6 News Rise in IPT ‘not prompting stampede to healthcare trusts’
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A surge of companies towards corporate healthcare trust arrangements could have significant implications for the health insurance industry if it comes about in response to increases in taxation alone, experts have warned. This year’s rise in insurance premium tax (IPT) from 5% to 6% has sparked renewed interest among companies about the potential savings that can be made by self- insuring employee healthcare schemes. Self-funded healthcare schemes through corporate healthcare trusts are typically not subject to IPT, while traditional, fully-insured private medical insurance (PMI) ones are. Fears that IPT could rise further
worst possible scenario, give rise to talk of tax avoidance, they warned. Nick Reynolds, head of
More expert views on corporate healthcare are available in the Boardroom Briefing supplement, distributed with this month’s Health Insurance
still – some commentators have mooted a possible rate of as much as 12% – has led to some speculation that there could be a stampede towards the seemingly tax-efficient alternative to insurance. That speculation has been fuelled further by comparisons made to IPT rates in other countries which are as high as around 20% in countries such as Germany and Italy. A panel of insurers and specialist healthcare benefit consultants,
gathered for Health Insurance’s most recent Boardroom Briefing, warned that even modest increases in the standard rate of IPT in the UK could jeopardise and destabilise the corporate and private healthcare market. They suggested that employers which rush towards trust arrangements without due forethought or the correct advice could encounter a number of difficulties and disrupt the market as a whole. The panel suggested that while self-funded arrangements are absolutely the correct funding vehicle for some companies, those that do so simply to minimise exposure to tax do not fully appreciate the full implications of their actions. A wholesale move towards self-funded arrangements away from insurance could, in the
intermediary sales at Aviva UK Health, which provides both fully insured solutions and mechanisms through which employers can self- insure, said: “Where is the tipping point? If we got to 10% on IPT, there would be a lot more interest [in self-
funding] and there would be a lot more regulatory interest as well, to make sure that you’ve got a proper arrangement in place that is meeting all the regulatory requirements.” Reynolds stressed that the issue
is not a problem for organisations such as Aviva which provide “copper-bottomed and gold- plated” trust scheme arrangements with the correct and proper legal deeds in place. Panellists at the debate said they
detected no wholesale trend at present for companies to move to trust arrangements purely to save tax. Nonetheless, panellists agreed that the industry would be wise to ensure that all intermediaries, employers and providers of healthcare trust arrangements continue to set up such trusts in a compliant and responsible manner.
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