The market for private medical insurance has been slowly shrinking over the last five years with the numbers of people covered falling from 1.9 million in 2005 to 1.7 million last year. But at last the insurers have woken up.

The over 55’s represent a prime sector of the market but they are also the group who have been most badly hit over recent years by the big price rises dished out by the insurers. Now both Standard Life, The Pru and Axa PPP have decided to do something about it. All three companies have brought out plain vanilla policies which concentrate on basic medical treatment and strip out some extras such as alternative therapies and psychiatric care. The policies also have increased the limitations on out-patient cover.

The effect on premiums is startling. Premiums for these new policies are up to 60% lower than the main line medical insurance policies and customers can build up no-claims discounts of up to 65%. Standard will even carry forward a no claims record from other insurers to the new policy.

However I do have a question. If these policies revitalise the attraction of medical insurance for the over 55’s, why can’t they apply the same thinking for the under 55’s?

Primary Care Trusts and hospitals are facing a budget deficit of £620 million. In order to cut costs, we are already seeing patients having to wait the maximum 6 months before having their surgery. Indeed, in the last quarter of 1997/8 there were 11,550 last minute cancellations for non-clinical reasons. This rose to 13,074 in the second quarter of 2005. (Source Liberal Democratic Party)

For many, Medical Insurance is the solution to ensure that they get the surgery they need as and exactly when they need it.

For more about Primary Care Trusts click here

Please read Part 1 before you read Part 2! Click here for Part 1

First a word of caution. This article does not describe any specific health insurance policy. The terms and conditions issued by insurers do vary so please ensure you check out the precise details of the any policies you are actively considering or already own. Then, after reading this article, you’ll know what small print to look out for!

Sorry Sir, we can’t pay that – it’s preventative
Your health insurance is designed to pay for the treatment and cure of medical problems as and when they happen. The insurance is not intended to pay for treatment that is drawn on to prevent an illness.

But a problem of definition can arise. Occasionally it is arguable whether a treatment is a preventative or a cure. Take the drug Herceptin for example.

Research shows that if used in the early stages of breast cancer, Herceptin can halve the incidence of the cancer returning for women who have the particularly virulent form of the illness known as HER2. In this situation, is Herceptin being used as a cure or a preventative? Insurers are split on the issue. Legal and General and Axa PPP won’t pay the high cost of Herceptin treatment whereas BUPA, WPA, Standard Life Healthcare and Norwich Union will for HER2 patients.

Sorry Sir, we can’t pay that – it’s a chronic condition
If an illness or condition is not a long-term problem and can be cured, your health insurer will define it as “acute” and should meet the cost. If your problem is incurable or it’s a condition that, despite the right treatment, will suffer from for a long time, then your insurer will define it as “chronic”. As soon as an illness is defined as chronic your treatment is no longer insured.

But deciding whether a condition is acute or chronic is fraught with potential conflict. The decision and its timing is rarely a cut and dried issue and can lead to conflict between policyholders, insurers and indeed, between Doctors themselves.

Diabetes and asthma are clearly chronic conditions as suffers are almost certain to have them for the rest of their lives. So those categories of illness are not covered.

But what happens when Doctors initially consider a patients’ illness to be curable, but then the illness deteriorates and the medical team is forced to change changes its’ mind – the condition is now incurable. This can occasionally happen, especially in the treatment of certain types of cancer.

In these situations, the illness is initially defined as acute, and the costs are therefore covered, but as soon as it becomes chronic – the medical costs are not insured. This is possible as insurers have the right to reclassify an illness from acute to chronic during treatment.

Sorry Sir, we can’t pay that - it’s too long term
The health insurance will not meet the costs of long-term treatment. But the definition of “long-term” can differ between insurance companies. So you need to check your policy to see how it defines “long-term”. This is important because the situation can arise where a course of treatment extends for say twelve months, but the insurer will only pay for nine months.

Sorry Sir, we can’t pay that – the drug is not approved
Two of the main reasons for buying Health Insurance are to jump the NHS queues and to get the latest medicines and treatments. But there’s a rider.

The Government wants to ensure that the financial benefits to the nation from using a new drug outweigh the costs of using it in the NHS. So it established the Institute for Health and Clinical Excellence to approve the use of new drugs by the NHS in England and Wales (an equivalent also exists in Scotland). The problem is that the Institute’s brief is to perform a complex cost/benefit analysis – a difficult brief and it has placed the Institute under scrutiny for the extended delays in drug approval. This impacts on private health insurance as many insurers have taken the view that until the Institute approves a drug, they will not pay for its use.

