This section explains the main types of private medical insurance offered in the UK. For details of policies and premiums, click here.
It includes the following headings:
This remains the most common method of funding private medical treatment in the UK. This type of cover will pay for all acute medical treatment without any limit and, normally, without an excess, or with only a small excess. The key benefit offered by private medical insurance is rapid access to treatment and choice over the timing of treatment. The specific benefits of the insurance route, compared to self-pay, for example, are:
However, the sense of total protection from having private medical insurance can turn out to be somewhat illusory in practice. There are important exclusions relating to circumstances when people with private medical insurance will find that their insurance company will not pay for treatment. Anyone considering subscribing to private medical insurance should be aware of these exclusions. The Association of British Insurers (ABI) has produced a helpful guide which explains what is typically included and what is not normally included in private medical insurance schemes. The guide can be read or downloaded at Are you buying private medical insurance?.
The ABI guide was published as the response of private medical insurance organisations to criticisms by the Office of Fair Trading in its 1998 report about the difficulties consumers experience trying to compare the large variety of different policies with their differing coverage (see OFT criticisms). The OFT recommended that a "core product" should be defined, indicating the coverage which most private medical insurance schemes offer and making clear those aspects which most schemes do not cover. Then each scheme offered by a private medical insurer would be defined as equivalent to the core product with specified additions to and subtractions from the core product.
CareHealth aims to help potential customers for private medical insurance make comparisons in practice between the different schemes offered by the main insurers by using the core product approach.
However, there is one serious limitation in the OFT's recommendation and, therefore, in many insurers' response: the main insurers do not publish details of their charges. (Consumers have to contact insurers to ask for a quotation, which will probably not cover the full range of options open to them from that company.) Without easy access to information on prices it is impossible for consumers to assess and compare the value for money of different schemes. CareHealth is attempting to rectify this situation by providing illustrative quotations for the main schemes offered by insurers. Some insurers do operate simple charging schemes with published premiums and CareHealth lists this information.
Pre-existing conditions are normally defined as conditions for which you have received treatment or experienced symptoms within the five years before applying for medical insurance.
Private medical insurance schemes will either not pay for treatment of pre-existing conditions or will apply conditions to paying for their treatment. There are two main types of insurance cover which handle pre-existing conditions in different ways:
1. Policies requiring a medical history declarationThis is the most common type of policy. People applying for this type of insurance cover need to fill in a form giving a detailed medical history. The insurance company may contact the applicant's doctor for further information. These policies will not cover treatment for pre-existing conditions whether they arise, one, five or twenty years after the subscriber began paying for insurance. This means that people with medical insurance of this type who experience a repeat of an earlier illness and who wish to be treated privately have to self-pay.
2. Moratorium policiesThis type of policy is less common, but offered by a fairly wide range of insurers. People applying for this type of insurance cover do not have to fill in a medical history form. The issue of the subscriber's medical history is dealt with at the point when private medical treatment is required. If treatment for a pre-existing condition is required during the first two years after the policy has started this is not covered by the insurance (in the same way as with medical history declaration policies). In such cases a subscriber will have to self-pay if they wish to be treated privately. However, if the subscriber does not experience symptoms or receive medical advice or treatment for a pre-existing condition for a continuous period of two years after the policy has started (the moratorium period), the insurance will then pay for treatment should the pre-existing condition recur after this two year period.
The differences between these two types of policy should be carefully considered by anyone intending to purchase private medical insurance who has had a history of occasional illness and hospital treatment. The moratorium policy may offer more complete cover for someone who has required treatment within the past five years but believes they are unlikely to experience a recurrence within the next few years. Moratorium policies will not offer any greater cover for someone who has a condition requiring regular treatment since such condition is likely to recur during the two year moratorium period. Also regular illnesses will be defined as "chronic" and therefore ineligible for cover under both types of policy.
It should be noted that the Office of Fair Trading's 1998 report on Private Medical Insurance came close to recommending that moratorium policies should be banned. This was for two reasons. Firstly, the belief that many purchasers did not fully understand the moratorium conditions. Secondly, the belief that some people with a history of illness were deliberately choosing moratorium policies and then refusing to consult a doctor or obtain treatment during the first two years after their policy had started in the hope that they would then be covered. Clearly such people were risking serious harm to their health by avoiding treatment. In reality such people would be unlikely to be covered anyway since moratorium policies generally exclude treatment for pre-existing conditions for which a subscriber received treatment or advice or for which they "ought reasonably" to have sought treatment or advice.
The Office of Fair Trading was persuaded that there is a valuable place for moratorium policies and they remain available.
Once a condition becomes defined as "chronic", that is, where repeat treatment is required for the same condition, cover no longer applies. People with recurrent medical problems who have medical insurance and who wish to continue to be treated privately also have to self-pay.
Private medical insurance schemes generally will not pay for medical treatment in relation to accidents. The reason is that someone involved in an accident will almost always be taken to an NHS hospital for emergency treatment. If the accident leads to an extended stay in hospital, most private medical insurance schemes will pay if the patient is then transferred to an independent hospital or an NHS private patients unit.
Private medical insurance excludes cover for medical and hospital care during normal pregnancy and childbirth. Women who have private medical insurance and wish to give birth in a private hospital will have to self-pay.
Other exclusions apply to out-patient drugs and dressings, kidney dialysis, cosmetic surgery, organ transplant, drug abuse, self-inflicted injuries, injuries arising from dangerous hobbies, HIV/AIDS, infertility and so on.
Much of the variation between different PMI schemes relates to the combination of additional aspects of medical cover which they provide. The main types of cover which may be added to the core product, either individually or in combinations, include:
The other main source of variation in coverage and premiums between policies relates to non-medical aspects. There are a variety of restrictions which mainly have the aim of providing reduced coverage in exchange for lower premiums than those required for comprehensive medical insurance. The main variations are listed below.
