What do reinsurers offer?
- Capital for solvency purposes
- Stop loss cover
- Reinsurance of larger risks
- Help with research, design, underwriting and claims management
Why is reinsurance becoming more popular?
Increasing high-value claims
Health funds/cash plans
Mutual organisations run for the benefit of their members
Why have many smaller cash plans suffered?
Declining or ageing customer base and rising costs
How many people are covered by cash plans (as of the start of 2021)?
– Over 2.5m individuals paying
– 3.3m covered
– Over 1m employer contributions
Self-insured schemes
Non-insured schemes run by TPAs
Self-insured claims payout in 2020
Est. £639m
Strengths of TPAs and consultancies
- Independence
- Motivation (rewarded for controlling client costs)
- Flexibility
- Information
How many people covered by PMI?
7.13m – 10.6%
Medical insurance market divisions
- Individual
- Company paid
- Voluntary
Voluntary schemes
Employees pay premiums entirely themselves, but often at premium discounts.
What % PMI is fully company paid?
40%
Savings scheme
Employer sets up a savings plan into which it pays estimated costs of healthcare treatment for its employees – stop loss can be used.
Tax on self-funded schemes
Employees may have to pay tax on the whole cost of treatment (and NICs too?)
Risks of self-insurance
- Underestimating total costs
- Costs can add up
- Unexpected complications
PMI taxation
– No VAT
– IPT at 12%
– Premiums deductible for corporate tax purposes
Employee PMI taxation
– Subject to P11D benefit-in-kind
– Gross premium added to gross income
– Lower PAYE tax code
NICs
– Employers must pay Class 1A NICs at 15.05%
PMI taxation for non-limited companies
– Employer pays income tax (rather than corporation tax)
– Insurance premiums offset against taxable income
6 ways to minimise PMI tax
- Obtain most competitive premium
- Choosing a sustainble insurer
- Choosing the right level of benefits
- Excesses
- Cheaper hospital band
- Self-funding/trust
When did new NHS reforms come into effect?
April 2013 – set out in Health and Social care act 2012
