A guide to health insurance

Whether it's a troublesome tendon, a niggling knee joint or a bothersome bump, getting it fixed quickly is important.

But although there have been improvements in the NHS, you can still find yourself waiting well beyond the 18 weeks promised for your first appointment, before you actually receive treatment.

"Medical insurance gives you the peace of mind that if you need medical care you can be seen by a specialist of your choice in privacy and comfort at a time that suits you," explains Jonathan Bowyer, head of consumer marketing at healthcare provider AXA PPP.

Healthcare plans are designed to pick up the tab for just about anything, from your initial consultation and diagnostic tests - commonly called outpatient treatment - through to your treatment and hospital accommodation, known as inpatient, when you're required to stay overnight.

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On top of this, and depending on the plan, it might also include physiotherapy, treatment abroad and cash payments if you have treatment on the NHS.

Some things won't be covered. These include accident and emergency, cosmetic treatment, experimental treatment or drugs, long-term or chronic conditions, for example diabetes or asthma, and routine pregnancies.

Pre-existing conditions are also commonly excluded, although some policies will offer a moratorium style of underwriting. In these plans, conditions will be covered providing you don't require treatment for them in the first few years of the policy.

Picking a plan

Although plans are broadly similar in terms of what is and isn't covered, they can vary a lot when it comes to the detail.

Plans fall into three categories: budget, which includes inpatient and day patient costs but excludes outpatient benefits; comprehensive, which has full cover for inpatient and outpatient as well as additional benefits such as physiotherapy; and intermediate, which fits between the two.

There are also some slightly different plans such as National Friendly's Healthcare Deposit Account, where 25% of your premium goes into a savings account that can then be used to fund 10% (25% if you're 65 or over) of your treatment, and Patient Choice's Access Plan, where you receive a set amount for your procedure, scan or consultation and can pocket any savings you make. 

Whichever plan you go for, the most significant way to reduce the cost is by going for less cover. This can be a good idea as Glen Smith, managing director of intermediaries Healthcare Partners, explains:

"A plan with little or no outpatient cover will be cheap and could be a great idea if you have the financial means to pay for any outpatient treatment you need," he explains.
As an example of the savings you could make, a 50-year-old male in Chelmsford would pay £60.38 a month for a budget plan such as Aviva's Solutions product with £500 of outpatient cover.

If they increased cover to Aviva's comprehensive plan, their premium would rise to £92.73 a month. This is a difference of almost £400 a year, which is enough to pay for three specialist consultations or an MRI scan.

As well as thinking about the price, Jan Lawson, managing director of specialist intermediaries the Private Healthcare Partnership, recommends considering why you want medical insurance.

"If you're worried about MRSA infection rates in NHS hospitals, and never want to be treated outside a private facility, a comprehensive plan is a must.

"On the other hand, if you only want your plan to step in if you have a major health problem then you could opt for a cheaper one," she explains.

Cutting the cost

There are a number of pricing mechanisms you can use to make cover more affordable. The most common of these is an excess, where you agree to pay the first part of a claim.

For example, Aviva offers excesses ranging from £100, giving a 5% discount on price, through to £5,000 with a 65% discount.

As well as the size, the way they're applied is also important. Smith explains: "Some are applied once a year, others per claim, which will give you a bigger discount, but if you have a series of small claims it may mean you never get to claim anything."
No-claims discounts are also available on medical insurance. These reward you each year you don't make a claim and are offered by several insurers including AXA, Aviva and Standard Life Healthcare.

Maximum discounts can be as high as 75%, which makes them attractive if you don't claim, but as Sue Smith, a specialist healthcare intermediary at Health Care Plus, explains, there can be catches.

"It's not so much about reducing the cost of cover but about the insurer managing claims.

"You can find that even a small claim will see you drop several levels of discount," she says. As an example, one of her clients recently claimed £141 for some physiotherapy only to see the premium jump by more than this upon renewal.

Lawson is also reluctant to recommend these plans. "You can start with a discount of as much as 50%, which looks like a great deal, but if you make claims this means your premium could double," she explains.

"Do check what happens if you claim after you take out one of these plans."

Another cost-saving device is a six-week option offered by the likes of Aviva and AXA. This gives you access to private healthcare as long as the NHS waiting list is six weeks or more, and will slice around 20% off your premium.

Other steps can also trim your premium. Paying annually rather than monthly will cut between five and 10% off your bill and a more restricted hospital list can take another 25% off, depending on where you live.

Lawson also recommends asking for a further discount. "Some insurers will offer a discount for certain occupations. CS Healthcare does this for anyone who's been in the public sector and WPA will give discounts to professionals," she says.

This article was originally published in Money Observer - Moneywise's sister publication - in June 2010

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