ProtectionAug 21 2015

NHS concerns

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NHS concerns

While the government has earmarked an extra £8bn a year for the NHS by 2020, there are already signs that the service is under considerable pressure. With these pressures affecting the availability of healthcare services, interest in private treatment is on the up.

Just how squeezed the NHS is can be seen in the latest waiting list figures from NHS England. These show that, with 3.12m people waiting for routine operations and procedures, waiting lists were at their highest level since January 2008.

Further, and in spite of a promise to start delivering treatment within 18 weeks of referral, almost one million people (924,000) were forced to wait longer than this in the 12 months to May 2015. And, for 6,118 people this wait extended to a year or longer, with 634 of these individuals still waiting for treatment.

The issues are also highlighted in a report published in April 2015 by The King’s Fund. In this it warned that workforce shortages could derail the plans outlined in NHS England’s Five Year Forward View. Its analysis found that staffing shortages in key areas such as mental health, primary care and community care, coupled with the NHS’s reliance on agency staff, would make it difficult to deliver new models of care.

Prompt treatment

But, in many instances, being able to access medical treatment quickly is essential. Where a condition prevents someone working or enjoying their normal activities, a long wait for an operation can seriously affect their lifestyle and potentially their income. Delaying surgery can also lead to the condition getting worse and trigger further health issues such as psychological problems - all of which would necessitate more treatment.

While it is possible to avoid the waiting lists by paying for private treatment, the bills can be chunky. For example, at Nuffield Health’s Guildford Hospital, a hip replacement costs £12,065, new knees come in at £11,310 each and carpal tunnel release is £2,295 per wrist.

Where a client’s budget can not take these one-off hits, private medical insurance (PMI) can help to spread the cost while also giving access to a broad range of healthcare treatments and services. But, with premiums linked to age, the cost can still be prohibitive.

For example, a 50-year-old taking out Bupa’s fully comprehensive Bupa By You plan would pay £996 a year or more depending on location. Even at age 35, when health issues are much less common, the annual premium for this type of policy would be more than £600.

Research by Bupa shows that these costs can be a significant deterrent. Half of the 32- to 55-year-olds it surveyed said that price was a barrier to taking out PMI. But, when asked whether they would consider it if it more affordable, 37 per cent said yes. Richard Norris, director at Bupa UK, says this is a key audience for the PMI market. “The PMI customer base is ageing. Targeting younger people with a plan that suits their needs will help to grow the market and make it more sustainable.”

Affordable cover

A variety of cost control mechanisms are available on standard plans to help make premiums more affordable. These include excesses and co-insurance, where the policyholder pays part of their claim costs; and six-week plans, where treatment is available where the NHS waiting list is longer than six weeks.

However, over the past 18 months, several insurers have launched entry-level products to make cover more affordable and target younger customers. These employ a variety of strategies to curb the cost of cover.

Exeter Family Friendly was one of the first into the market with its Health Essentials for Me plan. This is designed to address consumers’ fears around waiting times for operations and procedures on the NHS.

To achieve this, it provides cover for in-patient and day-patient surgery and treatment but excludes diagnosis and consultations. Customers can also add in unlimited cover for cancer and choose to increase the excess, which is automatically set at £100.

Also cutting back the benefits it offers is Bupa on its Fundamentals plan, which was launched through intermediaries in July. This provides full in-patient cover and diagnostic tests but only offers a maximum of two consultations a year.

In addition, benefit for physiotherapy and other physical therapies is restricted to £350 a year and can only be accessed to support recovery from in-patient and day-patient treatment. By clamping down on excessive claims for physiotherapy in this way, the plan is not only more affordable but also helps to make prices sustainable over the long-term by changing policyholder behaviour.

While these plans might restrict treatment, Stuart Scullion, commercial director at Punter Southall Health & Protection and chairman of the Association of Medical Insurers and Intermediaries, says this is a practical way to bring down the cost of cover. “A policyholder could take out a cash plan to cover restricted benefits such as consultations or physiotherapy,” he says. “Or they could just view the cost of the excluded benefits in a similar way to an excess.”

Take Exeter Family Friendly’s plan, which excludes specialist consultations as an example. The price of these varies but are typically between £150 and £250, which is a manageable cost if someone wants see a specialist quickly.

Controlling costs

While restricting cover to more significant healthcare expenses such as in-patient cover is one option, CS Healthcare cuts the cost of its HealthBridge plan a different way. Policyholders can access a full range of treatments, including consultations and diagnostics, but it caps the amount they can claim in any policy year to £15,000.

Within this limit there is a cap of £1,000 on consultations and diagnostic tests and investigations and there is also a compulsory co-payment feature, capped at £250 per person a year. Russell Stephens, director of marketing, distribution and membership services at the group, explains the thinking behind the plan: “Our research found that people were happy to turn to the NHS for the big ticket items such as cancer and heart disease, which are its areas of expertise, but they wanted to be able to access treatment for the more routine procedures quickly and easily. The annual benefit limit will cover many of these procedures.”

The drawback with this plan though is that it is only available to clients who work in, or have worked in, the civil service or public sector and charitable or not-for-profit organisations. However, as this adds up to more than 10m people and their families, it is still fairly extensive.

Taking a slightly different approach is April UK with its Inspire plan. Rather than cut back on the cover, this restricts where a policyholder can access treatment by using the network of 38 Spire Healthcare hospitals around the UK.

Partnering with one hospital group enables April UK to benefit from discounted charges, which are passed on in lower premiums. For example, a 35-year-old would pay £39.50 a month for a plan with no excess while a 50-year-old would pay £60.18 a month.

Market developments

Given the need to grow the PMI market, Mr Scullion expects to see more insurers look at the affordability of their cover. “I do expect to see most of the insurers launching products in this space over the next few months,” he says. “Entry level products are affordable but also offer a solution to some of the access issues facing the NHS. As long as clients understand what they are buying, they are a great addition to the market.”

And with the NHS set to face some of its toughest funding challenges yet, providing an affordable level of cover that appeals to a younger customer base could help to deliver the long-term sustainability the PMI market has been seeking for years.