You really can afford private medical insurance

There is only one thing wrong with private health insurance. It is too pricey for most people, and every year it gets pricier. Find out how to keep health insurance within your price range.

Private medical insurance may look like a luxury in the middle of a recession, but it is a luxury many people are reluctant to do without. And if NHS spending is cut after the election, you might view it as a necessity.

There is only one thing wrong with private health insurance. It is too pricey for most people, and every year it gets pricier, because medical inflation rises at two or three times the retail price index.

But if you want speedy, convenient treatment on an MRSI-free hospital ward, there are a host of low-cost policies available. And if you already have private health cover, there is plenty you can do to keep a lid on your premiums. People under 30 could get cover for as little as £35 or £40 a month, are somebody age 65 could trim their costs to £80 a month.

Here’s how to keep health insurance in your price range.

Posh on a budget

Most insurers offer three levels of cover: comprehensive, standard and budget. Budget plans trim your costs by excluding outpatient treatment such as initial diagnostics and consultations, which you can get free on the NHS (if you’re prepared to wait). But you are still fully covered for serious inpatient treatment, anything from a hip replacement to cancer care. Alternatively, choose a plan targeting specific illnesses, such as Bupa Heartbeat select heart and cancer. Simply Health also offers heart and cancer treatment.

The sweet smell of excess

Think of yourself as a car. When you take out motor insurance, you can cut your premium by agreeing to pay the first £50 or £100 (or more) of any claim. The same principle applies with health cover. A small excess of just £100 or £250 could slice 10% to 20% off your premiums. Some insurers take the principle to extremes. Low-cost policy XS health, from insurer WPA, offers three excesses of £1,500, £3,000 and £5,000. Standard Life Healthcare’s Choices plan charges either £1,000, £2,500 or £5,000 per claim. The higher the excess, the lower your premium. This means you are only likely to claim for major illnesses. Most people stick to a £250 excess. Many insurers also offer no-claims discounts, which can hack up to two-thirds off your premiums.

A-list or C-list?

Some insurance plans offer you access to every private hospital in the country, including central London teaching hospitals. This is sometimes called the A-list. That’s great if you can afford it, but you can save money by limiting your choice to cheaper B-list or C-list private hospitals, or even NHS pay-beds.

Six-week option

Axa PPP healthcare and Aviva offer a “six-week clause”. If the local NHS waiting list for your condition is less than six weeks, you must get your treatment on the NHS. If the waiting list is longer, you go private straight away.

Co-payment

The new breed of co-payment plans cut your premiums if you agree to pay a share of any treatment costs. Insurers believes this helps cut frivolous claims, and pass on the savings to you. WPA's Shared Responsibility plan expects members to pay 25% of costs up to a set limit, say, £1,000. WPA pays 100% of your costs after that.

National Friendly’s innovative Healthcare Deposit Account pays 25% of your premium into a deposit account in your name, with the remainder set aside to fund any treatment. When you claim, you pay 10% of the cost from your personal deposit account (25% if you are 65 or older). National Friendly pays the rest, up to cover limits. If you don’t claim, the money in the deposit account is yours (be warned, the account doesn’t pay interest).

Or you could...

There are plenty of other innovative plans available. Patient Choice provides you with a pot of money for necessary medical treatment. You can either spend this on private treatment, or seek treatment on the NHS and pocket the cash instead.

The innovative and popular PruHealth plan from Prudential offers you reward points for healthy living, such as eating salads and going to the gym, which reduce your premiums. Or you could go shopping for health cover at Tesco.

Finally, there is nothing stopping you from setting up your own savings fund to cover private treatment, and self-pay at a private hospital chain if the NHS waiting list for your condition is far too long.

But remember, you can’t make savings on health medical insurance without sacrificing cover. So make sure you understand what your chosen policy offers, and what it excludes.

Got a question about private medical insurance? Why not head over to Q&A and ask other lovemoney.com readers if they can help?