Analysis: Healthcare trusts – what types of medical benefits can they include?

Administrators of self-funded corporate healthcare trusts are keen to emphasise how flexible the mechanism is compared to traditional private medical insurance. Emily Borkowska looks at some of the more unusual healthcare benefits that can be incorporated in such schemes.

IVF and sex change are not the first things that spring to mind when thinking about healthcare benefits, but employers are using self-funded schemes to cover these more unusual treatments.

Traditional private medical insurance (PMI) excludes these benefits because they are not classed as illnesses, but self-funded healthcare schemes are extremely flexible and allow employers to include whatever treatments and services they want.

“A company can put anything they like in a healthcare trust,” says Alan Grinnell, managing director of trust administrator New Vision Healthcare. “As long as the benefits are to do with health, the company can have a tailormade package based on their own specific needs.”

Sex change operation is the least common benefit covered by trusts. Of the providers that Health Insurance spoke to, only Simplyhealth had a client who had included it in their trust deed.

“I don’t know what the rationale for including sex change operations was, but the company paid for three of them,” says Howard Hughes, Simplyhealth’s sales and marketing director.

IVF

Several companies include IVF in their healthcare schemes, enabling employees to have treatment up to a financial limit of, say, £10,000 in any one year. This differs from PMI, which may cover the cost of diagnosing a fertility problem but not the cost of treating it. Unusually, Simplyhealth had a client who set up a trust scheme for IVF alone.

“They may have had traditional PMI as well, but felt that IVF treatment was particularly important to them,” says Hughes.

Including IVF treatment is not always straightforward. Naomi Saragoussi, principal at Mercer, says both partners need to be members of the trust for the full investigation and treatment to be covered. Similar benefits covered by healthcare trusts include pregnancy and childbirth. Traditional PMI covers a pre-defined list of maternity-related complications, but some employers choose to mirror international PMI maternity benefits, which typically include scans, pre-natal and immediate post-natal check-ups and childbirth.

Some other trust scheme benefits not covered by a traditional PMI policy are HIV, alcoholism and addictions, dangerous sports, cosmetic treatment, dentistry, health screening and complementary therapies. Saragoussi has also seen pharmaceutical companies including their own drugs in their scheme and she had one client who provided for the harvesting of stem cells.

“The trust deed covered the harvesting of stem cells and the use of them if they were required, but it did not cover the cost of actually keeping the cells in case the person subsequently left the company,” she says.

Employers sometimes use healthcare trusts to extend cover for cancer, so that employees have access to a wider range of drugs and therapies. However, Nick Reynolds, head of intermediary sales at Aviva UK Health, says the cover provided by PMI is usually sufficient.

“Given that the major insurers have all moved their position on cancer over the last 12 to 18 months and there is more choice on the extent of cover, employers don’t have to go down the trust route. Cancer cover is more readily available in the insured market,” he says.

Private GP

A more common inclusion in healthcare trusts is access to a private GP. Magnus Kauders, commercial director at private primary care provider Blossoms Healthcare, says most employers provide access to private GPs as a core benefit, but very large schemes provide services on-site.

“They can clearly see the financial benefit of quick access to care and early intervention,” says Kauders. “Healthcare trusts make independent primary care the most essential step in managing the cost profile of the scheme, as every pound saved in diagnosis or treatment costs comes straight off the bottom line.

Self-funded healthcare schemes are also a useful tool for providing cover for chronic conditions. According to Richard Saunders, sales director at Healix Health Services, examples of treatment that can be covered in this way can be as broad as providing a £20,000 annual benefit for every member for excluded chronic conditions or measured extension such as long-term monitoring including tests and check-ups; long-term control or relief of symptoms; a condition that continues indefinitely; a condition that comes back or is likely to come back; rehabilitation cover; and cover for a condition that has no known cure.

Choosing benefits

The range of treatments that can be covered shows just how flexible trusts are, but employers need to think very carefully about what they include. When companies first switch to a self-funded arrangement it is common for them to offer exactly the same benefits and services they had under their PMI policy. After two or three years they can then mould the benefit structure to reflect their full requirements.

“This is usually integrated within the reviews with the third party administrator, employer and healthcare consultant,” says Saunders. “A greater level of management information will help identify conditions excluded by the ‘acute condition’ clause that can be considered by the employer. Obviously, this would be based on a full assessment of the exposure to the anticipated claims spend and the employer would have the final decision.”

Nick Tomkins, corporate account director at Jelf Wellbeing, says employers need to look at how the scheme is performing and consider their short, medium and long-term plans before adding in benefits.

“Some employers look at healthcare in a holistic manner and will think about their overall health and wellbeing strategy,” he says. 

Healthcare intermediaries play an important role in helping employers decide what to include. Steve Bradley, client director at Lorica Consulting, says he would survey the insured population and come up with a wish list of the benefits that employees would like to have.

“Which benefits the employer decides to include depends a lot on the company’s sector,” says Bradley. “Financial services companies need to be ahead of the curve so they tend to be inventive with benefits. London legal firms are increasingly falling into this category too. They want to be seen as the employer of choice.”

Financial liability

The make up of the staff is an important consideration when choosing benefits. If the employees are young the employer could include routine maternity and cash benefits for children, whereas older employees would be more interested in benefits like nursing at home. A lot will also depend on the upfront cost and the future financial liability of widening cover. The trust fund is not a bottomless pit and the more the employer adds to it, the greater the risk.

“If an employer extends benefits they need to be clear what the cost-benefit analysis is,” says Paul Moulton, sales and client relationship director at AXA PPP healthcare. “Dental is an attractive benefit and it is highly regarded, but employees claim frequently and it can add a significant amount to the overall claims cost.”

There is also the risk of big claims, but New Vision Healthcare’s Grinnell says even if the employer has a catastrophe year it should not put too much pressure on the scheme’s overall costs.

“In a standard five year period the employer might have one year when they have big cancer claims, but they will have four other years when they don’t. The set-up of a trust means that the surplus of the good years cuts the impact of a catastrophe year. The company can also take out stop loss insurance, which will guard against the risk of expensive claims.”

Trust providers

If an employer wants to extend cover they should assess the provider’s stance towards more unusual treatments. Intermediaries have found that smaller providers tend to be very flexible, whereas larger providers often want the trust to mirror their PMI plans. The way the trust is set up can also affect how creative employers can be.

“Some schemes buy a one size fits all trust deed which limits the scope of what they can do, while others are required to join a trust which is provided by an umbrella organisation,” says Ellis Turley, general manager at WPA Protocol. “With us, the client has their own trustee to suit their purpose and all we do is administer the scheme. The client can move when they want and they can take the trustee with them.”

Employers are certainly being innovative with their healthcare schemes, but whether they extend the range of benefits even further could depend on the wider economy. Intermediaries say the flexibility of healthcare trusts was more important to companies prior to 2008 when they were not scrutinising costs as much.

“The reins have been pulled in somewhat and employers are not being as generous,” says Lorica’s Bradley. “However trusts are still an attractive option which gives additional flexibility.”