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NHS funding gap could spur private cover demand

NHS funding gap could spur private cover demand

Increasing financial strain on the NHS could spur greater demand for private medical insurance as well as driving up premiums, a specialist has claimed.

Mark Rothery, the chief executive of specialist provider CS Healthcare, suggested that advisers may need to consider the potential growth in demand among their clients, as well as higher costs.

He said that a predicted shortfall in NHS funding was unlikely to be bridged because of a growing and ageing population, an inreasing prevalence in long-term health conditions, the rising cost of new treatments and drugs, and growing expectations of the public service.

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Mr Rothery added: “These factors are also driving up private medical insurance premiums, but it seems likely more of us will turn to the private sector in light of the NHS budget shortfall, with significant numbers happy to consider lower-cost PMI options: cover with a more limited range of benefits but which still addresses the areas where the health service is less able to deliver.”

In October 2014, the 44-page NHS England publication, Five Year Forward View, warned that action would be needed in the areas of demand, efficiency and funding in order to sustain a high quality NHS for long-term care.

It said: “In order to provide the comprehensive and high-quality care the people of England clearly want, Monitor, NHS England and independent analysts have previously calculated that a combination of growing demand if met by no further yearly efficiencies and flat real terms funding would produce a mismatch between resources and patient needs of nearly £30bn a year by 2020/2021.”

The warning from Mr Rothery came after comments last year from Philip Blackburn, an economist for research firm LaingBuisson, to the effect that while demand for private medical cover had been stable in 2013, the sector was likely to grow significantly.

He said: “Stable demand for private medical cover over the past year reflects a subdued economy in 2012 and early 2013, as economic impacts on the sector are lagged.

“Thus an upturn in economic growth during 2013 which continues in 2014 is likely to support gains in private medical cover demand, as companies are doing better and the consumer sector builds up confidence.”

Adviser view

Paul Bradley, head of medical insurance for Sussex-based Dewberry Insurance, said: “As a result of increasing waiting lists, PMI has always seen an upsurge of sales in the past, and this would represent a great opportunity for providers and advisers alike, particularly if providers could offer innovative and cost-effective new products.

“The effect of new, previously uninsured people in the market would bring greater price stability, and could even lead to reduced premiums as the risk is spread more widely, and an easing of the pressures on the NHS.”

Background

According to the Association of British Insurers, the average private medical insurance premium in 2013 was £700, based on earned premium and people covered.

This represented a 2 per cent decrease from 2012, but the ABI noted that the average premium for PMI, after adjusting for inflation, had remained fairly constant since 2003.