Health Care Focus: Take your health personally

One person's medical insurance is another's unforeseen costly bill. So read the small print. By Iain Morse

IN MAY 1998, the Office of Fair Trading (OFT) published a report on the medical insurance industry, warning that it must simplify its products or face further regulation. At present, the sale of these policies is regulated only by the Association of British Insurers' (ABI) code of conduct, not by the far tighter rules which govern the sale of "life and investment products".

This means that a broker selling private medical insurance (PMI) is not obliged to offer "know his client's circumstances," or "best advice", choosing the most appropriate policy from those available. It also means that many policies are sold "direct", or "off-the-page", with a danger that buyers make no real comparison between different products but choose on the basis of least cost.

Areas of concern in the OFT report included the way providers of PMI use both policy exclusions and moratoria. All PMI have some common features; they pay out benefit to cover part or all of the cost of private medical care for a range of medical conditions.

These need not be life- threatening, and can range from dental care to major organ transplants. But policy costs rise with both the range of treatment covered and choice of hospitals open to policyholders when they claim. Policy moratoria allow policyholders to be accepted without any medical examination or statement of health. But moratoria also exclude from cover any medical conditions that have been suffered in the five years before the policy began. Expect these to be excluded during the first two years of the policy, and to then become eligible only if the policyholder has not consulted a doctor, taken medication or received other medical attention, including check-ups related to the condition.

Not all PMI providers use moratoria; BUPA and PPP Healthcare both say they should be dropped. The key point is that if you are buying PMI and have any adverse medical history, simply chasing the cheapest cover, with moratoria, may leave you with a policy that won't pay if you fall ill for the same reasons.

Comparing different policies can also be difficult. Different providers use the same terminology in different ways. PMI plans can be broken down into broad categories - comprehensive, standard, and budget - but particular contracts can overlap these conditions.

Comprehensive plans cover the full cost of basic medical attention, including: hospital accommodation; fees for surgeons; anaesthetists and other specialists; the cost of medication; outpatient services; and extras such as alternative treatments - osteopathy and travel abroad for medical care.

Budget plans usually provide full cover for basic medical services, but trim away extras and outpatient services. Standard plans fall between these categories, restricting outpatient services and extras to a short list of core treatment.

While these categories are in general use, there is no agreed definition as to exactly what range of treatment and costs each covers. Comparing plans in one category can be difficult without doing plenty of spadework by reading each contract's small print detail.

When you look at the benefits available under a policy, it always pays to be clear about the way insurers use the terms "full refund" and "partial refund". Full refund means the non-payment of any qualifying expense. But a partial refund may have a cash limit put on it, or be expressed as a percentage of expenses incurred.

One place to start is by comparing the range of hospitals where treatment costs will be covered by a policy. Some providers, such as BUPA and RJR Healthcare, own their own hospitals - which can result in cost savings and cheaper cover.

Most providers band hospitals into three or four groups, depending partly on location; check on which hospitals are covered in your area before buying a policy. Some providers offer a list of 200 hospitals throughout the UK. Others go up to around 800.

If you choose a hospital the insurer regards as too expensive, then YOU may end up paying any excess charges above a minimum guaranteed amount. Most comprehensive policies will pay between pounds 210 and pounds 350 per night for this kind of treatment, but with some private hospitals in Central London charging pounds 700 per night, you might be left with a large bill to pay.

Cheaper standard and budget plans may not offer any cover for hospitals off their selection list, or they will much reduce benefits, usually to 50-60 per cent of costs.

Important differences emerge when the wider range of cover provided by different policy types is compared. Most comprehensive policies offer a full refund on all private ambulance costs; many budget plans limit or even exclude this benefit. All comprehensive policies offer a full refund on out-patient services, but many standard and budget policies limit outpatient treatment only to diagnostic examinations, or radio- and chemotherapy.

So the moral of the story is that if you read all the fine print and make a real and thorough comparison between the costs and benefits of different policies, you are less likely to be disappointed in the long run.