Is private health cover worth it?
Neil Faulkner investigates private medical insurance to see if it's worth getting.
Sections
Unnecessary medical bills
One problem is that some of the money from our insurance premiums go towards unnecessary medical bills.
If you look at the NHS, it frequently tries to do as little as possible, due to its budget constraints. However, when you turn to private care, the emphasis is on providing more - and often too much - care. That's because the more services the private practitioners provide, the more they get paid. In some cases this leads to overselling: too many tests, too many pills, too many procedures, not to mention the evidence of high prices in some areas due to lack of competition.
This sort of bias is nothing surprising; there is solid evidence of it occurring everywhere, and in any job or industry you care to look, from financial advice in the UK to midwifery in Germany. We all have costs and families to feed, and that affects our judgement.
Unfortunately, I can find no data showing how large an impact this has on health insurance premiums. Being a long-time researcher of this type of problem, and of this area of psychology, my best guess is that the impact is significant.
Purging
When you come to renew your policy, the price can be far higher, particularly if you've made a claim. Pushing customers out in this way is sometimes called 'purging'.
It's particularly easy for insurers to do this if they offer a no-claims bonus, which is a terrible invention for health insurance customers. The much higher price after the bonus is stripped away means you're forced to close your policy, potentially ending ongoing private treatment for a condition that you began suffering from in the previous year. Finding a new insurer now, after claiming, is probably going to be difficult and expensive.
More and more insurers are forcing customers to accept no-claims bonuses in return for their lowest prices, but you can still find some insurers that don't do so.
Rescission
There is another problem with health insurance, although it is the same with most insurances. The problem is called 'rescission'. This is when the insurer says the contract no longer exists because you didn't disclose something.
You really must be careful to explain all your medical history, if the insurer demands it. While the onus to ask the right questions is gradually shifting more to the insurer, I think you should still disclose if you have any doubts.
It's just an average
Health insurers like healthy people.
While an average £71 payout per £100 in premiums is good, it's probably lower (i.e. worse) for people who have a history of health problems. I think insurers could be marking prices up far more than they need to in order to either get rid of you or to have a much larger margin of safety than they look for with healthy people.
But the good news about averages is that it means some insurers offer lower prices for the same or similar cover. By shopping around, then, you could find an insurer that generally pays out more to its customers.
You can do just that with the lovemoney.com PMI comparison centre.
The all-important small print
This article is just a broad overview of whether the cover offered is generally value for money, but it's important to look carefully at the small print: there are wide differences in what you're covered for.
It's also worth reading Health cash plans: good value-for-money medical insurance? which has more information that will help you to decide whether to buy health insurance, and tells you about an insurance product that seems to be a particularly cost-effective type of health insurance, especially since it strips out large areas where private practitioners could more easily milk the system.
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Comments
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The title of the article asks the question whether medical insurance is worth it or not. As a medical practitioner I would have to say no judging by the run around some of my patients get. I am bemused by the fact that some people pay very high premiums, have numerous exclusions written in and when they do try to claim they ring up to effectively ask permission to use some of the money that they have put in. Unfortunately, many folk think that because they have paid in over a long period of time that it should make a difference which of course it doesn't. There is a difference when it come to medical insurance as apposed to insuring your tangibles like car, house, belongings etc in that you pay in but may never have need to ever make a claim whereas with medical insurance it is inevitable that you will do so at some stage. This probably goes part of the way to explaining the relatively 'high' claims pay out compared to premiums in. I think what bugs most of my patients is that they see medical insurance as carrying an element of service and not just covering risk but this is something that insurers clearly don't recognize. If you claim and have health issues you represent troublesome risk as far as they are concerned and this will be reflected in the premiums the following year. This also applies to age since as you age, the premium charges increase, often exorbitantly, driving the older clients away which is just what an insurer would want since it is this very group that is more likely to claim. Personally I feel medical insurance is a bit of a scam: 1. If you can afford to insure in this way you can afford to put the money by and use it as you want rather than having a third party decide whether you can use it. 2. If you have something serious occur such as heart problems, cancer or major trauma the NHS is unsurpassed in its treatment of you. 3. Gradually the insurance companies are taking the attitude with a number of common conditions that if the NHS won't cover it well why should we which then begs the question what are you paying for? 4. If you pay £100 and you only on average get back £71 then that is £29 that you are giving to the insurer in profit rather than keeping for your use; simplistic I know but logical nevertheless. 5. I have the greatest sympathy with people who say that they are forced to endure ineffective, conservative treatments for several months before access to a specialist of their choice. This is fundamentally wrong; medical insurers are insurance experts, they are not competent medical authorities. Personally I save my money and pay ad hoc. I would never give a single penny of my hard earned cash to a health insurer. I recognize of course that I can afford it but the counter argument is that if you can't afford to ring fence funds in this way you can't afford to insure and have to rely on the NHS, an excellent health care system to which we are all entitled though it has limits to what it can provide in this day and age.
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When the NHS comes under pressure (as it will continue to do as our population ages) the benefits of private health insurance (or indeed just self funding) becomes more attractive - providing you can afford it. Private medicine is expensive. And it has different charging levels - go self funded and you'll pay a low rate for your treatment, go through your insurance and you'll pay a much higher rate. Those with private medical insurance are funding the medical staff, particulalrly the doctors, excessively. But if you can afford it and it avoids you having extended periods of discomfort and pain why not? But its irritating when another benefit is to your employer (in getting you back to work quicker) but they contribute little or nothing.
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Well said, dimercaprol
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26 January 2014