Simplicity is the best health policy

Andrew Geldard surveys the new-look private medical insurance

Demand for NHS treatment has always placed considerable strain on the available resources to deliver it, with the result that waiting lists continue to be a feature of life for non-acute medical conditions.

Consequently, many people not in company health schemes bypass the NHS by taking out private medical insurance (PMI) and these schemes enjoyed massive popularity during the Eighties. However, according to the Association of British Insurers sales have been less buoyant during the Nineties, with many people allowing their policies to lapse. By 1995, the numbers of people with PMI had fallen by 25 per cent in five years to around six million.

According to research by Watson Wyatt, high levels of misunderstanding by consumers as to what is and what is not covered by PMI policies have been partly to blame. This ambiguity often results in consumers finding out too late that their policy does not cover a particular condition they need treatment for, creating a source of contention between provider and customer and resulting in bad press for the industry.

Recognising the need to provide greater clarity over what cover PMI policies provide, Prime Health are promoting an industry-wide "keep it simple" approach to medical insurance. Caroline Southwood of Prime Health says: "Part of this process involves using clear English in all literature explaining precisely what consumers are purchasing. People who purchase budget plans in particular are often left unaware of what benefits have been excluded to keep costs down and our latest two budget plans include a customer declaration to ensure the policyholder knows exactly what cover they are getting."

Another problem for PMI is that premiums are not cheap especially when you get older. Constant rises in medical costs, together with claims experience, mean companies usually raise premiums at least once a year, on top of further increases made on an age band basis. The age band increases differ among the top providers. For BUPA it is every five years, PPP have a small age-related increase every year while it is every 10 years up to the age of 60 for Prime Health.

Recent entrants to the PMI market, OHRA, are attempting to break this price structure with their product, Medios Executive 2000, which, under its loyalty bonus, makes no age related premium increases at all.

PMI plans can be loosely categorised into two types: comprehensive and budget. Comprehensive policies provide cover from a choice of up to 1000 hospitals for in-patient costs, including those for surgeons and consultants, home nursing, day care surgery, out-patient treatment and emergency worldwide repatriation. The cheaper budget plans give more limited access to out- patient consultations, choice of hospitals and have more restrictive annual claims limits while excluding certain treatments, like alternative medicine.

With consumers focusing on price, a number of new budget plans have been launched recently. An example is Prime Health's two new plans - Primecare Saver and SuperSaver - which cut premiums by reducing the comprehensive cover of its main Primecare plan. They offer full cover for eligible in-patient treatment, out-patient tests, consultations and day care surgery. Premiums start at pounds 16 for single cover and pounds 40 for a full family. Excluded cover includes alternative medicine and home nursing.

Guardian Direct's Standard and Value plans offer a refund of up to pounds 30 per person each year for routine dental or optical check ups and a further 12 for prescription charges. The Value and Standard plans provide costs for in-patient and day-patient treatment in a choice of up to 500 hospitals. For this cover, a man in his late 20s will pay pounds 14.80 each month for the Value plan and pounds 22.94 for the Standard plan.

If you already possess a PMI policy and are interested in changing to another provider, it is worth noting that the new policy provider may exclude treatment for a pre-existing condition. It could result in the provider not accepting you and create a situation where you are locked in with your existing provider. It is important to check with the prospective provider so that you know where you stand. Many companies also operate a moratoria where they accept you for cover, with any pre-existing conditions not included for the first two years.

While forecasts predict the PMI market will grow by 27 per cent by 2000, the industry needs to remain focused on two important customer needs - simplicity and price.

BUPA, 0800 600 500; Prime Health, 0800 779955; Guardian Financial Services, 0500 282820; OHRA, 01703 653663.