To bypass high premiums and still get private healthcare treatment, self pay is increasingly popular among the over 50s. Rachel Gordon reports
The NHS is improving – or so the Government wants us to believe. True, waiting lists may be coming down in some areas. But there are still delays for common procedures and not everyone wants to be treated in a ward – or run the risk of catching a superbug.
On retiring and leaving the safety of a company-paid private medical insurance (PMI) scheme, the cost of buying cover can come as a nasty shock. Others may simply find they cannot afford the price once they are over 50. And, for those in robust health, paying regular premiums and having no claims can simply seem like money down the drain.
Competitive deals
At the same time, there has never been a better time to self pay. A stronger NHS means more people rely on the State – putting private hospitals under pressure. The result is more competitive deals for patients who want fixed price deals.
Nuffield Hospitals and BMI Healthcare are both geared up to deal with the self pay market with dedicated propositions, including loans for those who need help with finding the cash. David Mobbs, chief executive of Nuffield Hospitals, says: "Over the past few years, we have seen significant growth in the number of people choosing to self pay, especially older people. Our patients know what they want and need, and Nuffield Hospitals was the first healthcare provider to offer a self pay product to its patients. Our Fixed Price Direct product offers patients the opportunity to know the full costs of their treatment upfront."
Nuffield Hospitals has a partnership with Barclays Bank and can offer an unsecured medical loan to cover the cost of treatment which is interest-free provided it is paid back within 12 months. 15.9% APR is charged on medical loans that are repaid over a longer period.
Last year over 16% of BMI Healthcare's patients paid for their own surgery – using the Group's agreed price package called Option or the BMI Card – this gives a six months' interest-free facility, after which a 9.9% APR kicks in.
But, while self pay can seem an attractive option, most health insurance brokers warn against it. George Connelly, who runs Health Care Matters, and is himself aged 64, comments: "Unless you have very deep pockets, it's not a good idea. While many people may be able to get their hands on a few thousand pounds, there is no guarantee what your bills will be. What many people don't realise is there is far more choice now."
Affordable cover
Among the alternatives to self pay which he would recommend to older people on a budget is Norwich Union's Trustcare policy. "In my part of the UK, Dorset, cover costs £45 a month if you take the option with a six-week wait. Then there are high excess policies such as those offered by AXA PPP healthcare, Standard Life Healthcare and WPA, although I prefer co-payment plans."
He explains this is because in the case of high excess plans, actually receiving a claims pay out is unlikely. WPA, for example, has one where the policyholder has to pay up to the first £5,000 themselves. "Although the very high excesses mean affordable cover and they do provide reassurance if you have a doomsday scenario, for most people a claim is going to be under this amount. They could end up having to pay out for several private treatments and not receive a penny from the insurer."
Connolly does favour co-payment policies however, such as those offered by Exeter Friendly Society and WPA. "Obviously you do need some readily available funds, but you are more likely to receive some help from the insurer."
Shared Care from Exeter Friendly Society allows policyholders to choose their own package of benefits and also provides access to Exeter's treatment sourcing subsidiary, Go Private.
Customers choose at the outset how much they want to co-pay, either 25% or 50% and the company claims that access to Go Private means treatment charges are likely to be lower than if the individual contacts private hospitals direct.
Neil Armitage, group marketing director for Exeter Friendly Society, says: "The over 50s are our core target audience but rising premiums has meant many of them cannot take any more increases. We launched Shared Care a year ago and it has really caught on. Our audience has been around the block and understands the concept that there is no such thing as a free lunch. They are prepared to become stakeholders and I think many prefer this type of plan to a high excess policy where they may never see the benefit."
Negotiating power
He adds that the Go Private service is an additional inducement. "No one wants to be running around getting quotes from private hospitals if they are ill or need an operation, our staff also have negotiating power and will be able to find the best deal. The service is also there, of course, for those who want to self pay alone."
Go Private runs a client's savings account facility, especially designed to pay for future healthcare needs. Accounts can be opened with a minimum of £5,000 and deposits can be made up to a maximum balance of £25,000.
While this may be convenient, Armitage admits that a pot of money can be held anywhere to self pay and it is up to the individual – and their financial adviser – to find the best place for it. "Many IFAs are not that switched on to selling private medical insurance. But, as self pay becomes more prevalent, advisers need to start looking at how they can weave a solution into their clients' portfolios."
This February, WPA linked up with the Cheshire Building Society to launch Healthy Savings, a health insurance and savings plan combined. Customers can choose three excess options of £1,500, £3,000 or £5,000 and the higher the excess, the greater the return on savings. The savings account pays the excess should medical treatment be required, and investment can either be via a cash lump sum, or gradually built up over time. Returns are around 3% per year, plus a bonus of a further 1% for the first six months. The minimum investment is £1 and the maximum £5,000.
The plan allows investors a choice of up to 650 hospitals across the UK, and customers can make as many claims as required up to the annual benefit limit. A medical examination is not required, and those aged up to 74 are eligible to join.
Charlie MacEwan, spokesman for WPA, says: "All our new customers are required to take some element of self pay and our Shared Responsibility policy could reduce typical premiums by up to 70%. Brokers need to get the message across to people in their 20s that saving £500 a year for example, would mean a decent pot of money when they need it in their 50s."
He adds that WPA has no plans to launch its own totally self pay advisory service and in fact, recommends Go Private as a suitable service to use.
Clearly, the self pay market is here to stay and more over 50s are in need of advice on whether to go down this route totally or to look at a co-payment scheme. Roger Hymas, managing director of private treatment sourcing company Healthcare Navigator, comments: "Many of our clients are older people – they are PMI refugees as they can no longer afford the premiums. There is a need for better financial advice linked to healthcare and IFAs have never been particularly switched on to healthcare or its funding."
Certainly, many feel IFAs have been too tempted to sell profitable bonds and funds that tie clients in. In the future, Hymas believes more providers will offer clients access to savings products and, to avoid tax, these should be convertable into ISAs where possible. "I see self pay growing but in particular, more hybrid products are likely – I think this is what Prudential has in mind as it prepares to enter the market."
Rachel Gordon is a freelance journalist
COVER notes
• Self pay is gaining popularity for the over 50s as PMI premiums can be expensive.
• Nuffield Hospitals and BMI Healthcare both offer medical loans to fund treatment.
• High excess and co-payment cover offer affordable alternatives to pure self pay.
