Health plans that won't damage your wealth

Medical insurance is the latest product of the financial service industry to make a claim on our pockets, writes Clifford German.

Once it was mortgages, then it was mortgages and pensions, then mortgages, pensions, private education for the kids, accident, sickness and unemployment insurance in case we get sick and cannot work, savings plans to keep us in comfort when we get old but fit and active, long-term care plans to take care of us if we get old and sick and unable to look after ourselves. They are all now clamouring for any cash we have left over after paying just to live. Disposable income is becoming a very arbitrary concept. Only a very brave or foolhardy person would spend it all.

But the calls on our pocket have not finished. As the concept of free universal health care hangs in the balance private health insurance is pushing its way up the queue to put its hand into our pocket. Private health care might not provide a better standard of care, but it will almost certainly provide faster care and also cover more of the kinds of care which the NHS increasingly dismisses as essentially cosmetic.

But it will cost anything from pounds 250 to pounds 300 a year per person, and older people could be expected to pay significantly more after the age of 50 and again at 60, so a cost-effective cover is very important. This is also a business where economies of scale are very important, and group schemes can obtain very substantial discounts as well as offering cover for a wide range of individuals, male and female, old and young, at rates that they can all hope to afford.

Group schemes are often available to employees of a single firm, and a number of major companies such as Jaguar, British Gas and BAA, who at one time might have made group plans available only to directors and senior managers, now offer group schemes for all their employees, often at subsidised rates. BAA, for example, offers healthcare insurance to its 8,500 employees and pays 50 per cent of the cost.

In an ideal world, of course, all employers would see the advantages of subsidising employee membership as a relatively cheap way of offering their workforce peace of mind and rewards for loyalty. There is also some evidence to suggest that they are rewarded by a drop in absenteeism which, according to a recent report for the CBI, costs UK employers an average of pounds 533 a year for every employee.

The market leaders in private medical insurance are, of course, Bupa and PPP, both of whom have been in the business for a long time, and both of whom offer a relatively expensive but comprehensive service. But cheaper options do exist. Manor House Healthcare, which is registered as a friendly society and distributes no profits, is offering group schemes to groups of 20 people or more, aged between 16 and 64. The group can be employees of a single firm or they can be any affinity group such as members of a trade union or even a rotary club, a sports club or similar association. Premiums cost pounds 13.04 a month and are the same for all, regardless of age or claims history, and cover all occupations and all parts of the country. Family membership is also available at pounds 34.76 a month to include any number of children or dependents aged between two and 16.

Members are guaranteed a prompt, efficient service with any surgery or treatment needed completed within seven weeks of making an appointment to see a consultant. Treatment is available locally in a network of hospitals around the country or in the society's own hospital in north London. Legal & General has also recently introduced a budget healthcare policy called Lifetime Essentials that offers a full refund of authorised in- patient and day-care treatment, including room charges, nursing care, operating theatre fees, drugs, medicines and dressings. It also normally covers the cost of diagnostic procedures such as x-rays and scans as well as radiotherapy and chemotherapy.

It covers follow-up out-patient treatment and some minor surgery at doctors' surgeries. Customers who choose to be treated free in an NHS hospital qualify for a cash sum. Monthly premiums start at pounds 9.95 for a 24-year old, rising to pounds 30 for a family of four with the parents under 30.

It is, of course, important with all private medical schemes to find exactly what conditions are covered and what are not. Private medical insurance does not pay the cost of living costs for policyholders who are unable to work because of illness. It usually does not cover long- term and incurable illnesses, and it may not cover Aids, infertility treatment, drug or alcohol abuse, mental or psychiatric illness or injuries caused by dangerous sports. Treatment abroad is also usually excluded.

Critical illness cover (CIC) is a specialised form of medical insurance that has grabbed most of the headlines in recent years by promising to pay out a lump sum to anyone who has subsequently been diagnosed as suffering from one of six or seven killer diseases, from cancer to heart attacks, strokes, major organ transplants, total disability and other life-threatening diseases. It does not specifically cover loss of income but the lump sum can be used to pay off mortgages and other outstanding debts as well as giving the policyholder some capital to make the best use of the time left.