Health Insurance

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Private Medical Insurance

What is private medical insurance?

Private Medical Insurance - How does Private Medical Insurance Work?

Private Medical Insurance gets you treated in a private hospital, private ward within an NHS hospital or treatment centre for short-term curable illnesses and conditions quickly and at a time and location of your choice avoiding lengthy NHS waiting lists.

It should not be seen as a complete alternative to the NHS and doesn't necessarily guarantee a better standard of treatment, but you will have a choice of how, when and where you are treated.

Private Medical Insurance - What does private medical insurance cover?

Private medical insurance is intended to cover the cost of in-patient or day-patient treatment in a private hospital or in a private ward within an NHS hospital, but out-patient treatment may be covered also. The level of cover and benefit varies directly in proportion to the level of premium you pay.

High-end comprehensive plans cover inpatient and outpatient treatment in all private hospitals, with the full cost paid for by the insurance company. At the upper end of the scale complementary and alternative healthcare and even dental care can be included, but this type of plan can be extremely expensive so most PMI policyholders opt for lower levels of cover. Lower level plans have fewer special benefits and may not cover the cost of out-patient treatment.

Insurance providers typically offer the policy holder a range of hospitals – choose among three levels: an A list without restriction, a B list (standard cover) that would exclude the most expensive private hospitals (the more expensive ones in London and some others will be excluded) and a C list limited to the least expensive hospitals. If a policyholder uses a hospital outside of the applicable list, the insurance company may have the right to refuse to pay out or to pay only part of the cost of treatment.

At the lowest levels, budget PMI plans may impose many kinds of restrictions, such as fixed limit maximum payments for various specified treatments or capping the total payable per annum and further exclusions of cover such as disallowing out-patient physiotherapy, further limiting the list of eligible hospitals or wards or only paying for treatment privately if the wait for NHS treatment is over six weeks.

Private Medical Insurance - What is excluded from private medical insurance cover?

Exactly what is excluded from your PMI policy varies depending on level of cover and from one insurance company to another. Typically, treatment for drug abuse or alcoholism, infertility treatment or standard pregnancy, HIV/AIDS and most cosmetic surgery are all excluded, and unless your policy is generously comprehensive (and expensive) private visits to your doctor, routine medical examinations and non-emergency dental care outside hospital will also be excluded.

To begin with PMI policyholders will usually be prevented from claiming for the cost of any treatment relating to ‘pre-existing conditions’, namely any health problem you have or of have had at the time of your application or prior to inception of the policy. Generally, PMI providers will refuse to pay for any treatment relating to any pre-existing medical problem until two full years without treatment have passed, then the condition may be covered, but some PMI policies exclude such conditions for life so it is important to check carefully if this might affect you.

Besides the kinds of exclusion referred to above, most private medical insurance policies exclude long-term chronic illnesses such as multiple sclerosis and arthritis for which there is no cure or which do not respond to treatment. That said some policies cover the cost of treating health complications resulting from or associated with an excluded chronic illness. Mental illness is commonly excluded, although some policies do allow for limited cover.

Private Medical Insurance - How Much Does Private Medical Insurance Cost?

Private Medical Insurance - How to Keep the Cost of Cover Down

There are various ways to get the cover you want at competitive rates, but it is important to be aware of what options are available and the quality of care you can expect for a certain premium. Some low-cost policies may compromise on cover and not provide the desired benefits.

• Choose a budget or basic policy with a restricted choice of hospitals and list of treatments. These policies generally only pay out if your treatment is not available via the NHS after a specific period of time. If choosing a basic policy, make sure you have the flexibility to add policy options as your care needs and budget change.
• Choose to pay a policy excess, this can help you to afford a more comprehensive policy or simply make a cheaper policy more affordable.
• Some policies offer no-claims bonuses that can help limit the increase in your premium. This gives you an incentive not to make minor claims which account for the majority of claims.
• Choosing a different grade of hospital accommodation
• Paying for part of your treatment
• Receiving treatment under the NHS when it is available within 6-12 weeks
• Choosing to receive treatment at a specified hospital

Private Medical Insurance - Inherent problems with private insurance

Any private insurance system will face two inherent challenges: adverse selection and ex-post moral hazard.

Private Medical Insurance - Adverse Selection

Insurance companies use the term "adverse selection" to describe the tendency for only those who will benefit from insurance to buy it. Specifically when talking about health insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills. On the other side, people who consider themselves to be reasonably healthy may decide that medical insurance is an unnecessary expense; if they see the doctor once a year and it costs $250, that's much better than making monthly insurance payments of $400 (example figures).

