How to make private healthcare affordable
The high cost of private medical insurance undoubtedly serves as a major disincentive for consumers – especially when the NHS provides approximately the same service free at the point of use.
What’s more, the cost of private medical insurance rises over time, in line with the policyholder’s age, meaning those who can afford it now may be priced out of the market by the time they need it most.
However, there are many benefits to private health insurance, such as specialist drugs and treatments, reduced waiting times, greater access to elective surgeries and unrestricted visiting hours.
There are also ways to reduce the cost of premiums. Here are three:
Reduce your coverage
Health insurance is designed to offer protection against a vast number of illnesses, many of them unpredictable. Picking the coverage you need can be tricky, as your needs are speculative.
The majority of health insurance providers recommend the level of coverage a policy should have. While potentially helpful, this approach can also result in unnecessary coverage.
For instance, consumers may end up being covered for services they do not mind resorting to the NHS for, or simply are not important to them personally.
“On top of considerations of how much one can pay, it’s important to consider how much cover one requires,” says Russell Stephens, executive director at CS Healthcare.
“In terms of policy, you have a whole spectrum of options – fully comprehensive, no-excess, benefits/treatments payable, essentials only. You can even take a pick n’ mix approach.”
“The number of services that many may feel they’ll never need is sizeable,” “It’s important to only pay for the things you’ll actually use. While it’s nice to feel fully covered, will you ever require private cover for screening, helpline access, ‘alternative’ medical treatments or the use of a private ambulance?”
As a result, Richard Norris, director at Bupa, recommends a ‘menu-based’ health insurance policy.
“This approach enables individuals to tailor their policy to fit their own health priorities, and allows them to only spend on the coverage they feel is essential,” he says.
Faulkner suggests a 50/50 approach, combining cover for certain needs with a continued reliance on the NHS for others.
“This is an ideal strategy if you can’t afford comprehensive cover, or only require private medical insurance for specific purposes – it allows people to go to their insurer for minor or short-term conditions, say, and use the NHS for emergencies or major illnesses,” he says.
“There are ‘six week wait’ policies, which entitle holders to private treatment only if the NHS cannot treat them within 42 days. This option can reduce premiums by up to a third.”
Increase your excess
If you want to ensure you’re covered for a wide array of possible scenarios but don’t want to foot the bill upfront, increasing your voluntary excess is an effective way of reducing a premium.
“You can share risk with your insurer on a proportional basis, by paying a higher excess or entering a formal co-payment agreement,” suggests Stephens.
A co-payment agreement means the policyholder pays a specified amount for healthcare services (e.g. doctor visits, prescriptions drugs), with the insurer paying the remaining costs. By decreasing the amount an insurer will have to stump up when you make a claim, your insurer will reward you with a smaller upfront fee.
If you live healthily and have spent little time in hospital or a GP’s waiting room, this option may be especially tempting. However, health insurance often covers unforeseen circumstances, and should you fall ill unexpectedly or be involved in a freak accident, you will be obliged to pay out a significant sum. As a result, it’s vital to be certain you can afford to meet excess requirements should you make a claim – and are willing to.
“A good way of calculating how much excess you should be paying is to consider whether the potential cost is so high you would ever be discouraged from making a claim – by definition, this negates the purpose of having health insurance in the first place,” says Faulkner.
“Alternatively, an approach could be to earmark some savings for all or part of your excess costs. If you go this route, it’s worth comparing prices for individual services from insurer to insurer.”
Use a healthcare cash plan
Healthcare cash plans – sometimes called healthcare benefit plans – are a substitute for private medical insurance, which are growing in popularity with consumers and employers due to their low cost.
Healthcare cash plans allow consumers to reclaim money spent on healthcare treatment. The policies are designed to cover individuals’ day-to-day healthcare needs – not just accidents and emergencies. Rates vary across providers (and there is currently no comparison site for the sector), but a few pounds every week (deducted from a pay cheque, or paid upfront) covers individuals for a range of services, up to an agreed limit every year.
“Charges for visits to the dentist and optician can deter people from regular check-ups, potentially allowing minor complaints to become major issues in the process,” says Ben Faulkner of AXA PPP Healthcare.
“A healthcare cash plan allows you visit a healthcare professional when you feel it necessary – and you can choose the professional disciplines that are included with your cover.”
Depending on the provider, consumers can opt for a number of services to be included in their cash plan – ranging from the general (e.g. dental, optical) to the specific (e.g. chiropody, new baby support and assistance). It’s even possible to have NHS prescription charges and hospital car park fees included.
Some healthcare cash plans will limit the amount each family member can claim back, while others give dependents a percentage of an adult’s limit. Some policies do not cover children for specific conditions, or will only cover for certain hospital treatments and consultations.
However, healthcare cashplans are a substitute for private medical insurance – not an alternative.
“Cash plans provide cash benefits for out of pocket expenses and hospital stays – but they’re not meant to cover the cost of treatment,” explains Stephens.