The largest insurance schemes have options which entitle the subscriber to different grades of hospital accommodation. The main difference concerns whether the patient will always have their own room with ensuite facilities. The lowest grade generally means that if the subscriber chooses to be treated in the most expensive hospital they will probably have to share a room. They will probably still receive their own room in most private hospitals or NHS private patient units.
Several insurers offer different policies which entitle policy holders to be treated at a wider or narrower range of hospitals. Some schemes will allow subscribers to be treated at almost any private hospitals while others, with lower premiums, restrict choice to a smaller network of selected hospitals. The networks generally include hospitals operated by the largest private hospital groups but often exclude NHS private patient units and/or the major independent hospitals in London. Hospitals Included in Insurers' Networks analyses which categories of hospital are available under the different policies.
An excess in an insurance policy is an amount the subscriber pays themselves towards any claim. The insurance company pays the full balance of the claim above the level of the excess figure. The majority of private medical insurance schemes now include the option of agreeing to pay an excess should it be necessary to claim on the policy in exchange for paying lower premiums. A recent development is high excess policies which offer substantially lower premiums but where subscribers are liable to pay significant amounts themselves (from £1000 to £5000 depending on the policy).
Some policies include a no claims discount structure, where premiums are reduced if the subscriber does not claim. However, premiums can also increase above the level charged on joining if claims are made. No Claims Discount Policies outlines the issues involved.
This type of restriction may appeal to people who choose private medical insurance more as a way of being sure that any important treatment is not delayed rather than because of the benefits of single rooms, extensive menus and so on. Under this type of insurance subscribers accept that they will be treated by the NHS if this can be offered fairly rapidly, while knowing that they will be treated privately if waiting lists are long.
A further variation of the previous restriction is offered by policies which offer full private medical cover for a specified list of operations and treatments which are known to be those which have long NHS waiting lists (typically over three months). The list of conditions covered is reviewed regularly.
The high excess insurance route is a powerful new approach to private health which combines protection from high medical bills through insurance with substantially lower premiums by levying a high excess. The amount of the excess, typically in the range of £1000 to £5000 is within the means of a large proportion of those people who currently buy or consider private health insurance. If a subscriber requires private medical treatment they must pay up to the amount of the excess themselves in any one year (or in some schemes in relation to any one course of treatment). The lower premiums allow the money saved in comparison with comprehensive insurance to be invested. High excess insurance suffers from many of the same exclusions as conventional medical insurance. Therefore there remains a case for building up a health fund to cover treatment for conditions defined as either pre-existing or chronic.
A new variant of policy has been designed for people ready to follow the self-pay approach, but wishing to insure part of their exposure to medical charges. These policies provide a cash reimbursement of hospital charges (typically from 30% to 75%) and premiums are again significantly lower than for conventional comprehensive medical insurance.
This web site does not attempt to cover private medical schemes offered to employees as part of their remuneration packages. However, it is helpful to understand in general terms how they work, and how they compare with personal schemes.
It is almost always better to join a company scheme rather than to provide your own private medical insurance.
There are three main differences between company and private medical insurance. The most obvious difference is that companies have greater buying power than individuals and will usually negotiate lower rates than an individual. Also, the individual does not pay the premium, although it is a taxable benefit.
Secondly, coverage applies automatically to partners and children of the employee.
Thirdly, and most importantly, there is a difference in the type of people covered. There is a natural tendency for healthy people from healthy families not to buy personal medical insurance. Conversely, unhealthy people, or people from unhealthy families, are far more likely to purchase health care. Insurers call this tendency "selection against the office", and try to avoid it in various ways. For medical policies, insurers usually require a medical history declaration, and may request a medical examination. They also exclude pre-existing conditions, either for ever, or for a period of years.
On the other hand, with company schemes there is "selection in favour of the office", because almost all employees are covered, and they are younger and healthier (at least to start with) than the population at large. They also tend to leave before they start getting old and sick. The only exception is for very small companies, where, until the company reaches a certain size, insurers may regard each employee as a separate individual.
Because of these differences, company schemes generally do not exclude pre-existing conditions or impose a significant delay before they will cover them. There may be a limit on chronic (long-lasting) conditions, but it will be less severe than for private policies.
You will be covered immediately or after a short period (say six months). Usually, pre-existing conditions will not be excluded. However, if you (or members of your family) are currently receiving treatment, you must make this clear. It is also important to make it clear if this treatment is covered by an existing private or company scheme. Obviously, if the same insurance company is providing cover for both your old and new employers, there is unlikely to be a major problem. Otherwise the two insurers may negotiate an arrangement between them, or the employer may have negotiated terms for this eventuality.
Coverage will cease, but you should discuss what will happen with any continuing treatment. It may be sensible to delay resigning during a course of treatment for you or your family, and you should certainly discuss transitional arrangements with both employers.
This is a very significant point. Many insurers will let you transfer to a private insurance scheme without evidence of good health (or loading of premiums for poor health). They may exclude pre-existing conditions (that is, conditions for which you or your family were treated for under your company scheme). If you want continuing cover for existing illnesses or existing courses of treatment, you may find that the insurer will only transfer you to an expensive scheme. In any case, you must make arrangements before you retire.
Another factor often overlooked is that some insurers will offer full or partial coverage to retired members of staff and their families. Naturally this has to be paid for by the former employer, and is a taxable benefit to the former employee. Arrangements for this should be discussed with your employer before you retire, and you may be able to negotiate continuing medical insurance cover in return for a smaller retirement bonus. The main problem with this kind of arrangement is that it may cease after a number of years, and it may then be difficult to arrange your own cover.