An introduction to private medical insurance

Published by Sam Barrett on 11 December 2007.
Last updated on 08 May 2012

Doctor and patient

No matter what age you are, being in good health helps you get the most out of life. So access to the best treatment should your health take a turn for the worse is something that all of us want.

Despite some headline-grabbing investment by the Government to improve the NHS, there are still many areas that are not meeting patients' expectations. However, private medical insurance (PMI) can provide peace of mind that you can get the treatment you need, when you need it without having to rely on the NHS or pay massive bills each time you require care.

Like any other insurance policy, you pay a monthly or annual premium. In return, the insurer will cover the cost of private medical treatment should you become ill. The type of treatment covered by the plan will vary, depending on the type of plan you've bought. There is no such thing as a 'plain vanilla' PMI policy and there are hundreds of plans designed to suit different people, according to their individual circumstances.

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It doesn't have to be expensive

Although PMI is often thought to be expensive and a type of insurance reserved for the wealthy, insurers have been working hard to come up with variations to suit everyone, whatever their budget. The NHS provides the best emergency treatment and the private health sector does not try to replicate this. But for non-emergency treatment, such as a hip replacement or treatment for a bad back, it can provide much quicker access to care.

The NHS is aiming to deliver an 18-week patient pathway from GP referral to the start of treatment by the end of 2008. But even if this target is met, waiting 18 weeks for an operation will still be regarded by many people as too long. If it also means taking time off work while you wait, it could lead to financial hardship, especially if you're self-employed.

PMI gives you access to private care, which means you can arrange to have treatment at a time that suits you and usually in a hospital of your choice. This improved access to healthcare can be a major benefitand could mean you are back on your feet much sooner.

"Bad backs and worn out hip joints don't get any better by waiting. Being able to access treatment quickly can make a big different to your recovery," says Jan Lawson, managing director of specialist PMI adviser Private Health Partnership.

Getting a speedy diagnosis can also make all the difference. "I've seen lots of examples where GPs on the NHS spend months doing minor tests but don't have the budget to carry out more advanced tests to diagnose the problem," says Lawson. "If you go private, you suddenly find you are getting access to detailed tests, seeing a consultant and getting the diagnosis you need to get the right treatment."

The 'postcode lottery'

Although the NHS does provide good access to treatment for serious conditions such as heart disease and cancer in some areas of the country, not all trusts provide the same level of service. This 'postcode lottery' that we hear so much about could mean that you are unable to get access to a new drug or treatment because of local budget restrictions and priorities.

Many PMI plans will fund the most up-to-date treatments giving you the best care available, not just what your local trust can afford. However, improved access to healthcare is not the only benefit of PMI. In fact, a recent survey by insurer BUPA found that most people listed being treated in cleaner hospitals as the top reason for taking out PMI.

"Hygiene is a big motivator for many of my clients," says Lawson. "Infections such as MRSA are not something you want be exposed to and in private hospitals where there are single rooms and less patients, there is a much better hygiene record."

Protection from the unknown

Although PMI can provide valuable cover, it's important to understand that it is not designed to cover chronic conditions which require ongoing treatment and cannot be cured, such as asthma.

Insurance is made to protect policyholders from the unknown, so you are also unlikely to be able to get cover for a medical condition that you already know you have or have sought advice about.

Depending on how the policy is underwritten, you may be able to get cover for pre-existing conditions after a certain period of time, but you should not take out a policy with the intention of claiming for a specific treatment.

Unless you have a very comprehensive plan, most PMI policies will also have a number of exclusions for certain other treatments. Common exclusions include infertility treatment, cosmetic surgery, treatment for addictive conditions such as alcoholism or drug abuse, self-inflicted injury, psychiatric illness and treatment related to HIV and AIDS.

As there are so many different PMI plans available, it's important to understand what your cover includes. Unsurprisingly, the most comprehensive policies are the most expensive.

Other plans are designed to reduce premiums in different ways. Some may limit the types of treatment covered by the plan or place time or cash limits on the different treatments you can claim for. To keep premiums down, 'modular' policies allow you to choose which elements of cover you want in place and which ones you want to limit.

Limiting your options can pay off

Another way to reduce cost is to limit the choice of hospitals that you can receive treatment in, as insurers can often negotiate cheaper deals if they use certain hospital networks. However, if you have your heart set on seeing a specific consultant you need to ensure that they practice in one of the listed hospitals.

You can also choose to pay towards your treatment yourself. This may be through an excess, which works the same way as an excess of any other insurance policy, where you pay the first part of your claim up to a specified amount. Excess amounts can be as little as £50 or as much as £1,000, depending on how much you want to reduce your premium by.

Or you may choose a co-payment plan - where there is no excess - but you agree to pay part of the costs for all treatment up to a specified limit each year. Most co-payment plans offer a choice of how much you agree to pay, usually 25% or 50%, in return for reduced premiums.

With so many options, there will be a plan to suit most pockets. It's important that you shop around and seek advice from a specialist PMI broker. The Association of Medical Insurance Intermediaries is the trade association for PMI brokers and there is a facility on its website to find an adviser in your area.

With the right plan, you can be reassured that if you have a health problem in the future you can get the best treatment where and when you want it.

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