PRIVATE HEALTH A SPECIAL REPORT: Run for cover and jump the queue

Private medical insurance schemes are multiplying rapidly. Alison Eadie reports on DIY health

Demand for private medical insurance (PMI) has remained flat, despite expectations of a resurgence after the end of recession, according to healthcare consultants Laing & Buisson. Some 6.2 million people, or 11 per cent of the UK population, had PMI cover at the end of June last year. Growth is not expected to return until the `feel-good' factor emerges, the consultants said.

Cost consciousness continues to dominate much of the medical insur-ance market. Sun Alliance has just brought out a new type of policy, which cuts 30 per cent off the cost of its comprehensive PMI by excluding major life threatening conditions and accidents.

John Copeland, health and benefits manager, said Health First Direct was designed to leave out areas of health care the National Health Service did well.

As a result the policy does not cover cancer, heart attacks, strokes, leukaemia, kidney failure, major organ transplant or accidents and emergencies.

"People have confidence in the NHS to treat these diseases and few if any private hospitals are equipped to offer extensive chemotherapy or heart transplants," Mr Copeland said. The policy covers outpatient treatment up to the point of diagnosis of an excluded disease.

The cost of cover for a couple in their mid-30s with two children under the age of 18 is £42 a month.

Six-week wait policies, which offer private treatment if local NHS waiting lists are longer than that and which have dominated the budget end of the PMI market in recent years, are in retreat.

BUPA, the largest medical insurer with 45 per cent of the market, is no longer actively marketing its six-week wait policy. A spokeswoman said BUPA had found that if people bought PMI, they wanted the certainty of going to a private hospital for treatment.

Instead, BUPA developed Local Hospital Care, which matches the six-week wait policy on price by restrict-ing patient choice to a single local private hospital and through excluding the cost of outpatient consultations. Excesses, where patients opt to pay the first £100, £150, £200, £250 or £500 worth of treatment, also keep the cost of premiums down.

The amount the policy will pay out on specialists' fees is capped at different amounts depending on the complexity of the procedures, but there is no overall maximum to total benefits payable in any one year.

Private Patients Plan, which pioneered the six-week wait plans in 1979, this month scrapped the ceiling on annual benefits payable on its two cheaper plans, Value and Secure. The ceilings were £20,000 and £60,000 respectively.

Individual items like surgeons' fees remain capped. PPP has also introduced voluntary excesses on the Value and Secure of £50 and £75 a year respectively.

A few months ago PPP waived the six-week wait rule for 10 of the most common medical procedures includ-ing hip replacement and hernia repair, so patients no longer had to refer to the length of NHS waiting lists.

There are hundreds of medical insurance policies on the market, from budget to deluxe, and all coming with different variations and exclusions. No claims bonuses, loyalty bonuses, excesses, restrictions on categories of hospital, exclusion of outpatient care, different loadings for age are just a sampling of the variations on the market.

OHRA, the Dutch-owned insurers offer "own risk options" which combine features of no claims bonuses and excesses. It is more advantageous to families rather than individuals and to non-claimants. Policyholders can opt for a 30 per cent, 40 per cent or 50 per cent excess, expressed as a percentage of the value of their premium, in return for a 17.5 per cent, 27.5 per cent or 37.5 per cent discount on the premium paid.

A family of two adults and two children paying a total annual premium of £720 - £300 per adult, £100 per child less 10 per cent family discount - and opting for the 50 per cent excess, would receive a £270 discount. The family is liable to pay the first £150 of a claim per adult and £50 per child. The own-risk option is applied only once per person per year. The family would still make a £20 saving even if it claimed for one adult and both children in one year.

OHRA also offers a loyalty bonus, which guarantees that whatever the age of the policyholder, they will never have more than one age-related premium increase during the life of the policy. Those joining in their 20s or 30s can expect to pay more initially with OHRA than with other insurers, but by the time they are in their 50s and 60s they are reaping the rewards.

David Potter, director of OHRA, is sceptical of budget medical insurance which he likens to comprehensive car insurance that only covers the front of the car.

He says if the policyholder cannot afford an extra £10 or so a month, he certainly cannot afford a bill of several hundred pounds for something excluded from the policy.

For those who can afford to banish all worries about exclusions, Clinicare's Carte Blanche covers many things excluded from cheaper policies. It describes itself as a health maintenance plan rather than a conventional insurance policy. It includes dental and ophthalmic fees, spectacles and contact lenses, alternative therapies, prescription charges and normal maternity care.

A family of two adults in their early 30s living outside London with two children, would pay £1,473.84 annual premium, Clinicare estimates that without insurance the family would pay around £900 a year on dentists, opticians, prescriptions and osteopaths.

Before committing themselves buyers of PMI must do their homework or take independent advice. Changing insurer can be hazardous because of the exclusion of pre- existing medical conditions. Some insurers, like OHRA, particularly target young people and families. Others, like Exeter Friendly Society, offer competitive rates for older people.

Peter Bye, of independent intermediaries Private Health Partnership, warns there are too many policies on the market and too many are being sold on a cut price basis.

He advises people to think what benefits they want and then search for the most competitive deal.

He also warns of increasing numbers of commission-driven PMI salesmen coming into the market.

The Office of Fair Trading is looking at the selling of PMI as part of its follow-up to the Monopolies and Mergers Commission report into consultants' fees published last year. It is understood to be concerned about misleading sales literature and the hard sell of some operators in the market.