There’s no such thing as bad publicity. The rule has once again been borne out, this time by Norwich Union Healthcare, when the insurer came under attack in November for its new PMl policy, Fair + Square.
David Hinchliffe, Labour chairman of the Commons all-party health select committee, expressed anger because policyholders are entitled to a £250 benefit per night spent in a NHS acute hospital bed. Then junior health minister Gisela Stuart weighed in behind the MP for Wakefield. They claimed the inducement to the NHS route could clog the State system.
The crucial point is that Fair + Square is perfectly legal. The scheme merely continues in higher profile a long-standing cashback tradition operated by most of the PMI industry. Thus the two politicians would seem to have shot themselves in the foot. Unsurprisingly, Norwich Union is reporting a boost in sales for its policy after the onslaught.
Hinchliffe’s outburst received considerable coverage in the broadsheets and he gained a slot on BBC Radio 4’s Today programme. Louise Zucchi, Norwich Union’s corporate affairs spokesperson, comments: “I can say that the only effect of the publicity has been to sell a number of extra policies, although we cannot at the moment put a figure on it.”
Certainly the incentives in Fair + Square to take NHS treatment are considerable. The £250 cashback also covers day-case treatment and the annual limit on claims is set at £10,000. Such figures are at least twice the average figure across the industry. The insurer thinks these incentives are sufficient to persuade a fifth of policyholders to spurn the private treatment option. This results in considerable savings to Norwich Union, allowing cheaper premiums, Zucchi argues. “These cheaper premiums have resulted in us pulling in new customers to the PMI field,” she says. “We have expanded the market and that surely must be welcome. Numbers of policies sold, and the proportion sold to people previously without PMI, is commercially sensitive information. But we can confirm that a considerable proportion of policyholders are new to the market.”
Fair + Square was launched in March 1999 following extensive research. Zucchi recalls: “We spent more resources researching this than any other policy. We invested huge resources because you can’t go ahead without being as sure as possible. When you are launching just another PMI product, you’re in the comfort zone – which I admit Norwich Union has been in some cases. In that case, you don’t have to go to such lengths. You are less likely to make a mistake.”
What niggled the two politicians is that Norwich Union went so much further. BUPA, for instance, offers cash benefits on only two of its six plans and these are just £30 a night. PPP healthcare is bolder. Its Comprehensive, Extensive and Key Plan policies pay £100 a night of free NHS care up to a claims maximum of £2,000 per year. PPP’s budget scheme – Starter Plan – pays £50 a night up to the same annual ceiling. Zucchi agrees that the Norwich Union plan refreshes parts other plans do not reach. “Most insurers have had a cashback element for years but it has always been a smaller part of the wording and a smaller part of the policy, whereas Fair + Square focuses on it.”
Norwich Union is emphasising the comprehensive nature of its policy. It claims that the only difference between Fair + Square and other plans is the cashback. This actually allows cheaper premiums because, its research shows, sufficient policyholders will spurn the private option. The overall claims total therefore falls. Premiums are £37 monthly for a 35-year-old and £72 for a customer aged 55. Intermediaries take 25 per cent initial commission and five per cent on renewal.
Thus, Fair + Square offers premiums lower than some comparable policies yet secures policyholders the crucial early first private consultation. Seeing a consultant and getting an early diagnosis is not only important for the policyholder’s peace of mind, it has become a major issue over the past two years. The change has been brought about as the government has sought to massage waiting list data by delaying the process by which patients get on the list in the first place.
There is no doubting that the first appointment has become a real issue for patients. Health economists and doctors are increasingly concerned at the “queue to join the queue”. And in a sharp pre-Christmas exchange at prime minister’s question time, Tony Blair was forced to accept figures from the Conservatives that numbers waiting for a first appointment had risen from 280,000 to 512,000 since the general election.
In November’s outburst, Hinchliffe claimed Fair + Square could have a “corrupting influence”. It could encourage NHS staff to “collude” with patients to stay overnight, presumably splitting the benefit. He said: “People who use this scheme will be choosing to go into the NHS. It could lengthen waiting lists in the health service and could have a corrupting influence.”
Although he now wishes not to emphasise the corruption angle, an unrepentant Hinchliffe says: “The concern was not so much about a degree of malpractice but about the principle of the [Fair + Square] scheme. It was an incentive to use the NHS and get a reward for doing so. I don’t believe in private medicine and I don’t believe in schemes that interlink with the NHS. If you have to have private medicine, then the system should be completely separate.”
But what about the £2bn that people pay out in private treatments, arguably saving a similar sum on the NHS budget? Hinchliffe is unimpressed. He claims there are only a limited number of doctors and nurses and the private sector is hi-jacking the State reserves. He contends: “It’s a myth that people that go private are helping the NHS. They aren’t. They are helping themselves.”
In an unintended puff for the Norwich Union plan following Hinchliffe’s initial attack, health minister Stuart described it as “very advantageous” for the individual policyholder. However, she deplored “an unwelcome knock-on effect on the NHS”. She said: “There is no getting away from the fact that people paying for a private diagnosis are getting on to the waiting list for an operation earlier than they would have if they had not paid. The Fair + Square policy cannot be seen as working in partnership with the NHS or benefiting it in anyway.”
William Laing, director of healthcare analysts Laing & Buisson, reckons sympathy is non-existent among insurers for the MPs’ views. “In an industry where there has not been a lot of innovation, the Norwich Union plan is a welcome small step; it extends choice,” he argues. “The scheme is basically a hybrid between conventional PMI and hospital cash plans.”
Cash plan benefits, of course, are small beer set against PMI benefits. A relatively expensive £4 a week cash plan per individual might give a benefit of £210 per week in hospital, although that cover also includes a host of other benefits, from chiropody to dental and hearing consultations.
Cash plans sprang from Victorian mutual aid societies. Here the motive was to compensate the luckless patient while wages were lost. When private medical care became a separate entity to State care following the creation of the NHS in 1948, cash plans paid out irrespective of whether the contributor was under State or private care.
Insurers adapted the concept so that policyholders would receive benefits when they opted to follow the NHS route – recognition that skipping the private option was likely to save companies a lot of money. Even with the apparently super-generous £250 a night Fair + Square payout, Norwich Union is making huge savings when the patient goes on the NHS. Average length of hospital stay for hip replacement is around six days, so the Fair + Square policyholder who picks the State stream is in line to pocket £1,500. The policyholder going private will cost the insurer about £6,000.
“It’s clear,” Laing continues, “that the Norwich Union plan has moved things on a lot, even if the principles have been around for years. But Hinchliffe’s claim that the scheme could have a corrupting influence seems a little far fetched.”
Tim Baker, head of Norwich Union Healthcare, seldom misses an opportunity to propound his views on the problems afflicting the NHS – such as queues – and those afflicting the private sector – for example empty beds. The answers must surely lie in greater co-operation, Baker argues. As the scope of the NHS shrinks while people’s health expectations grow, how can any MP not blinded by dogma argue against greater private sector involvement?
Without a private sector, the health service would be in an even bigger pickle. The private sector in Britain removes 14 per cent of the burden on the NHS. Put another way, that’s 12,000 hip replacements or a quarter of the national total; 5,000 heart bypasses or a fifth of the national total. Is the Chancellor willing to fund this surgery? The answer lies in the long queues for NHS hip surgery and the several hundred heart patients a year who die waiting.
Claims that private hospitals are robbing the State sector of staff are baloney when doctors are abundant across Europe. Otherwise, English health authorities would not be sending their patients to Germany and France for surgery.