MCD’s Health Link is a healthcare trust fund for firms with as few as 100 employees. Previously such schemes have tended to be the province of 1,000+ schemes, due largely to the cost and complexity of setting them up and running them.
The MCD scheme includes comprehensive third party administration, MCD’s Treatment Sourcing Service, a form of managed care, and stop-loss insurance in one fixed price package.
Schemes are individually tailored to meet an employer’s requirements. MCD then uses its Treatment Sourcing Service to find the optimal treatment package for the patient, often securing the advantage of fixed price treatment. Such arrangements can avoid the claims overcosts that can arise if complications in the treatment occur.
As an example of tailoring, MCD cites the example of a sports club with its own physiotherapists, which would then be unlikely to need a physiotherapy benefit built in.
MCD says that healthcare trusts can offer employers savings of up to 20% a year when compared to private medical insurance. Partly that is because, except for any stop loss premiums, payments into the scheme do not attract insurance premium tax (IPT). As IPT went up from 5% to 6% on 4 January this year that is a worthwhile saving in itself. Also, the VAT payable on the administration charge is recoverable. Lower costs overall mean a lower P11D benefit to employees, with consequent income tax savings to them too.
Stop-loss insurance is available and, if claims costs are below expectations, any surplus is kept within the trust, so reducing future funding costs. Any excess costs can be covered by stop-loss insurance.
What They Say
Jan Lawson, chairman of MCD, said: “This is an alternative to standard corporate healthcare provision and offers a significant potential saving to the employer. Health Link originated through a desire to meet the needs of clients with unusual risk profiles, which made arranging standard PMI difficult and costly to arrange. Although a healthcare trust is not suitable for every organisation, they should at least be considered by employers and their insurance advisers alongside other options in the decision making process.”
What We Say
"Healthcare trusts have grown in popularity over many years and have the advantage of avoiding the new, higher, 6% IPT. But they can do much more than that – for example, if claims are less than the trust fund, the surplus is simply retained and reduces future costs. The main downside is that healthcare trusts have often proved too expensive and complex for smaller businesses to set up and run. This plan avoids that and so should open up healthcare trusts to even more firms. But the solution is not suitable for every employer. That said, it is worth considering, albeit only for mid-sized and above employers."