Medical Insurance Article

A guide to private medical insurance

If you are contemplating either Private Medical Insurance, Income Protection due to illness or Critical Illness Cover, it is necessary to navigate through a minefield of insurance product names, definitions, terms of cover, benefits and exclusions. The article below attempts to shed some light on such Plans and Policies so that you may make informed judgements and decisions concerning Healthcare Insurance.

Private medical insurance (PMI)

PMI is an insurance Plan intended for use when covering the costs of private medical treatment for curable short term medical conditions, referred to frequently as acute conditions. PMI may cover the costs of surgery, specialists, accommodation and nursing at a private hospital or in a private ward of an NHS hospital.

Plans offered usually come in two types, Standard or Comprehensive.

A Standard Plan covers hospital or emergency treatment with no optional extras or cover for Outpatient treatment. Under a Standard Plan you will usually be covered for Inpatient and Day-care treatment only.
Comprehensive Plans often add extra modules or options to cover Outpatient treatment, dental treatment, complementary medicine, maternity, travel and personal accident.

In general, PMI Plans do not cover CHRONIC or CRITICAL illness which cannot be cured, for example multiple sclerosis, asthma or diabetes. However, in a crisis, most PMI policies will pay the cost of treatment for stabilising a patient and returning them to their previous level of health when possible.

PMI contracts are offered on an annual basis, with premiums payable monthly, quarterly or annually. Discounts are offered by many companies should you pay annually, or take up a VOLUNTARY EXCESS/DEDUCTIBLE on claims. Some insurance providers will accept new clients at any age but most place upper limits at 65-75 years old.

Once you are in a plan, the insurer usually continues to offer cover, year on year, albeit at an increasing premium with age. If you leave a Company or Group scheme, most insurers will offer you and your family cover, but it may be on differing conditions and different premiums.

For a Range of Premiums from Quality International Medical Insurance Providers

It is very important that you understand the terms on which plans are offered so that future claims and treatment are covered, or not. If you have a current PMI Plan but wish to change to another insurer, for reasons of price, additional cover or simply that you have suffered poor claims administration, then you may be offered, by an independent healthcare advisor, a "no worse terms" plan or Continuing Personal Medical Exclusions (CPME) Plan. This simply means that the underwriting company of the new Plan, will accept offering you cover on the same terms as the previous Plan. If you have had claims and particularly exclusions from cover, these too will be carried forward or considered by the new insurer. The CPME transfer method allows for continuity of cover, particularly if you are presently undergoing treatment or have had treatment in the recent past and are concerned as to a re-occurrence of such a medical problem.

For example, if your company previously had PPP cover and you left and decided to take cover for yourself/family, you may have found PPP's cover too expensive and discovered that you could transfer your existing plan to The Permanent Health Company on a "no worse terms" or CPME basis. A word of caution here, many sales people in the healthcare insurance industry earn money via a commission system and may suggest that you transfer to another company in order for them to secure a new commission, this is called "churning" in the Healthcare Industry.

The most frequent and inexpensive way to start a new PMI Plan is by a Moratorium. Providing that you/family are fit and well, with any pre-existing conditions being in the dim and distant past, then this method of taking up medical insurance can be very cost effective. It is vital that potential purchasers understand what Moratorium means, particularly if their past medical record excludes them from benefits in certain areas.

When insurers offer such Plans, they are taking on clients without them disclosing medical history. This has both advantages and disadvantages which have to be carefully weighed up. For example, if you had a benign growth removed last year and took on a Moratorium Plan, then 18 months into your new Plan cancer was diagnosed, this could mean excluded cover under Moratorium due to the previous benign condition being a pre-existing condition of less than two years. Some companies, such as OHRA will offer applications against a full medical questionnaire, thus giving you an alternative to the Moratorium route.

Which hospitals may i use for my treatment?

In the United Kingdom Insurers have adopted a system of grading hospitals. Generally this categorisation is to levels A, B or C, with 'A' grade hospitals being the best and most expensive. Lists of hospitals covered under a PMI Plan are usually available with any quotation and should be studied carefully before deciding. Some insurance companies have their own or preferred hospitals which may not suit you. It is important to consider the distance, reputation and range, across the country, of hospitals offered by your potential PMI insurance company.

Benefits and exclusions

This is probably the most vital area of reading under a PMI plan after the Moratorium Clause is understood. All policies carry a list of general exclusions from cover and some companies exclude more or place financial limits on certain benefits offered, particularly benefits such as routine dental cover or maternity cover. The most common exclusions are

Alcoholism or drug abuse
Dental treatment
GP services
HIV or AIDS
Hazardous sports
Infertility
Normal pregnancy
Sterilisation
Treatment Overseas
Cosmetic surgery

In addition to any general exclusions, others may be applicable depending on the people who you wish to have covered. If information on the application form names medical conditions which you have recently suffered from, often going back 5 years, an insurer may exclude such conditions from cover or qualify such cover.

