By Amy and Tony Updated July 2015
Health insurance ain't cheap. It should be viewed as a luxury, not a necessity, as the NHS provides comprehensive medical treatment to anyone who needs it, regardless of their ability to pay.
What is health insurance?
Health insurance, also known as private medical insurance, covers the cost of private medical treatment for ‘acute’ medical conditions - diseases, illnesses or injuries likely to respond quickly to treatment.
People typically buy health insurance for three reasons; choice, speed and quality of facilities. Policyholders avoid NHS waiting lists. They receive faster consultations and private, usually more comfortable treatment but before you decide whether or not to buy it, ask yourself, do you need it?
Health insurance can cover the cost of private day patient surgery, tests and hospital accommodation but it may excludes trips to a GP, accident & emergency or an organ transplant. See inclusions and exclusions for more.
Health insurance: Need-to-knows
You may not need health insurance
There are a number of alternatives to health insurance. They include self-insurance, cash plans, workplace schemes and the NHS.
There are also a number of policy restrictions, such as cosmetic treatment or injury related to dangerous hobbies, so make sure you NEED it before you buy.
Can I self insure instead?
Instead of paying, say, Ј300 a year to an insurer, pay Ј25 a month into a high interest savings account. Should you need any minor treatment or consultations, simply dip into your own insurance fund. Stay fit and healthy and you get to keep your “premiums” with the interest on top.
If you do decide to pay as you go by self-insuring, for additional peace of mind you can hedge against any serious problems by buying an insurance policy with a high excess (the amount of each claim you agree to pay). Naturally, the higher the excess, the lower the cost.
For example, rather than buying an expensive cover-all policy with an excess of Ј50, you could agree to pay the first Ј1,000 of any treatment. This would significantly reduce your premiums and if you have serious problems, then you have some cover to fall back on, limiting your exposure to major problems.
Can I use a healthcare cash plan rather than buying health insurance?
Healthcare cash plans are very different to health insurance. They include dental and optical care as well as alternative treatments. Here, you pay a few pounds a month, then if you need to pay for NHS or private treatment, you can claim some of the cash back, up to an annual maximum limit.
For full details, read the Healthcare Cash Plans guide. Think of it as a good added extra to NHS care, rather than an alternative to health insurance
I'm already covered under a workplace scheme. Do I need to buy cover?
If you have a workplace scheme, and it is right for your needs, you are unlikely to need to buy cover. Some employers may pay for your health insurance for you or your whole family, although this is classed as a 'benefit in kind' so you'll pay tax on the cost. But it can still be cheaper, even if you pay yourself, because firms' bulk-buying power means they can negotiate big discounts.
So find out the cost and compare it to the cheapest plans. If your employer doesn't have a scheme, see if your partner's company will allow you to join it.
Can I just use the NHS?
Health insurance works alongside
the NHS, so you won't lose your entitlement to NHS treatment just because you have health insurance. If you really don't need to avoid waiting lists, or won't benefit from faster consultations, consider sticking with simple NHS treatment.
What restrictions will I face if I buy health insurance?
There are a number of restrictions to health insurance cover. If these make the product less attractive, consider going without.
- It's possible you'll be put in a private patient unit within an NHS hospital, but you could also end up on a NHS ward rather than a private room.
- If you get a serious illness, you won't necessarily receive treatment more quickly by being covered by a health insurance policy than you would under the NHS.
- You won't have unconstrained choice over where you are treated, or who you are treated by. When you buy your policy, typically you'll choose a hospital list which will determine where you can be treated. The broader selection of hospitals you choose, the higher your premium will be.
- You won’t be refused cover if you have a disability, but as with other pre-existing conditions, your insurer might not include cover for treatment needed as a direct result of your disability. But under the law, the provider must act reasonably.
- You’ll need to give all relevant information about your disability and, if your policy doesn’t cover pre-existing conditions, any existing medical condition causing disability or arising from it will not be covered.
It may not cover pre-existing conditions
Health insurance isn’t designed to cover you for every health issue that might occur. It covers treatment for acute conditions that start after your policy begins - so you may still need treatment via the NHS in some cases.
Some insurers may provide cover for longer-term (chronic) conditions, but you’ll need to check the policy to see what you’re covered for.
Your premiums will increase over time
Even though there's competition in the health insurance market, whatever policy you choose, your premiums are likely to rise each year above the rate of general inflation. As methods for diagnosing conditions become more advanced, the costs of these developments are often passed on to policyholders.
In addition, as you get older, you're more likely to need treatment and premiums increase to reflect this. For example, a 70-year-old's is likely to pay three times more for cover than one for a 35-year-old.
Lots of treatments are NOT covered
Your individual policy will outline exactly what you are and what you aren't covered for. There are some pretty standard exclusions, such as a trip to A&E, normal pregnancy and cosmetic surgery.
What is usually covered?
What is covered under a health insurance policy will largely depend on its terms and conditions but there are some features which are commonly included.
While not usually included as standard, outpatient tests, consultations and treatments with a specialist and therapy such as physiotherapy and complementary therapy may be included in some policies.
Acute stages of chronic conditions
While chronic conditions are largely excluded, some policies cover their acute stages. This means that some treatments and specific drugs for cancer may be included but will usually attract a higher premium. Palliative care, care for patients who are suffering from serious long-term illnesses, is usually excluded.
As well as the above many policies also include exclusive drugs which are unlikely to be available on the NHS. For the drugs to be used, they need to be approved by National Institute for Health and Care Excellence.