What is private health insurance?
Around 5.1 million people in the UK have private health or medical insurance, and the companies offering it pay out £7.4m every day, according to the Association of British Insurers.
But what is private health insurance? And how does it work?
At its most basic, private health insurance, also called ‘private medical insurance’, pays out for private treatment if you fall ill.
However, private health insurance doesn’t cover you for everything and differs from provider to provider. The product is designed to pay for essential medical conditions (usually called ‘acute’ conditions), that respond quickly to treatment, as well as surgery and medical tests.
What does private health and medical insurance include?
What you are covered for depends on your provider, but there are some elements usually included in most policies.
Most policies cover the costs of inpatient treatment (where you need a hospital bed for the day or overnight), including tests and surgery.
Outpatient treatment (where you see a consultant or have diagnosis tests) is covered under many policies but the amount you can claim for may be capped. Cheaper policies cover fewer types of out-patient treatment and have lower caps.
Hospital accommodation and nursing care
A stay in hospital and limited nursing care is included in most policies.
Some policies will include drugs unavailable on the NHS, but that have been approved by the National Institute for Health and Care Excellence.
Cover for psychiatric treatment varies between insurers. This is a difficult area for providers as it blurs the line between curable illness (which is covered) and long-term care (which isn't). Comprehensive policies may include psychiatric treatment, but not all do.
Some policies also offer complementary therapies, a private ambulance, home nursing, a 24-hour advice line and parental accommodation if your child is in hospital. Again, a comprehensive policy is more likely to cover these areas.
What is excluded from private health insurance?
Private health insurance is easier to buy if you're healthy. Many insurers exclude pre-existing medical conditions, instead focusing on essential conditions that respond quickly to treatment.
Your policy won't pay for longer-term treatment such as kidney dialysis, or illnesses such as asthma. Other exclusions include drug abuse, normal pregnancy, organ transplants, infertility and non-essential cosmetic treatments.
This doesn’t mean, however, that private health insurance is unsuitable for those with pre-existing conditions, it just might be difficult to get the cover you need.
Different types of private health or medical insurance
There are two main types of private health insurance – fully underwritten or moratorium policies.
If you choose a fully underwritten private health insurance, you will have to give your provider your full medical history. With a moratorium plan, you will only need to give limited information to your insurer.
A fully underwritten policy is likely to give you wider coverage, but will be more expensive. A moratorium policy will be cheaper and will come with blanket exclusions on some pre-existing conditions.
Some insurers also have specialist policies. For example, some only cover you when you have to wait longer than six weeks for NHS treatment. Other policies are designed specifically for the over-55s, or have a special focus on one disease, such as cancer.
Modular, pick-and-mix style policies are becoming more common. These cover you for in-patient treatments, but also allow you to add cover for different things so that you tailor-make your insurance package.
Should I buy private health insurance?
Private health insurance is not without its merits. It fast-tracks consultations and covers private treatment for short-term medical issues
Of course, we're lucky enough in the UK to have the NHS, which provides free healthcare at the point of need. And private health insurance can be expensive - premiums rise every year with age.
Research carried out by Which? in August found that annual premiums for a 55-year-old, with no excess and no outpatient cover, were around £1,000 a year. This rose to around £1,375 at 65 and more than £2,000 at 74.
Costs can be considerably higher than this if you have pre-existing conditions and/or previous claims
It's worth considering these alternatives, below, before making a decision.
Private health insurance alternatives
Private health insurance from your employer
This is more of an alternative way to pay for private health insurance, but many employers offer it as a perk of the job, and it's usually much cheaper than it would be if you paid yourself.
Employer private health insurance schemes are often more generous - for example, they may cover pre-existing conditions. And most insurers allow you to switch to a personal policy without losing your extras.
Healthcare cashplans are generally much cheaper than private health insurance - but are only designed to cover everyday health expenses such as dental work, glasses, contact lenses, and physiotherapy.
The cover you get is unlikely to extend towards the costs of serious medical treatment - such as an operation.
You pay a monthly premium, and the cashplan provider will reimburse you for medical expenses covered in the plan. There's an annual limit on how much you can claim, with more comprehensive policies having higher limits.
Critical illness cover
Critical illness cover is often sold with life insurance, and pays out a cash lump sum if you're diagnosed with one of a number of listed critical illnesses, including some types of cancer, a heart attack or stroke, multiple sclerosis or the loss of limbs.