The fundamental concept of insurance is that it balances costs across a large, random sample of individuals. For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100/month. One of them gets really sick while the others stay healthy, which means that the insurance company can use the money paid by the healthy people to treat the sick person. Adverse selection upsets this balance between healthy and sick subscribers. It will leave an insurance company with primarily sick subscribers and no way to balance out the cost of their medical expenses with a large number of healthy subscribers.

Because of adverse selection, insurance companies use a patient's medical history to screen out persons with pre-existing medical conditions. Before buying health insurance, a person typically fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, whether the person has been treated for any of a long list of diseases and so on. In general, those who look like they will be large financial burdens are denied coverage or charged high premiums to compensate. On the other side, applicants can actually get discounts if they do not smoke and are healthy.

Starting in 1976, some states started providing "health insurance" "risk pools", which allow individuals who are medically-uninsurable through private health insurance to be able to purchase a state-sponsored health insurance plan, usually at higher cost. Minnesota was the first to offer such a plan, there are now 34 states which do. Plans vary greatly from state-to-state, both in the costs and benefits to consumers and to their methods of funding and operating. They serve a very small portion of the uninsurable market -- about 183,000 people in the USA but in best cases do allow people with pre-existing conditions such as cancer, diabetes, heart disease or other chronic illnesses to be able to switch jobs or seek self-employment without fear of being without health care benefits. Efforts to pass a national pool have as yet been unsuccessful, but some federal tax dollars have been awarded to states to innovate and improve their plans.

Private Medical Insurance - Moral Hazard

Moral hazard describes the state of mind and change in behavior that results from a person's knowledge that if something bad were to happen, the out-of-pocket expenses would be mitigated by an insurance policy--in this case, one which provides reduced prices for medical care.

Private Medical Insurance - Common complaints of private insurance

Some common complaints about private health insurance include:

1. Insurance companies do not announce their health insurance premiums more than a year in advance. This means that, if one becomes ill, he or she may find that their premiums have greatly increased (however, in many states these types of rate increases are prohibited).
2. If insurance companies try to charge different people different amounts based on their own personal health, people may feel they are unfairly treated.
3. When a claim is made, particularly for a sizable amount, insured may feel as though the insurance company is using paperwork and bureaucracy to attempt to avoid payment of the claim or, at a minimum, greatly delay it.
4. Health insurance is often only widely available at a reasonable cost through an employer-sponsored group plan.
5. In the United States, there are tax advantages to Employer-provided health insurance, whereas individuals must pay tax on income used to fund their own health insurance, although there are a minority of pre-tax health plans currently extant.
6. Experimental treatments are generally not covered. This practice is especially criticized by those who have already tried, and not benefited from, all "standard" medical treatments for their condition.
7. The Health Maintenance Organization (HMO) type of health insurance plan has been criticized for excessive cost-cutting policies in its attempt to offer lower premiums to consumers.
8. As the health care recipient is not directly involved in payment of health care services and products, they are less likely to scrutinize or negotiate the costs of the health care received. The health care company has popular and unpopular ways of controlling this market force.
9. Some health care providers end up with different sets of rates for the same procedure. One for people with insurance and another for those without.
10. Unlike most publicly funded health insurance, many private insurance plans do not provide coverage of dental health care, or only offer such coverage with additional premiums and very low dollar-amount coverages.
11. Insurance Companies can influence the type or amount of treatment that the insured receives by setting limits on the number of visits, types of treatment, etc., it will cover.

Private Medical Insurance - Which private medical insurance policy should I choose?

If you are an individual UK consumer looking for private medical insurance, there are a number of factors that should influence the type of private medical insurance that you choose.

Depending on your individual case, the following factors are worth bearing in mind when choosing a private medical insurance policy.

• Are you looking for a comprehensive or a budget healthcare plan?
• Do you have money to spare to cover outpatient costs, meaning reduced premiums?
• How old are you? – The cost of medical insurance increases greatly with age.
• Where do you live? – Medical insurance plans can be more expensive in urban areas
• What exact cover requirement do you have? – For instance, some people like their health insurance policies to cover complimentary therapy.
• Can you afford voluntary excess payments? – Voluntary excess is a set sum that you pay in order to reduce premiums on your private health insurance policy.
• Are you aware that the cost of health insurance premiums increases as you age? – Can you afford to meet increased payments at a time when you are more likely to need health insurance? In some cases you can fix your premiums, but most health insurance companies review premiums regularly and increase them at medical inflation rates.

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