Personal Finance and Healthcare Expert
Investing in health insurance gives you the benefit of private healthcare when needed. You might expect your premium to increase, but what if a sharp increase has you questioning whether your policy is still affordable? We share some ideas to help you lower the cost of your premium.
When you first buy health insurance, your chosen insurer considers various risk factors and gives you a quote based on the likelihood you'll claim on the policy. The more likely you are to claim, the higher your premiums will be. They'll consider factors such as your age, where you live, whether you smoke and more.
At the end of your first year of cover, they'll have more information about you to add to their risk profile. In particular, you may have claimed for significant treatment or not claimed at all. They'll review this information and give you a health insurance renewal quote that reflects any changes.
The amount of money you pay your insurer each month or year in return for coverage and your policy benefits.
We've already mentioned that insurance providers add new information to their risk assessment when calculating your renewal quote. External factors outside your control also influence increases in your health insurance premiums.
Here are the main factors that contribute to health insurance premium increases.
The cost-of-living crisis impacts more than household bills; it also affects health insurance premiums. Higher inflation rates mean getting less for your money and paying more if you want your health insurance coverage to stay the same.
Inflation also impacts private health insurers as they may pay more for rent, utility bills and staff wages.
Medical inflation differs from general inflation as it focuses on the cost increases associated with medical treatments. The cost of medicines, hospital and consultant fees, and investment into cutting-edge treatments all contribute to medical inflation.
For example, new diagnostic or surgical techniques often involve buying new equipment. The latest medications cost more initially as pharmaceutical companies price them to recover their development costs.
It all means that medical inflation can increase your health insurance costs because your insurance providers want to ensure you can access the latest treatment but must cover the cost.
None of us are getting any younger, and your age is one unavoidable factor that will increase your health insurance premiums. Our risk of ill health increases as we age, meaning we're more likely to claim. Your health insurance premium increases to reflect the risk.
Health insurance providers tend to group policyholders into age groups, meaning you can face a significant price hike when you move up a band. This isn't always the case, as insurance providers differ in how they calculate premiums. Some adjust age-related premiums every year, giving a more gradual increase.
When you take out a health insurance policy, you'll often start with a significant no-claims discount of 65-70%. If you don't claim on your policy, you'll see this improve, but the limit is often in the region of an 85% discount. On the flip side, if you claim, your no-claims discount will reduce so renewal premiums will be higher. How much your claims affect your premiums varies between insurers, but it's usually linked to the size of your claim.
If your health insurance prices have only increased slightly, you might be happy to absorb the cost. However, if your renewal quote contains a hefty price hike, you may wonder whether it's worth having health insurance any longer. Thankfully, there are ways you can reduce your premiums and save money on private healthcare insurance.
You get what you pay for, and health insurance is no exception. Adjusting your cover is often the simplest way to reduce costs. However, it's important to consider the practical impact of any changes to ensure you don't lose the advantages health insurance provides.
Here are the main ways you could adjust your policy to reduce your premium.
When you first bought your health insurance policy, you started with basic cover, including cancer care and in-patient treatment, such as surgery. Then, you chose any optional extras you wanted to add. The cost increases the more extras you add, so you can easily save money by removing some on renewal.
However, consider whether removing cover will also remove some of the benefits you get from your health insurance. For example, optional therapies cover can provide quick access to physical therapies that help you avoid NHS waiting lists and may prevent the need for surgery. It's essential to weigh up your options before deciding.
Health insurance policy terms include financial limits for each type of treatment. The policy may state a fixed number of treatment sessions or give a figure, letting you have treatment until the money runs out.
Most insurers offer cover in increments up to and including unlimited access to treatment. Dropping down a level could help you save a significant sum. Some insurers provide packaged prices, meaning you must reduce your financial limits. In contrast, others let you tailor your policy more closely to ensure the treatments most important to you are covered. This can let you keep a broader range of optional extras but adjust them to meet your needs.
A health insurance policy excess works like a car insurance excess. You pay for the first part of your treatment, and your insurer pays the rest. Some insurers apply an annual excess so you only pay once, while others apply an excess per treatment.
Increasing your excess can reduce your premiums, as it means your insurer pays less. However, check the small print to see how much you could pay and whether it's affordable. Otherwise, you might end up paying for health insurance coverage but not using it because you can't afford the excess payment.
