Should you take out private health insurance?

The NHS is creaking. A record 5.6 million people are on waiting lists for treatment in England, a number that could hit 14 million in a year, says Kate Hughes in The Independent. Faced with long waiting times, more people are going private. Only 13% of Britons had private medical insurance (PMI) before the pandemic, but a “stampede” among younger buyers has taken the average age of those taking out policies down from 40 to just 33 over the past year.

Medical insurance works like any other insurance policy, says Nick Green of unbiased.co.uk. “You pay a monthly premium… and claim on your insurance if you need treatment.” Those with PMI can enjoy speedier referrals, may get access to specialist drugs not available on the NHS and can enjoy other perks such as a private hospital room. You will still need the NHS for pre-existing and chronic conditions such as diabetes and emergency treatment.

The cost of PMI depends on factors such as age, smoking habits and location. “A 35-year-old couple can expect to pay between £700 and £1,000 a year, while a 55-year-old couple will be charged on average between £1,200 and £2,000,” notes Helena Kelly in the Daily Mail. “Premiums typically increase between 9% and 14% each year – in line with medical inflation, which always far exceeds general inflation.”

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There are ways of cutting the cost, says Dean Sobers of Which. Policies that limit how many hospitals you can choose from, or that only kick in when the NHS can’t treat you within six weeks, are cheaper. Opting out of outpatient cover – that is, private consultations and scans – “can take hundreds off the annual premium”. As with other insurance, choosing a higher excess will also mean lower premiums.

Consider self-insuring

Nearly three-quarters of PMI policies are held in corporate schemes, meaning they are offered by businesses to their employees. For those without such employer coverage another option is to self-insure: you save the premium you would have paid for insurance every month and use the resulting cash pile to fund your own treatment should you ever want to go private.

A lot of private treatment is accessible to those with savings. Cataract surgery costs about £2,500 per eye, while a knee or hip replacement will set you back between £10,000 and £15,000. If you don’t need treatment, you get to keep the money you put aside.

Insurance is there to protect you against losses that you cannot afford to cover yourself (this is why insuring a new smartphone is usually not a good idea). In extreme cases that can apply to PMI: The Times highlights one breast cancer patient who was forced to go private by delays during lockdown, costing her insurer “over £65,000”.

Still, in life-threatening circumstances most of us would turn first to the NHS. “If you have a serious illness such as cancer, heart disease or stroke, you’ll get priority NHS treatment. NHS hospitals can be as good as, or better than, private hospitals,” says the government’s MoneyHelper site. “Basic insurance, such as car and home insurance – and life insurance if you have dependants” are a higher priority than PMI.

For now, PMI is still considered more of a luxury than a necessity. Yet as the health service struggles with the Covid-19 backlog the number of people wondering whether they can really count on the NHS will only increase.