These delays can create conflict between patient and their insurer where a drug has been proven to be beneficial for a condition but where the Institute for Health and Clinical Excellence has not given approval for its use. The compromise arrived at by the Financial Ombudsman is that if your insurer won’t pay for a drug, then if the experimental treatment is more expensive, the insurer should meet the cost of an approved conventional treatment with the policyholder paying the balance.

Sorry Sir, we can’t pay that – it’s a pre-existing condition
The basic principle is that if you have already suffered from a condition before you start a policy, then that condition “pre-exists” the policy. Thereafter, any claims for treatment of that condition are invalid.

For this reason, insurers insist you complete an exhaustive application form before they agree to provide you with insurance cover. After all they need an accurate picture of your medical condition before they quote a premium. For many applications, with your prior approval, the insurer will write to your GP for more precise details of your medical history. They like to have a complete picture.

So lets say some years ago you fell over and badly twisted your knee. Your knee appeared to recover but is now painful again and it turns out that you have a torn cartilage needing surgery. Your insurance company could argue that the cartilage damage was a pre-existing and you have to pay for the operation.

Some insurers try to resolve these areas of potential conflict with policyholders through a moratorium clause within your policy. Typically, these clauses provide that so long as you have been symptom free for two years regarding any condition you’ve suffered from within the last 5 years, subsequent treatment is insured. You should carefully read your policy because not all policies have these moratorium provisions and the qualifying periods of time do vary between insurers.

Sorry Sir, we can’t pay that – its not covered
Health Insurance is an annual contract – just like your home and contents insurance. So when renewal time comes, your insurer is free to review your premium and also change the conditions on which they’ll continue to provide cover.

Consequently, if your insurance policy comes up for renewal mid way through a course of treatment, it’s possible to find that your renewed cover no longer insures that particular treatment. Then you’d have to foot the bill for the rest of the treatment.

Furthermore, with continuing advances in medical research, more and more conditions are becoming curable. This progress has shifted back the dividing line between chronic and acute conditions.

This impacts the insurers’ purse in two ways. With more illnesses being reclassified as acute, the number of claims are increasing. Furthermore, there’s also a trend for new treatments to be more expensive – Herceptin is a good example.

The net result is that the insurers are finding that the overall cost of claims is rising. These increased costs are inevitably passed back to you through increased premiums. And in an attempt to limit claims, insurers have a tendency to adjust their exclusions and definitions. This means that you must always study your renewal notice closely before you agree to renew.

So when you’re buying Health Insurance, be forewarned that everything is not always black and white. If you’re insured and need treatment, always contact your insurer as soon as possible to get them to confirm in writing that they will meet the cost of the treatment you need.

Part 1

In the UK around £3 billion a year is spent on Health Insurance. Seven million people are insured with one in seven policies being purchased by individuals, the remainder being put in place by employers for the benefit of their employees.

Health Insurance is designed to provide protection for curable, short-term medical problems. It enables policyholders to jump the NHS queues to see consultants, be diagnosed, receive surgery or be treated.

But it’s not a replacement for the NHS. Private hospitals don’t have emergency and casualty departments and you don’t necessarily get better medical care – you simply get it quicker and at a hospital and at a time that suits you.

The fact is that Health Insurance is complex and few policyholders take the trouble to carefully read the details of their cover. As a result, many policyholders misinterpret what their policy will cover. If you are expecting Health Insurance to pay every medical claim, you’re mistaken.

Policies refuse to pay for dental treatment unless it is taken out as an optional extra to the main Health Insurance policy. Standalone dental insurance policies are also widely available and are becoming increasingly popular.

They also refuse to pay for treatment associated with straightforward pregnancies and childbirth. However if complications develop, then with most policies, the picture changes – the insurance will meet the costs of treating the complications.

How about cosmetic surgery? Again the answer’s no. Cosmetic surgery is clearly an elective procedure and does not constitute a valid medical problem.

When it comes to the issue of treating alcoholism and drug abuse, the insurers take the view that the problem is self-inflicted. Sorry sir, you’re certainly not insured.

Few prospective purchasers of Health Insurance will be too surprised or upset about these exclusions. But those are the tip of the iceberg!

Before you buy you need to appreciate the less obvious treatments and situations that fall outside the scope of the cover.

Part 2 of this article goes on to explain in detail …….. Click here for Part 2