Company to Private Healthcare
Essential Healthcare Sales Director Brian Mulreany contributed to an
article on Health Insurance in The Times dated 29 September 2007. Read
what Brian had to say below.
September 29, 2007
Prepare for culture shock
Helen Pridham on the painful switch from company to private medical insurance
Members of company health insurance schemes are in for a nasty surprise
when they retire. Many employees are reluctant to go without private
medical cover when they stop working, but they face a huge increase in
cost, especially if they stay with the same insurer.
Brian Mulreany, of Essential Healthcare
, the health insurance adviser, says: “Most employees pay only tax on
this benefit. Moreover, the premium that the employer pays will be
relatively low because there will be a group discount. So when people
retire and are offered an individual continuation option by the
company’s insurer they are often shocked to see premiums double or even
triple.”
Worse still, this huge rise in premiums comes at the same time as you
are coming to terms with reduced income as you move on to a pension. If
you are receiving treatment for an existing condition and want to
maintain your cover, you have little choice but to stay with the same
insurer. “This is why the premiums on group-leaver policies are so
high,” Mr Mulreany says. “Only those in poor health tend to stay on, so
the claims ratios are high and insurers lose money.”
For this reason, some insurers of corporate schemes do notoffer a
continuation option, which means that you will have to shop around for
a new policy. But for many people it will be cheaper to move to a new
insurer anyway, even if they have had a couple of claims in the past.
Steve Walker, of Medical Insurance Services, the independent adviser,
says: “If you have had one-off procedures in the past, such as a
hysterectomy or hernia repair, you should not have problems obtaining
cover elsewhere, and in about 90 per cent of cases you will pay less.”
Also, many policies have two-year moratoriums on cover for conditions
treated in the past five years, with cover reinstated after the two
years if you are clear of treatment, consultations and medication for
that period.
Not surprisingly, Mr Walker recommends that former employees consult a
specialist adviser before they switch. He says that when individuals
shop around, they tend to stick to the big names and try to reproduce
the cover they had when they were covered by a company scheme.
Advisers can recommend insurers that offer favourable terms to people
leaving group schemes, or provide access to deals available only
through brokers. They can also tell you the pros and cons of more
limited cover. Mr Mulreany says: “Most group schemes are fully
comprehensive but many individual schemes are menu-based, so you can
choose the cover you want and pay less.”
One such scheme is offered by BCWA. It has five cover options:
outpatient tests and consultations, acute surgery, complementary
therapy (such as physiotherapy), treatment for cancer and heart
conditions and dental and optical treatment. AXA PPP also has a scheme,
available through intermediaries, that covers inpatient treatment,
outpatient surgery, MRI and PET scans and radio and chemotherapy.
However, it does not pay for outpatient consultations, therapies and
minor procedures. Mr Mulreany says: “Older people often have savings
and can afford to pay for outpatient consultations or physio, if
necessary, leaving the insurer to cover the cost of the big-ticket
items.”
It is also important to consider affordability in years to come. Most
insurers increase their premiums in line with age as well as inflation.
Exeter Friendly Society is one of the few insurers to have “age at
entry” pricing, where your premiums are fixed at your age when you
first take out the policy. However, premiums still rise with inflation
– in Exeter’s case, premiums on traditional policies have risen by an
average of 9 per cent a year over the past five years.
Those who are worried about the prospect of rising premiums could also
consider the Healthcare Deposit Account from the National Deposit
Friendly Society. This scheme allows you to pay a fixed premium for
life in return for a fixed annual amount of cover. For £50 a month you
receive up to £25,000 of medical benefits each year and £750 of dental
and optical cover.
Half of the premium is paid into a deposit account and used to pay for
part of the claim cost, or it can be withdrawn if cover is no longer
required. This scheme may not cover all your costs but it could be
useful for people on a limited budget.
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For retired people who are making an effort to remain fit and
healthy, PruHealth is providing private medical insurance with a
difference. The insurer is offering discounted premiums to
policyholders who can demonstrate that they are living a healthy
lifestyle.
To obtain the discounts policyholders must earn Vitality points by
undertaking activities such as visiting a gym regularly. PruHealth has
also teamed up with Sainsbury’s so that policyholders can accumulate
Vitality points when buying fresh fruit and vegetables. Purchases will
be monitored through shoppers’ Nectar cards.
Dave Priestley, PruHealth’s sales director, says that the policy has
proved popular with all age groups, including the retired. “As people
grow older they often take more interest in their health and they also
have more time to go to the gym and keep fit,” Mr Priestley says. “Even
if they have to make a claim, they can still benefit financially from
our policy through such things as reduced-cost health screening and
reductions in gym membership fees.”
However, the company does expect there to be fewer claims from its
health-conscious customers. Mr Priestley says that, since the policy
was introduced three years ago, claims among people who accumulate
Vitality discounts have been about 33 per cent lower than those from
people on the basic premium.
Case Study
Philip James and his wife, Christine, were members of his company’s
private medical insurance scheme for 13 years before he retired from
full-time work last year, aged 63.
The couple, from Sutton Coldfield, Warwickshire, wanted to continue the
cover. “We had not made a claim in five years,” Mr James says, “but we
liked knowing that if we did have a problem we would not have to wait
ages for treatment.”
Mr James’s company had paid an annual premium of £1,500, but the
leavers’ policy offered by the insurer was more than £3,000. Mr James
looked for an alternative but found nothing much cheaper until a friend
recommended Medical Insurance Services, the specialist adviser.
“They suggested an AXA PPP policy with two options – one that covered
outpatient costs and another that didn’t,” Mr James says. “We chose the
latter, as we could use the premium savings to pay for any outpatient
costs. Our premiums worked out at about £1,350 a year – less than half
the cost of the company leavers’ scheme.”
The Times 29 September 2007