A critical illness policy can be used to pay for anything - and so might include medical treatment costs, adaptations for your home (such as mobility aids, special equipment or structural changes required due to a disability), or to pay off your mortgage.
The one thing it doesn't do is provide a regular income, which income protection does.
The illnesses covered vary between insurers, so get advice before buying a policy and check the policy document. Pre-existing conditions tend to be excluded, but some insurers will base cover on your medical history
The best private health insurers for customer satisfaction
No private health insurer is truly delivering if they're letting you down on service.
We’ve surveyed more than 1,000 policyholders of private health insurance to find out their experiences of using different insurers. We've scored eight major private health insurers - Aviva, Axa PPP, Bupa, Saga, Simplyhealth, Vitality Health and WPA.
To generate our Customer Score, we ask private health insurance customers how satisfied they are with their provider and how likely they are to recommend the company to a friend or family member.
Which? members can log in to see the results. If you're not a Which? member, take a two-month trial to Which? Money for just £1 to see the results of our analysis.
How to get cheap private health insurance
Speak to a broker for help
Private health insurance is a complicated product so it's best to speak to a broker, especially if you have had medical problems or need specialist cover for certain illnesses.
To find a broker, check out the Association of Medical Insurers and Intermediaries (AMII). Comparison sites are a good starting point to find out how much cover may cost.
Cut your costs by tweaking your policy
Once you have picked a policy, you can start to cut costs by tweaking the cover.
Start by considering your choice of hospitals. Most providers will give you a list to choose from and you may be able to cut costs if you opt for a shorter list.
Next, think about adding an excess to your policy. If you're happy to contribute to the cost of treatment yourself your premiums will fall, just make sure you can afford to pay the excess.
Also consider whether you'd be willing to have some treatment on the NHS. Many policies allow you to choose discounted cover that kicks in only where the NHS can't provide it quickly (usually six weeks). So, if speed of treatment is your main reason for going private, this can be a good compromise.
Finally, decide which parts of the cover are really important to you - as many insurers allow you to pick and choose from modules. For instance, dispensing with - or reducing - outpatient cover (for the most part, consultations with doctors and scans), can take hundreds off the annual premium.
Beware ditching and switching
Private health insurance is nothing like car and home insurance where switching each year brings you savings. Trying to ditch your current provider to get a better deal can be tricky.
Any conditions you've developed over the life of your current policy are unlikely to be covered by your new provider as they'll be considered as pre-existing conditions.
Meanwhile, as you get older, and are considered more of a health risk by the insurance industry, your premiums will rise – making it tougher to find a cheaper deal.
If you're considering ditching and switching always check your potential new policy against your existing one to make sure it has everything you need.
Stay as healthy as you can
Some insurers, namely Aviva and Vitality Health, will give you discounts if you stay healthy. Aviva’s scheme, MyHealthCounts, rewards you with up to 15% at renewal if you're fit and healthy, while Vitality Health provides up to £100 cashback.
How to claim on your private health insurance policy
Step one: Read your policy document
Different health insurers have different claims processes. If you're planning to seek private treatment, read the small print of your policy or check your insurer's website to see whether there's specific guidance.
Step two: Speak to your GP
Start by speaking to your GP about your condition as you normally would. Your GP can refer you for private treatment. There are two main types of referral; an open referral, where your GP doesn't address the letter to a specific consultant, or named referral, where a specialist is listed on the letter.
Read the terms and conditions of your policy to check which one your provider will want.
Step three: Call your private health insurance provider
Next, call your provider and explain the situation. What you'll need when you call will differ from provider to provider, but consider the following:
- Your policy number
- Details of what your GP told you
- Details about your condition
- Details of your referral.
Step four: Call your private health insurance provider (again) once you have seen a specialist
Once you have seen a specialist, call you provider again to let them know what steps will be taken next. Also, make sure you understand how you'll pay for any consultations or treatment – either you'll have to pay and claim the money back, or you'll provider will pay directly.
Step five: Don’t be afraid to complain
If your claim doesn’t pan out as you expect, or you feel that your insurer has treated you unfairly, don’t be afraid to complain.
Speak to your provider first, but if it isn't proving helpful (and you have exhausted their complaints process) take the matter up with the Financial Ombudsman Service by calling 0300 123 9123