and this should only be in the region of £3,000-5,000. 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 work with a number of organisations, the control that has been instilled directly in the business has been a major benefit.
Employers 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.
As a case in point; 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. So 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 enables firms to tailor the benefits offered to staff to meet the business’s own needs. But for HR management, it is vital that there is absolutely no compromise on medical care for employees or their dependents – another common 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 be all on cost rather than care.
The truth could not be more different. Working with organisations that have their foundations in medical care, and which have 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 while ensuring that the fund is capitalised at the right level. Indeed, 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 on to the employer.
Central components
A nurse-led claims platform, which forms a central component of a trust’s service, means that it 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.
But, of course, the overriding question is going to be about costs. Can a healthcare trust actually deliver savings over PMI? Well, firms will 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. In addition, 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.
Firms, such as Healix, pride ourselves on being able to provide a specialised and expert service, while 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.
Steve Hook, marketing director of Healix
