Priced out of private health plans

Premium rises of up to 80 per cent are forcing many pensioners to abandon their policies, says Clifford German

PRIVATE medical insurance premiums for the over-60s are going up by as much as 80 per cent this year, forcing thousands of senior citizens who have paid rising premiums for years for the reassurance of private medical care to abandon their policies without ever making a claim.

The steep jump is being blamed on the removal of tax relief on premiums for the over-60s in Gordon Brown's first Budget last July. The loss of tax relief affected all premiums renewed after 2 July. The change should account only for an average increase of 30 per cent, but most private health policy premiums are reviewed every 10 years up to the age of 60 and every five years thereafter. So anyone crossing an age threshold suffers a double whammy this year.

Premiums also rise each year by as much as 10 per cent as a result of "medical inflation", the rate at which the level of claims and the cost of medical care rises. Insurance premium tax increased from 2.5 per cent to 4 per cent on premiums renewed after 1 April last year, and might go up again next week. Policyholders can also face a heavy increase in premiums after a claim has been made.

Insurance providers have tried to help by encouraging policyholders to pay the first part of a claim themselves in return for reduced premiums, and to switch to more restricted cover, which does not pay for some forms of out-patient treatment or limits policyholders to a restricted range of hospitals and consultants. The two biggest providers - Bupa and PPP - have also tried to organise consultants and hospitals who are willing to limit their charges to the levels covered by most policies in return for the extra work channelled to them. PPP is trying to concentrate its hospital care into the four London hospitals it owns or the 37 hospitals in its national healthcare network.

One of the newer private medical insurance providers, Prime Health, has tried to counter rising premiums by raising the age limit from 55 to 74 to allow switching from full cover to one of its budget plans, Prime Care Supersaver and Prime Care Saver. These offer lower premiums in return for a reduced level of cover. They continue to cover the cost of most in-patient care, and consequent out-patient treatment, but do not cover alternative medicine, psychiatric treatment or major dental work.

Patients can also cut premiums by opting to pay the first part of any claim themselves. Prime Health, for example, offers a 10 per cent discount if patients pay the first pounds 100 excess themselves, rising to a 25 per cent discount for the first pounds 250. Patients who agree to accept treatment in a restricted number of hospitals instead of Prime Health's full list of 600 hospitals countrywide also qualify for a further 15 per cent discount.

Another relatively new provider, Legal & General, has relaunched its initial package as three levels of cover with premiums rising from pounds 9.95 a month at age 24 to pounds 31 a month at age 59 for hospital cover and subsequent out-patient care (excluding consultants and physiotherapy) to pounds 23.71 at 24 and pounds 61.90 at 59 for standard cover which pays up to pounds 500 for out- patient treatment and specialists where in-patient care is required, and pounds 29.99 a month at 24 and pounds 81.99 a month at 59 for fully comprehensive cover. Discounts are also available on the last two options for policyholders paying part of the charges themselves.

Norwich Union's cheaper options include Trust Care 6, which offers prompt access to pay beds at NHS independent units if there is a general waiting list longer than six weeks, and Trust Care Starter, which excludes the cost of out-patient consultations and treatment. Manor House, a long-established friendly society, offers a flat rate cover at pounds 13.04 a month for affinity groups of at least 20 people provided they are in work, but pensioners can remain members after they retire. Group policies sponsored and subsidised by employers are becoming more popular, but they are little use to anyone who is already retired.

Meanwhile, NHS waiting lists are still growing and the cost of private medical insurance looks certain to go on rising faster than inflation. Anyone taking out private medical care probably has to come to terms with the prospect of steadily rising premiums or face the fact that they may no longer be able to afford private treatment just when they are old and infirm and most likely to need it.

For now the best advice must be for buyers to make sure they know what is covered and shop around if necessary, although changing insurers is not always an easy option because recent medical problems covered by the original policy may not be covered by a new one.