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Private medical insurance: what you need to know

Sam Brodbeck
Seven million people are covered by health insurance - E+

The dominance of the National Health Service means private medical insurance has had a small market in Britain compared to other countries, and particularly the US, where there remains far less state support.

But, as fears of the health service’s ability to cope with ever-rising demand grows, that is beginning to change.

Figures for 2016, published last year by LaingBuisson, an industry analyst, showed premiums relating to private medical cover hit £4.8bn. This represented a small rise on the previous year driven, the firm has previously said, by dissatisfaction with the NHS and greater restrictions on the availability of treatments.

Despite this growth, there are still fewer policies in force today, at just over four million, than before the financial crisis, when there were 4.4 million.

What exactly is private medical insurance and who provides it?

Private medical insurance (PMI) is insurance taken out to cover the cost of diagnosing and treating acute health conditions. If you suffer a serious injury you should still visit the accident and emergency units at local hospitals.

Around three-quarters of Britain’s policies – covering around seven million people – are provided by companies on behalf of their staff. Individuals taking out their own insurance typically pay more – at an average of £1,952 a year, compared to the £974 paid by firms.

Health insurance – do you need it, and when will insurers pay out?

The largest insurers offering private medical insurance include specialists Bupa and Vitality, as well as the giant multi-line insurers such as Aviva and Axa. Employers may also offer health cash plans, that help to meet everyday healthcare expenses, or dental benefit plans.

Taking out insurance yourself

Around one million people have taken out policies themselves. As with other types of insurance, the two main costs are the monthly premium and the excess, the amount you pay on a claim before the insurance kicks in.

Most policies will cover treatments provided to inpatients at hospital but if you’re an outpatient there will be often be restrictions around the types of treatments available and caps on claim amounts. However, you are likely to be given a greater range of potential treatments than would otherwise be available on the NHS and you’ll be able to choose which hospital you visit.

As with travel insurance, most policies will not cover pre-existing conditions. That means you will not be insured against illnesses you’ve already been diagnosed with. Pregnancy, cosmetic surgery, HIV and self-inflicted injuries are normally excluded.

Does your company pay?

Most private medical cover is provided as a “benefit in kind” perk by employers, who can negotiate cheaper premiums than individuals. In most cases you will need to pay insurance premium tax. Group policies offered by your company may even cover pre-existing conditions, so be sure to check especially when there is a change in your personal circumstances, such as the birth of a child or getting married.

The pros and cons of private medical insurance

Mental health

Slowly mental health issues are beginning to be viewed in the same way as other illnesses. Businesses lose billions of pounds a year when staff are forced to take time off work but many policies exclude mental health problems alongside other pre-existing conditions.

Earlier this year, Bupa expanded the scope of its workplace policies to include long-term mental health conditions. It said this covers “all” mental health issues – including alcohol and drug abuse. Dementia and learning development problems are excluded. The insurer has also removed time limits on treatments, so employees are covered if their condition returns.

Bupa said the number of employees claiming for mental health treatment has doubled over the past decade, and that businesses now pay out £1,000 per employee per year on average as a result.