If your broker thinks the Insurance Premium Tax (IPT) increase is the big issue, they don’t understand the future of Private Healthcare
When the Chancellor announced that the Insurance Premium Tax (IPT) will increase by 58% from 6% to 9.5% from 1 November 2015, the implications for employers across the UK were immediately understood. Whilst most Group Risk products, like Life Cover, remain exempt from IPT, other popular employee benefits such as Private Medical Insurance (PMI), will become more expensive – again!
Unfortunately, it is inevitable that insurers will pass on this tax hike to consumers, which from a brokerage perspective proves a headache. However, for two reasons I think that the IPT increase shouldn’t be the worry that it is painted to be.
Firstly, in the UK we benefit from a stable taxation and legislative environment. Unlike most claims and loss ratios, the increase to 9.5% this year is highly unlikely to spiral to 30 or 40% next year. And relatively speaking, we still have one of the lowest IPT rates in Europe.
Secondly, and more importantly, the tax increase can be mitigated if employers are advised correctly. There are a number of alternative funding mechanisms available including healthcare trusts, master trusts, corporate deductibles and other self-funding schemes that can be used to offset the IPT increase. Modern health management has evolved from a practice over reliant on PMI to one that has the flexibility of mind and mechanism to devise strategies that can adapt, survive and thrive in an increasingly complex legislative environment. That is the value of consulting over pure brokerage!
The three biggest issues that should worry Benefit Managers and Finance Directors are the continued sustainability, affordability and relevance of Private Healthcare. Traditional means of cost containment, like higher excesses and benefit limits, which may deliver savings in year, are actually driving value and membership out of the market, to the detriment of all.
Private healthcare benefits need to be advised and managed with a long-term perspective.
Partnerships with leading organisations can develop new treatment pathways, new means to consume and deliver healthcare and allows employers to provide massively expanded access.
Innovations in technology are transforming how private healthcare can be delivered and consumed. The advent of tele health, fully integrated into individually tailored care pathways has delivered a step change in cost containment, quality and healthcare outcomes for patients. Why should getting access to private healthcare be cumbersome when app led technology is today removing the friction of referrals for thousands of people?
Technology is also disrupting the very definition of private healthcare and opening up these benefits to the whole of the workforce. Today, for forward thinking employers, the provision of private healthcare is not limited to a funding solution when you’re ill. They’re providing rapid access to the treatments on demand. I may not pay £1,000 for Private Medical Insurance but I will happily pay to see a physiotherapist using an app on my smartphone this afternoon.
Such approaches have allowed employers to bring the benefits of private healthcare to many thousands more employees, helping to tackle underlying causes of absence and performance in ways that PMI simply can’t.
At the same time we’re rebasing risk profiles to allow for a more table claims experience and drive greater predictability for future costs.
And we’re also able to strip out your IPT liability, if that’s what’s really worrying you…