What will affect my premium in the furture?

Once you decide upon a Plan and know the present premiums, how much will they be next year, or when you are 65 years old? At 40 years old, you may easily be able to afford a Comprehensive Plan, with all the "bells and whistles". However, when you retire and are 65 years old, what sort of cost of premium will you be asked to pay and could you afford it? Private Medical Costs are expensive as treatments become increasingly more sophisticated with new drugs and technology available. Insurance companies increase premiums annually in line with MEDICAL INFLATION. Government legislation also affects premiums particularly if tax incentives to plans are either allowed or excluded.

Premiums are clearly affected whether or not you take out a Standard Hospital Plan or a Comprehensive Plan. You may frequently enjoy a discounted price by agreeing to a VOLUNTARY EXCESS or by paying annually rather than monthly. No claims discounts may also be offered and clearly claims do make for more expensive premiums in the long run. It may be noted that premiums for those above 65 years old generally increase faster to 70 years old and beyond, rather than say from 25 years old to 30 years old.

Advisors at Medibroker Limited, an Independent PMI/PHI brokerage, generally advise clients over 60 not to take up new Comprehensive Plans but take out a Standard Plan only with an excess. The costs simply grow so fast after that age that it becomes almost non viable to take out a new Plan which offers Outpatient care over the age of 70. Cash Plans are now available to support such Standard PMI Plans and can give a substantial support to elder citizens for routine Outpatient cover, dental and optical costs. A Comprehensive Plan is far more appropriate, for example, for a married couple of 35 years old, both working, with three small children, aged 5, 7, and 10 years old.

Do I need to provide health evidence to take out PMI

As mentioned earlier, there are a number of conditions for which you will be unable to get PMI cover. In addition, insurers will not automatically offer cover for previous illnesses or treatment you have had or are in fact still being treated for. These are called PRE-EXISTING CONDITIONS.

Insurers may sometimes ask for a medical history questionnaire to be completed and signed or may write to your Doctor, or ask you to undergo a medical examination.

Medical background information can often be vital to prove veracity (or not) of future claims. If you are unsure, then declare the medical background at the time of application. If you have a medical condition which is likely to re-occur, the insurer will probably exclude that condition or charge an additional premium to cover it. Thus your Plan offer may be on the basis of a CPME transfer, for example, from your company scheme, when you leave.

The second method of application does not require, at the time of applying, any evidence of health, but simply proceeds on the basis of a Moratorium regarding any pre-existing conditions. This Moratorium may be allowed to expire after a period of usually two years when you have not had treatment nor advice for that pre-existing condition, bringing it under cover in year three. A chronic condition would be probably permanently excluded under this type of Plan. These Plans are quicker and very simple to take out but caution is necessary when considering what treatment you have had in the past five years and whether or not such conditions may re-occur. Sales people should be asked to clarify Moratorium terms particularly how far back the company considers pre-existing conditions.

What happens when I need to make a claim?

All Insurance companies will pay valid claims, it is in their interest to do so. They will not pay invalid or fraudulent claims or claims which are outside the cover your particular Plan might offer. It is always better if treatment is needed, to contact your insurer's client service department who will quickly assist with advice and support for claim administration, which hospitals are to be used, specialist help etc. Some insurers pre-authorise all claims so that you do not have to pay doctors' and hospital bills but leave all settlement to the insurance company itself. If companies do not pre-authorise, then original bills will be requested with a claim form submission.

An insurance company is only as good as its claims record and underwriters. Always check the credentials of the underwriters and the record of the company regarding claims. Check out the background of the insurer with the appropriate professional institution and Association of British Insurers. If your complaint or claim is not satisfactorily dealt with, two useful addresses follow. Insurance is not about glossy magazines or impressive benefits lists. It is only of use when you need to use it.

THE INSURANCE OMBUDSMAN
City Gate One
135 Park Street
London SE1 9EA

Tel 0845 600 6666

THE PERSONAL INSURANCE ARBITRATION SERVICE
24 Angel Gate
City Road
London EC1V 2RS

Tel 0171 837 4483

Advice and brokerage

If you take or seek advice from a broker or healthcare insurance advisor, ask if they have professional liability cover and are genuine independent advisors and not tied agents or simply direct sales people on commission from one insurer. There are many sound professional advisors who will offer best advice. These brokers usually have agencies with several insurance product providers and can offer you a wide range of different benefits and premium structures. Generally it is better to ignore brand name and product title and to concentrate on companies' track record for claims, service and premium increases over time. It is always in your interest to read the documentation carefully as there can be little worse than becoming ill, then finding that the cover you thought you had, is invalid.

Article prepared by
Mr J Leslie Smith, BSc. Econ (Hons) Associate I.E.E
Chairman and Managing Director - Medibroker Limited

Email: advice@medibroker.com
Web Sites at www.medibroker.co.uk and http://www.medibroker.com