Unlike with other group healthcare products, it has never been essential for intermediaries to undergo any training or necessary for them to gather names, addresses and other personal details of scheme members. All that has usually been required has been the handing over of the contact details of an HR manager or other appropriate decision maker. What’s more, screenings were not regulated by the FSA and did not constitute a P11D liability for employees.
Most of these attributes remain just as compelling as ever but it only takes one bad egg to ruin a party and, courtesy of HM Revenue & Customs (HMRC), changes to the benefit in kind rules this July have introduced a new level of complexity. It all comes down to the different treatment of health surveillance screenings and health assessment screenings.
Health surveillance screenings are understood to remain unaffected by the changes. These include pre-employment screenings but consist primarily of check-ups for early signs of work-related ill health on employees exposed to specific risks governed by health and safety legislation. Tests are normally carried out on around a dozen employees on the same day either at their own work premises or in a mobile clinic.
The matter is further confused by the fact that, following industry pressure, the Revenue has agreed to hold off collecting tax under the new rules for 2007/08.
Because health surveillance screenings have always been primarily for the benefit of the employer, there has never been any logical reason why they should be taxed as a benefit in kind.
Health assessment screenings, on the other hand, arguably benefit the employee far more than the employer. Essentially the human equivalent of an MOT test, they check an individual’s general state of health and provide them with time to have lengthy discussions about diet and lifestyle considerations with a doctor – or, in the case of the most basic formats, a nurse. The average GP nowadays is simply too busy treating those who are ill to provide detailed preventative advice.
Even the least costly health assessment formats provide a significantly more detailed level of investigation than is likely to be available from a GP. GP practices are required to provide annual health checks to all patients over the age of 75 who have not had a consultation within the past 12 months, and they must invite all new patients for a health check within six months of registration. In addition, patients who have not seen a GP within the last three years have the right to request a free health check.
Nevertheless, in practice, GP check-ups often consist of little more than weighing, measuring and checking blood pressure, and will not necessarily be available at a time that is convenient to those who require them. Private health screenings can, on the other hand, be arranged when it suits both employers and employees.
Although health assessment screenings can benefit employers by reducing long-term absenteeism if they spot illnesses in their early stages, their attractiveness as a perk to employees means that they have probably always deserved to be taxed as a benefit in kind when company-paid. But it has only been since the recent tax changes that some of them are actually taxed as such.
Under the new regulations, for there to be no P11D liability for employees who receive one health screening a year “health screenings must be available to all employees.” This not only reduces the appeal of health screening to employers who only wish to offer them to some of their workforces, but the ambiguous way in which the rules are worded fails to make it clear whether employees face a tax liability if their employer pays for screenings for some staff and offers screenings as a voluntary benefit to the remainder.
Paul Roberts, consultant at national specialist intermediary IHC, says; “The wording of the HMRC bulletin is not sufficiently clear for anyone to be certain, and it’s all a huge mess. It’s unclear whether all screenings have to be company-paid or not, so it’s essential that anyone setting up a scheme that falls into this grey area clarifies the situation with their local inspector of taxes.”
Nevertheless, experts agree that employees are clearly exempt from P11D liabilities if their employer pays for health assessment screenings for the entire workforce once a year. Furthermore even in less straightforward cases, having to liaise with a local inspector of taxes is not necessarily the end of the world.
According to HSA’s Annual Market Survey 2007, 70 per cent of companies are likely to introduce health screening benefits during the next 5 to 10 years. The tax changes are, however, likely to see a swing towards the least costly forms of health assessment screenings as companies reduce the average cost per head in order to offer the benefit to their entire workforce.
To date the most popular type of health assessment screening has tended to involve most worthwhile external tests (including an ECG) and some internal ones, and costs between 400 and 500 – although significant discounts can be obtained on sizeable schemes. Bupa’s Classic screening, for example, costs 430 for men and 460 for women and involves 36 tests. It last for two hours, around 45 minutes of which is spent with a doctor.
There has also traditionally been some demand for shorter screenings that focus on the most essential tests. Bupa’s Key Health Assessment, which costs 300 for both men and women and is very popular with the under 40s, offers up to 30 minutes with a doctor.
The fact that Bupa, which pays 8 per cent commission on average for group business, is the only one of the major established national players to pay commission to intermediaries at this end of the market limits choice, although recent entry Norwich Union Healthcare and some smaller local providers also pay commission.
But new inexpensive nurse-led screenings, costing in the region of 40 to 70, are likely to come into their own as a result of the tax changes. Prevent, Health Sure UK and Norwich Union Healthcare all pay commission on these.
Carl Laidler, director of screening programmes at Prevent, says; “The early indications are companies that have traditionally used the more expensive providers for executive screenings are now looking at the lower-cost providers to see whether screening can be offered to all employees, so that tax is not applicable.”
As with health surveillance screenings, these ultra low-cost health assessment screenings tend to take place at the employer’s premises or in mobile clinics and can involve a significant number of employees being seen to on the same day. Indeed, it can even be possible to combine them with health surveillance assessments, if required – which all three players also offer and pay commission for on either a combined or stand-alone basis.
Cash plans that include an element of health screening cover in addition to a range of other health benefits provide a further low-cost format that IFAs can earn commission on. One notable provider in this respect is HSA, which offers a mobile screening service via a module on its WorkWell plan. Another is HealthSure, not to be confused with the health screening provider with the similar name, which provides cash pay-outs to put towards screenings. These pay-outs range from 100 to 300 depending on the grade of cover selected.
Case study – Aifa demonstrates benefit of low-cost screenings
“They viewed it as a perk and liked the idea that we were thinking of them”
Chris Cummings, director general, AIFA
When the Association of Independent Financial Advisers (Aifa) offered its employees the opportunity to have a company-paid low-cost health assessment screening with Prevent this June the entire 17 strong workforce agreed.
The nurse-led screenings, which cost 49.50 per employee and were carried out at Aifa’s City based premises over the course of two days, involved everything from diabetes, cholesterol and urinalysis tests to metabolic rate, bone mass and nutrition assessments. All results were fed back to the individuals concerned during the session.
Chris Cummings, director general of Aifa, says “I thought it was hugely valuable and I can’t understand why more organisations don’t do it. Most people will have a clean bill of health but, if there is anything wrong with them, it’s really important to spot it early. The feedback from staff has been very good and I think we will be doing it annually from now on.
“They viewed it as a perk and liked the idea that we were thinking of them, even though they knew we were a small organisation that has to watch the pennies. I used to have an annual health assessment in my previous job and found it reassuring, but I knew that we couldn’t afford such a comprehensive format.”
Cummings feels that IFAs could do a lot worse than look at advising on group health screening as a simple way of getting involved with clients’ health needs and of adding value to existing client relationships.
At a glance
- Recent tax changes have complicated the sale of some health assessment screenings.
- The changes are understood not to affect health surveillance screenings.
- The actual sales process for all types of screening remains attractively straightforward.
- The tax changes are likely to create a trend towards lower-cost health assessment screenings.