'Affordability crunch' near on private health costs, Bupa warns

People cannot pay premiums that have risen by more than three times their wages

Private health insurance is becoming so expensive in the UK that people can no longer afford it, the chief executive of Bupa warned yesterday.

Stuart Fletcher said sky-high costs were meaning the whole market was "approaching an affordability crunch".

"For the last decade, health inflation has been running at three times the level of the retail prices index," he said. "That has had to be reflected in premiums and people cannot afford to pay premiums that have risen by more than three times their wages. So they have been forced to choose between dropping health insurance altogether or opting for less cover."

The group's UK customer base fall by 5 per cent to 2.5m in the six months to June and Bupa's European and North American profit fall by 22 per cent to £35m on revenues down 2 per cent at £1.44bn. But thanks to strong Australian, international and care services performances, profits rose 3 per cent to £256m on revenues up 5 per cent to £4.12bn. Bupa has welcomed the Competition Commission investigation into the private health market but is taking steps to tackle the affordability issue before it reports in 2014.

Fletcher said: "We have had to look at what we offer our customers, providing them with greater flexibility, and at the same time we have had to deal with the private hospitals and consultants over what they are charging."

He said the group had already come up with fixed pricing on 70 of the most common procedures.

But Fletcher added: "There is still insufficient competition between, and a lack of effective controls over, prices charged. That is particularly the case in London."

He pointed out that Bupa's Spanish operations, which are far more integrated than the UK's, produce much better profits because "we can commission the best care for the patient at the lowest possible cost."

He believes the same could happen in the UK if the National Health Service reforms resulted in closer integration between state and private-sector services.