Healthcare Trusts vs Private Medical Insurance
Private Medical Insurance (PMI) is a well-established way for employers to provide access to private healthcare. For many organisations, it remains a familiar and effective part of a broader reward and benefits strategy
Against a backdrop of rising healthcare costs, insurance premium tax (IPT), pressure on services, changing workforce expectations and evolving health and wellbeing strategies, businesses across a wide range of sectors are increasingly turning to healthcare trusts as a viable business funded alternative to PMI.
What is a healthcare trust?
Healthcare trusts are essentially a means of your business funding corporate healthcare; rather than paying a premium to an insurer you create a trust for your claims which a trust administrator then uses to pay for healthcare as and when it’s needed.
Before you compare the two models, here's a short video that explains how a healthcare trust works in practice.
At a glance comparison:
| Healthcare Trust | Private Medical Insurance (PMI) | |
| Population size | Best suited to groups of 300+ (or a spend of at least £300k) | Suitable for organisations of all sizes |
| Funding | Employer-funded claims pot and administration fee | Fixed premium paid to an insurer |
| Cost transparency | High visibility of claims spend, fund performance, and administration costs | Visibility of premium costs and claims activity, but less insight into underlying treatment cos |
| Insurance premium tax (IPT) | No IPT on the claims fund (only applicable to any stop-loss insurance) | IPT applies to the full premium cost (currently 12%) |
| Surplus spend | Unused funds remain within the trust and can be rolled forward | Premiums paid are not returned or carried forward |
| Benefit design | Highly flexible, allowing benefits to be tailored to workforce needs and wellbeing strategy | Typically more standardised with less flexibility to remove or adapt benefits |
| Management Information (MI) & reporting | Detailed reporting on claims, treatment costs, utilisation, and fund performance, enabling ongoing optimisation | Regular claims reporting available, but benefit structure is generally less adaptable |
| Governance | Trusts are robustly governed and must comply with trust law and HMRC rules. Trusts must have formally appointed trustees, who are legally responsible for independent governance. | Insurance policies are regulated by the FCA and PRA ensuring fair pricing, transparency, and financial stability. The insurer is fully responsible for complying with this regulation. |
Explore the full findings
Choosing the right healthcare model is a significant decision for any organisation. Our comprehensive report gives HR professionals the detail they need to confidently evaluate both options.
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