Choosing private medical insurance How private medical insurance works
Why choose private medical insurance (PMI)?
The UK is one of the few places in the world that has a universal free health service, so why would anyone choose to pay privately for medical care? According to a Bupa survey, the main reasons for going private were the fear of superbugs such as MRSA and hospital cleanliness, and a desire to avoid long waiting lists.
Private medical insurance (PMI) allows you to avoid NHS waiting lists and receive fast-track consultations and private treatment for short-term, curable medical problems. You are treated privately in an NHS hospital or in a private hospital. PMI doesn’t cover every medical eventuality, however, so it's important to check your policy details.PMI is not essential and should come way down the list of your priorities when you are thinking of financial products. However, if you have disposable income and all your finances are in order, then PMI could be for you if you feel it will give you peace of mind.
What does health insurance cover?
Standard PMI plans cover essential treatments, including surgery, consultations, nursing and hospital care, but exclude treatment for drug addiction and incurable conditions. Comprehensive policies offer additional benefits, ranging from complementary medicine to personal accident cover.
There are two types of plan, known as fully underwritten and moratorium. Fully underwritten policies require you to disclose your full medical history to establish what will and won’t be covered. Moratoriums simply impose blanket exclusions on pre-existing conditions going back a set number of years.
Moratoriums are usually cheaper, but watch out – any disorder that subsequently surfaces won’t be covered if an examination shows it arose during the moratorium period.
The main things to consider are:
- PMI doesn't replace all NHS services - for example, accident and emergency treatments aren't covered.
- With very serious illnesses, you will not necessarily receive treatment more quickly with PMI than you would under the NHS.
- You won't have unconstrained choice over where you are treated or by whom. When you buy a policy, you will typically choose a hospital list, denoting the selection of hospitals and treatment centres in which you will be entitled to cover. The broader the selection, the higher your premium. But insurers also impose schedules of fees setting out the maximum amounts they will pay specialists for a given procedure. So if you have chosen, or require, a specialist whose charges exceed the schedule maximum, then it will be up to you to make up the shortfall. Some insurers will have networks of 'recognised' consultants who, by pre-agreement, won't charge more than the schedule fees.
- You won't always get treatment in a private hospital. You may be put in a private patient unit within an NHS hospital. You could also end up on an NHS ward rather than in a private room.
How much does PMI cost?
Premiums vary, depending on the level of cover you buy, your age, state of health and whether or not you smoke.
Your premiums will tend to go up annually to keep pace with medical costs and because the risk of illness increases with age. Discounts are sometimes available if you’re able to pay the whole annual premium upfront, and if you agree to pay an excess fee on any claims.
Many policies also include a no-claims bonus, which rewards you for staying in good health. This feature should not dissuade you from getting suspected problems checked out, so avoid policies that threaten to remove a bonus merely for visiting your doctor.
Employer-provided health insurance
Many employers provide PMI as a free 'perk'. You still need to pay tax on the value of this benefit, but for basic rate taxpayers this means that they only pay 20% of the actual cost. Employer PMI schemes are often more generous than individual schemes - for example, they may offer cover for pre-existing conditions. When you retire, or switch employer, you may be faced with buying PMI independently. The choices for self-insurers are quite complex - determined by the level of cover you need and the amount you can afford to pay. Most insurers allow you to switch to a personal policy without losing cover for pre-existing conditions that arose while employed. This is known as a continuation of insurance.
Consider the following before taking out PMI
- Don't take out a PMI policy (unless it is offered as a company perk) before your finances are in order
- Pay off any debts and build up a cash fund to deal with unforeseen emergencies
- If you have dependants, make sure you have enough life insurance
- Make sure your income is protected if you can't work
- Make sure you have some form of private pension provision in place.