Healthcare premiums dissuade customers

The number of people paying for individual private medical insurance has fallen by more than 12 per cent since the Labour government took power in 1997 with a pledge to rebuild the National Health Service.

But it is too soon for ministers to celebrate: the chief reason for the decline is the 54 per cent rise in premiums over the period, not improvements in the NHS, according to a report.

The cost of private medical insurance has convinced many people that it is better to carry the risk themselves and pay for private-sector operations when they need them. An estimated 300,000 people paid for their operations last year, three times the number in 1997.

Tories want to encourage this trend by offering subsidies worth up to 60 per cent of the cost of an operation to people who opt for treatment in the private sector, to take the pressure off the NHS. But Labour argues that this will divert up to £2bn from the NHS to subsidise those who were in many cases already paying for private care.

Premiums are being driven up by the increasing number of claims and by their higher cost, fuelled by advances in medical science. When the independent market analyst Datamonitor asked consumers why they did not have private medical insurance, the commonest answer was "too expensive". Average individual premiums have risen from £789 a year in 1997 to £1,218 in 2002.

Despite the hefty increases more companies are offering private medical insurance as a perk of the job, and thus the total number covered by private insurance had grown to 6.7 million at the end of 2002, an increase of 604,000.