Factors Affecting Private Medical Insurance Monthly Costs

Changes in medical technology and the proliferation in the number of private hospitals have attributed to escalating medical costs.

Medical advances and the development of specialised expensive equipment mean people are living longer and claim rates have increased. Additionally the bulk of claims expenditure lies in the charge made by the hospital provider, over which insurers have no power. It is also worth noting that the percentage of insurance claims accounting for the patient’s bed is 60%. 20% pays for the consultant and 14% is for the anaesthetist.

Rising medical costs as well as increased competition have forced many providers to try to reduce the impact and keep premiums to sensible levels. This has been achieved in part by: -

• Restricting the number of hospitals used, this is done by rating them according to bands i.e. A to B or C. Whilst such initiatives allow the PMI provider to negotiate lower costs, it restricts hospital choice for the policyholder. It therefore remains vital to check that the most appropriate hospital (usually the nearest and with the facilities required) is covered under the chosen PMI plan.
• Restricting outpatient treatment, e.g. psychiatric treatment is sometimes excluded, if not then treatment is divided between inpatient and outpatient with maximum cover limits in force. Physiotherapy is sometimes excluded, if not then annual benefit limits may be applied
• Additional benefits such as alternative medicine, osteopathy, dentistry, optometry etc, tend to vary between plans. In some cases these benefits may be subject to certain restrictions.
• The vast majority of PMI providers on the market now adopt excesses, where the policyholder pays the first amount of a claim, this is usually a voluntary option.
• No claims discounts are being offered by an increasing number of providers on at least some of their plans.

Premiums are determined by: -

Hospital banding

Premiums are based on the hospitals you are likely to attend and therefore are banded usually according to area/cost. However providers have different approaches to hospital banding.

Many categorise hospitals on A, B or C scale, where A is more expensive and C least expensive. This can be ranked according to the level of charges for services and accommodation, or just accommodation alone. Some providers such as BUPA rank hospitals on location, where London hospitals are A, provincial ones B and regional ones C.

While these banding systems differ from provider to provider, they are broadly similar in that London based hospitals usually have more expensive facilities. Comparisons would be much easier if all providers had only three bands, however some have four or five.

Some companies have introduced a national network of preferred hospitals. where they do not operate a banding system but have lists of approved hospitals.

Although these developments are leading to lower premiums and associated benefits it is vital that the hospital that you would prefer to be treated in is included on the list supplied by your cover provider.

Age

The applicant’s age obviously has a bearing on the premiums. Most companies assess premiums based on distinct ages, but a few operate age bands.

NHS Treatment Option

One way to decrease premiums is to select this option, which is available on some plans. This is where, In/day patient treatment is subject to being more than a six-week wait under the NHS.

Discounts/excesses

Most plans allow policyholders to save on premiums by paying an excess, while many provide discounts for the payment of annual premiums and a few offer discounts for families. Opting for an excess of between the first £100 to £5,000 of treatment reduces the monthly costs. Although high excesses may seem prohibitive, a £5,000 excess would seem inexpensive if it guaranteed treatment for certain types of cancer which can cost in excess of £50,000 per annum.

Loyalty bonuses and no claims discounts are designed to keep policyholders on board since there is a high degree of competition in the market.

Methods of payment

Annual premium – Direct Debit/cheque - this method usually incurs a discount.

Monthly premium – Direct Debit

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