Looking for private health care? Try the smaller operators
By Harvey Jones
7:30AM GMT 03 Jan 2013
These are tough times for anyone buying private medical insurance, as premiums outpace inflation and the choice of insurer shrinks.
The average health insurance premium has shot up by 66pc in the past decade to around £135 a month, putting cover beyond the pockets of more and more people, according to research from insurer Passport2Health.
The big four health insurers, Bupa, Axa PPP, Aviva and PruHealth, now account for nearly 90pc of the market, but a handful of smaller, niche insurers offer an alternative to the big boys. They include Passport2Health, Freedom Health Insurance and the Permanent Health Company (PHC).
Passport2Health is the most recent entrant. In June it launched an innovative new policy that claims to cut premiums by up to 50pc by paying for private diagnosis in Britain and private treatment overseas.
An estimated 60,000 Britons seek cheaper private treatment overseas every year. Passport2Health is offering to do the legwork for them.
Its policy will fund UK diagnosis, including MRI, CET and PET scans, costing up to £1,300 a year. If treatment is required it will pay for overseas travel, accommodation and treatment, and post-treatment rehabilitation in the UK, said sales director James Davies. “We provide a complete door-to-door service for the policyholder and a companion. Our policy is between 30pc and 50pc cheaper for people aged between 25 and 55.”
Policyholders can choose from its network of private hospitals in France, Germany, Spain, Belgium, Cyprus, Portugal, Gran Canaria and Malta. Israel and Turkey should soon be added. Passport2Health isn’t fully comprehensive, as it excludes illnesses that require continuous care over an extended period, including multiple sclerosis and cancer.
This will deter people for whom cancer cover is a key requirement, said Sue Smith, a specialist medical insurance broker with Health Care Plus. “Others won’t want to travel overseas for treatment, but will prefer to be near their family and support network.”
Passport2Health is a niche product that is most likely to appeal to retired people, she said. “They have the time to go abroad to get an operation, and treat it as some kind of holiday. People who are still working probably won’t have that luxury. But it is good to give people an extra option.”
Ms Smith regularly directs her clients to smaller insurer PHC. “It has been around since 1994 and its policies are underwritten by Axa PPP, which suggests it has staying power.”
Ms Smith also recommended Freedom, which has offered an innovative plan called Your Choice since 2003. Once you are diagnosed as needing treatment, Your Choice gives you a choice of payment methods, said Freedom’s business development manager, Andrew Sandilands.
“We can arrange private hospital treatment on your behalf. Alternatively, you can shop around for private hospital treatment yourself. As a self-paying customer, you are likely to be quoted cheaper prices, and we let you keep any savings you make.”
You could even buy medical treatment overseas, and again pocket any savings, or use the NHS and keep half the cost of private treatment yourself. “If you need, say, £10,000 of private treatment, but use the NHS, we will pay £5,000 into your bank account, which is free of tax,” Mr Sandilands said.
Your Choice offers four levels of cover, each with an annual limit on inpatient costs. Its Gold plan offers £30,000 a year in inpatient cover, which rises to £100,000 on its Diamond plan.
Most good medical insurance brokers should be aware of Passport2Health, PHC and Freedom, but they may need nudging about an insurer called the Benenden Healthcare Society.
Benenden, a not-for-profit mutual organisation, offers health insurance for a flat rate of just £6 a month, a fraction of the premiums charged by larger rivals.
The money goes into a mutual fund, which members can call on if they need it, said Benenden’s Neil Barnes. “We are an affordable, viable alternative to private medical insurance, but we don’t offer comprehensive cover. We aim to complement, rather than replace, NHS provision.
“We always ask members if they have tried the NHS first before approaching us. We cannot provide guaranteed services, it depends on member needs.”
If your claim is approved, the mutual will fund treatment at its hospital in Benenden, Kent, or one of 18 affiliated hospitals in Britain. It also offers local private consultations and tests up to £1,500.
Benenden won’t suit people who want guaranteed private hospital treatment, but it may prove an attractive halfway house for others. And it doesn’t automatically exclude pre-existing conditions.
The friendly society’s 900,000 members were traditionally public-sector employees, but in September it opened its doors to any UK resident.
CS Healthcare is another niche insurer, but its policies are still restricted to current and former workers in the civil service or public sector.
Many health insurance brokers are sceptical about using smaller insurers, said Stuart Scullion of brokers the Private Health Partnership. “The biggest concern is whether the insurer will have the size and scale to offer competitive premiums in the long run,” he said.
Mr Scullion praised smaller insurers for bringing choice and innovation to the market. “They can’t always compete on price, but they sometimes offer great deals. Just make sure you know exactly what you are getting, and what your policy excludes,” he said.
Two established, medium-size insurers, WPA and Exeter Family Friendly, also offer innovative health insurance policies. WPA’s Shared Responsibility plan offers cut-price premiums because members have to pay 25pc of any claim; the insurer pays the remaining 75pc.
Charlie MacEwan of WPA said: “Once you have exceeded a pre-agreed limit say £1,000 in any given year we will pick up the full cost of treatment for the rest of the year.”
Exeter offers an innovative plan that automatically covers pre-existing conditions after two years of membership, even if they recur during that period. To be eligible, you must be aged 65 or less, and never have suffered a heart condition, stroke, cancer, joint replacement or diabetes.
Martin Howell, a health insurance adviser at MediSearch, said Exeter had a deserved reputation for innovation. “Getting cover for pre-existing conditions is a major problem,” he said. “I have sold the Exeter plan to clients who are worried that their problems will flare up again. It won’t cover every condition, but can really work for some people.”
Mr Howell said most people would continue to buy policies from the big four insurers. He currently rated Axa PPP healthcare’s Essentials plan. “This is a modular policy that allows you to choose from a list of add-on benefits, so that you pay only for what’s important to you.”
Ms Smith still sends most of her clients to the “tried and trusted” big insurers. “Right now, Axa PPP is offering the best combination of premiums and benefits, closely followed by Aviva,” she said.
Smaller health insurers have their charms and shouldn’t be ignored, but the big players will continue to dominate the market.