Guided consultant choice reduces your premium by limiting the amount of choice you have over who treats you. With guided choice, your insurer will usually send you a list of 3-5 consultants when you claim. They're still fully qualified consultants, but they've agreed to the insurer's fee schedule, allowing the insurer to predict treatment costs better and offer you a discount on your policy.
You can switch to a new health insurance company for a better deal and lower premiums. The only circumstances that would prevent you from switching are if you're currently in the middle of cancer treatment, for example.
Health insurance excludes pre-existing conditions from cover, meaning any conditions you sought advice or treatment for in the five years before buying a policy are excluded. This can make switching complicated. A new insurer will likely apply exclusions if you have had treatment on your previous policy, meaning your new policy may not cover the same treatment as the old one.
Suppose you've received a renewal quote and decided to get quotes from other insurers. In that case, you must compare these quotes carefully to ensure the coverage and policy terms are at least as good as your existing policy.
If you haven't claimed on your existing policy, you should be able to switch without having new exclusions added. However, if you have previously claimed, you'll likely need to consider using CPME or CMORI underwriting.
A health insurance broker will give you free advice and can help you compare the leading providers. By speaking to a broker once a year or at least every other year, you can ensure that you have the right policy for you.
You can switch using continued moratorium (CMORI) underwriting if you have moratorium underwriting on your existing policy. If an exclusion applies to your existing policy, your insurers can remove it if you stay symptom-free for two years. Switching to a new provider could mean restarting that moratorium period, even though you've already been symptom-free for a year. Using CMORI underwriting lets you transfer the moratorium period you've already earned in the same way as you would with the no-claims discount on your car insurance.
You can only choose Continued Personal Medical Exclusions (CPME) underwriting if you have full medical underwriting on your existing policy.
CPME lets you avoid adding more exclusions to your new health insurance policy even if you've used your policy to have treatment. For example, if your health insurance paid for physiotherapy for hip pain, a new policy might exclude any further treatment for that hip. Using CPME prevents this, meaning if you need a hip replacement later on, your insurance will still cover it.
It's worth shopping around and reviewing your health insurance coverage yearly to ensure you get the best coverage for your budget. However, you may not have to switch if you find a better deal elsewhere. You can haggle with your current insurance provider to see what they can offer.
Here's how to get started.
It's a good idea to get comparison quotes first to see what else is available. If you find a policy with equal (or better) coverage and terms at a lower price, you can use the evidence to start a conversation with your insurer. They're much more likely to offer a better deal if they risk losing you to a competitor whose quote is already in your hand.
When insurance companies increase prices yearly, they often rely on the fact that most people won't ever question the increases. We lead busy lives, and sticking with the insurer we know is far easier than shopping around.
Insurers often don't give you their best prices when sending your renewal. Challenging the increase encourages them to offer you a lower premium, better coverage or additional perks for your money.
If you've taken all these steps but still have an unaffordable insurance premium, self-insurance may be worth considering. When you choose self-insurance, you act as your own insurer, putting the money you would have spent on premiums into a savings account. Then, if you need treatment, withdraw the funds from your account instead of contacting your insurer. Most private hospitals will give you a fixed-price quote for surgery if you contact them directly.
This approach avoids the risk of spending hundreds of pounds on health insurance without ever claiming. You can also use the funds for another purpose if you wish. However, you run the risk that the fund you create isn't enough to pay for your care. You may have enough to cover the cost of an operation but not ongoing cancer treatment.
The above recommendations (apart from self-insurance) are more straightforward if you speak with a regulated broker. They'll help you gather and compare quotes, advise you on appropriate coverage and underwriting, and negotiate with insurers on your behalf.
MyTribe guides help you understand your private healthcare and health insurance options but aren't a substitute for professional advice. Speaking to a regulated broker gives you advice tailored to your circumstances so you can make an informed choice about your cover. Contact us for a comparison quote, and we'll put you in touch with a high-quality broker to discuss your health insurance needs.
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Kirsty is a personal finance and healthcare expert who enjoys demystifying legal and insurance topics for a wider audience. She’s a former solicitor with a personal injury and insurance background.
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