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What are healthcare trusts?
Healthcare trusts provide a way for employers to self-fund healthcare benefits for employees as an alternative to traditional private medical insurance (PMI). Rather than paying premiums to an insurer, the employer contributes to a trust fund that is used to pay employee medical claims under agreed-upon rules. The trust is governed by a trust deed and trustees, and is typically administered by a third-party claims specialist.
There are two main models: standalone (client-owned) trusts, fully bespoke with employer control, and master trusts, which are pooled arrangements where multiple employers participate under a shared trust structure. Hybrid approaches are also in use, combining trust-funded elements with insured cover for major inpatient treatment.
What are the cost implications?
Because healthcare trusts are written under a trust and not a contract of insurance, no insurance premium tax (IPT) is applicable, saving around 12% and giving these a significant advantage over PMI. Set-up costs range from £8,000 to £15,000, and there are also ongoing administration fees. Trusts tend to become cost-effective where an employer’s healthcare spend is significant; some advisers suggest schemes are more common when maximum healthcare spend is in the mid-six figures or more.
As a non-insured arrangement, a healthcare trust is effectively self-insured, meaning employers carry open-ended liability for claims, unless stop-loss cover, protection against the financial impact of higher-than-expected claims, is purchased at additional cost. Even so, as an alternative funding vehicle, healthcare trusts can deliver immediate cost savings that can be significant for larger schemes.
Are there any tax or legal issues?
Both tax and legal considerations are fundamental to a properly structured trust.
Employers avoid paying employer national insurance on IPT that would apply to PMI; however, employers still pay Class 1A national insurance contributions (NICs) on the taxable benefit provided to employees, and employees incur a benefit-in-kind (P11D) charge on employer-paid healthcare benefits.
There are important considerations around ensuring compliance with the trust rules. Governance includes ensuring funds are sufficient to meet claims and that trustees act in the beneficiaries’ best interests. Professional legal and tax advice is considered essential both at setup and on an ongoing basis.
What are the current market trends or developments?
With PMI premiums rising sharply, healthcare trusts are increasingly viewed as a way for organisations to manage volatility and potentially reduce overall costs. Interest in healthcare trusts continues to grow across the market, with estimates from Healix Health that more than 75% of corporates paying over £2 million annually on healthcare already use a trust, a figure expected to rise further as medical inflation continues to drive up PMI premiums.
What was once mainly used by larger employers is now being explored by a broader range of organisations, including smaller businesses, as more employers look for better control over healthcare spend, claims costs and risk.
Employers are also starting to use trusts in a more joined-up way, according to Healix Health. This involves closer integration with services such as occupational health, employee assistance programmes (EAPs) and virtual GP services, as well as more thought being given to how trust-based schemes can support earlier intervention and recovery, rather than simply funding treatment.
At the same time, healthcare trusts are broadening beyond traditional PMI to include services such as neurodiversity support, gender dysphoria care, fertility treatment and other family-friendly benefits, signalling a more holistic approach to employee wellbeing. Mental health support is being built into trusts as standard.
Technology continues to play a key role in improving the experience of trust schemes, with the integration of digital tools, including apps, telehealth services, and online claims platforms that simplify access and reduce administrative friction for both employers and employees.
For mid-sized organisations, master trusts and corporate deductibles, where the employer agrees to self-fund claims up to a set level before protection (usually stop-loss insurance) applies, can be an attractive option. These arrangements offer scalability and some of the advantages of a standalone trust, without the need for a full governance structure, making them a practical choice for employers seeking flexibility.
Who are the main providers and what types of scheme do they offer?
The UK healthcare trust market is specialist, comprising a mix of insurers and independent trust administrators. These include Aviva, Axa Health, Bupa, HCML, Healix Health, Vitality, and WPA, whose schemes range from fully bespoke employer-owned trusts to master trusts managed by the provider.
