Private health insurance needs careful treatment: Sue Fieldman looks at some of the new products flooding on to the market (CORRECTED)

CORRECTION (PUBLISHED 6 MARCH 1993) APPENDED TO THIS ARTICLE

IF YOU are already confused by the plethora of private health schemes on the market, your confusion is likely to turn to acute anxiety this week with the launch of a veritable deluge of new products.

Bupa, the biggest medical fees insurer, has introduced Bupa EssentialCare - a policy that it describes as 'a new, low-cost private insurance scheme'.

The essential element of the policy is that you are covered only for hospital in-patient treatment. If you want to visit a specialist for a consultation you will have to pay.

The idea of in-patient only cover may be new to Bupa, but Norwich Union has been offering a similar product with a similar name, Personal Care, since April 1991. Personal Care is Norwich Union's biggest seller.

Norwich Union offers broadly better benefits at a lower cost. Bupa will reimburse hospital costs only up to Band C limits - a low level on Bupa's hospital scale. Norwich Union gives a full refund.

Norwich Union is considerably cheaper. For a family where the elder parent is 38 and two children are under 18 the premium is pounds 47.60 a month with Bupa if you pay by annual variable direct debit. The Norwich Union premium is pounds 32.11. But you can get the Bupa cost down to pounds 35.22 if you accept a pounds 250 excess.

Policies that offer reimbursement for in-patient treatment only are a good way to cut costs. Bupa reckons that on average the premiums are between 30 and 45 per cent less than for its standard policy.

However, you have to be sure you know exactly what you are covered for. Penny O'Nions is a doctor and director of the independent financial intermediary De Havilland. She said: 'In theory they are a very good idea if your only concern is rapid and comprehensive cover while in hospital. They provide excellent value at a very competitive price.

'However, you must remember that to see a consultant and the diagnostic tests he may require may be lengthy and expensive. You could run up a substantial bill before you get into hospital. For example, when I had a barium meal at a provincial hospital two years ago the cost was pounds 120.'

Another way of cutting premiums is to provide cover for consultations and out-patient treatment, but restrict the hospitals you can choose for in-patient use.

First Choice Health, which sells its own policies as well as those of other companies, will use cold-calling to drum up custom.

Under its Pure Health Plan you have to use one of the 100 selected hospitals to ensure you get full reimbursement of your hospital and doctor's bills.

The policy covers alternative medicine including osteopathy and acupuncture provided you are referred by a general practioner.

However, every claim is subject to an excess of pounds 100. You will have to pay the first pounds 100 - a substantial drawback when consultation fees for specialists and alternative practioners are frequently much less than pounds 100. There are two variations of the plan. Cover for our 38-year- old's family on First Choice Pure Health Plan, the cheaper version, costs pounds 66.95 a month.

Keith Wallace, a spokesman for the company, reckons that at present more than 70 per cent of the company's sales are of their competitors' products. It is not at present offering Bupa policies.

Another new entrant to the already over-crowded medical insurance market is Medicus. It has had a troubled start, incurring the wrath of the American Blue Cross organisation by originally using a similar name. However, the launch of the Medicus products is now planned for 10 March.

There will be five policies underwritten at Lloyds. The cheapest is a six-week-wait budget plan, which has a pounds 150 excess on every claim. The standard policies reimburse for in-patient and out-patient care, but there is a list of hospitals that you have to use unless medical necessity deems otherwise.

Premium rates are worked out individually. Our family would pay pounds 59.50 for cover on the Bronze Plan, cheapest of the standard policies. You can reduce premiums by paying a lump sum and the balance by monthly instalments.

Medicus will be selling through agents appointed by regional directors, who have paid for a particular selling area. When a policy is sold the regional directors, the agents, the administrators and Medicus itself all receive a fixed fee - the equivalent of commission.

Medicus acknowledges that its fee package to agents is better than its competitors'. However, it says that paying fixed fees instead of commissions will help to keep premium costs down for the customer.

Before you buy, find a broker who specialises in the field and will give independent advice on all the companies' products on offer.

CORRECTION

First Choice acceptance

IN the article on private medical insurance in last Saturday's Money pages it should have been stated that First Choice Health's Pure Health Plan is accepted by 880 hospitals - 144 offering a full refund.

(Photograph omitted)