UK employers are facing mounting pressure when it comes to funding healthcare. Demand on the NHS continues to rise, private medical insurance (PMI) premiums are increasing, and sickness absence remains high. Recent data shows average sickness absence reached 9.4 days per employee last year, up from 7.8 the previous year – a clear signal that workforce health challenges are intensifying.
Traditional PMI still plays an important role. However, many employers are questioning whether standardised insurance models can keep pace with evolving workforce needs. As health risks shift and costs climb, organisations are increasingly asking whether a different funding approach could deliver better value and better outcomes.
The limitations of traditional insurance
Traditional private medical insurance still has its place, but it’s built around predefined benefit schedules. While this provides certainty, it can also create rigidity. What works for one workforce may not work for another, yet many employers find themselves tied into ‘one size fits all’ packages that are not necessarily designed around their people.
An organisation with a younger workforce facing stress and anxiety has very different needs to one managing chronic conditions in an ageing demographic. Yet both may pay for identical packages, with limited scope to redirect resources where they would deliver greatest impact.
This inflexibility comes at a cost. When healthcare provision does not reflect workforce needs, opportunities for early intervention are missed. Employees may struggle to access the right support at the right time, often resulting in higher absence levels, increased healthcare utilisation and ultimately greater expenditure.
In an environment where employers are under pressure to demonstrate return on investment from every benefit pound spent, the lack of flexibility from traditional models is increasingly difficult to justify.
A different approach: master trusts
Healthcare trusts, particularly master trusts, offer an alternative funding model. Rather than purchasing an insurance policy with fixed benefits, employers contribute to a trust fund that pays claims based on a set of healthcare benefits tailored to the needs of their workforce. A master trust operates as a non-discretionary trust serving multiple employers, typically suitable for organisations with 500 or more employees. Professional trustees oversee governance, compliance and financial management, removing much of the administrative burden from participating employers.
The key advantage lies in control and customisation. Employers can design benefit structures that reflect their workforce profile, absence data and wellbeing priorities. If mental health support needs to be strengthened, funding can be directed accordingly.
From a financial perspective, master trusts can also introduce greater transparency. Where claims are lower than expected, unused funds can help offset future costs, creating an incentive to invest in prevention and early intervention. For employees, this can mean broader coverage than they would receive through standard private medical insurance.
Driving measurable outcomes
For many employers, the conversation has shifted from “What cover do we provide?” to “What outcomes are we achieving?”
An integrated approach to health and wellbeing enables organisations to link healthcare provision with absence data and workforce analytics. Early access to clinical support for common drivers of absence, such as mental health conditions and musculoskeletal disorders, can reduce the likelihood of short-term issues escalating into long-term absence.
When healthcare funding is aligned with prevention and proactive support, employers gain clearer visibility of what is driving absence and where targeted interventions deliver the greatest value. Over time, this can translate into measurable savings through reduced absence costs, improved productivity and a more resilient workforce.
In a climate of rising premiums and growing scrutiny of benefit spend, that ability to demonstrate tangible return on investment is increasingly important.
Is trust-based funding right for every organisation?
Trust-based healthcare funding is not a universal solution. Smaller employers may find that the scale required to manage claims volatility outweighs the potential benefits. Master trusts transfer more financial risk to employers than fully insured models, and organisations must have sufficient resilience to absorb fluctuations.
Data capability is also critical. To maximise value, employers need meaningful analysis of claims and absence trends, alongside expert guidance to shape benefit design. Without this insight, the advantages of flexibility can be lost.
Communication is another key consideration. Employees accustomed to traditional insurance arrangements will need clear information about how a trust-based model works and how to access support. Effective engagement is essential to ensure that investment translates into utilisation and improved outcomes.
Looking ahead
The healthcare funding landscape is evolving. As workforce health challenges become more complex and cost pressures continue to rise, employers are exploring alternatives to conventional insurance models.
Master trusts represent one such alternative, offering greater flexibility, transparency and alignment between funding and employee needs. They offer a clearer return on investment along with tangible employee outcomes. The integrated approach offered by master trusts creates a more responsive, outcome-focused approach to workforce health that supports both people and performance in equal measure.