In autumn 2000, we had a call from a 53-year old man taking early retirement. He and his wife had been insured under his employer’s Bupa scheme for ten years. He now wanted to continue his health cover independently.
However, he was shocked at the cost of continuing his cover privately. Bupa had quoted him £1,840 for the year, to continue cover on its standard BupaCare scheme for himself and his wife (aged 48), with no excess.
With no adverse health history, being re-underwritten would not cause any problems. Therefore, we rejected the original Bupa continuation option quotation. Other insurers could offer standard comprehensive cover, with no excess, for around £1,300 a year.
Being in good health and financially comfortable, he seemed ideal for one of the new “high excess” schemes. So we obtained quotations from Bupa and Standard Life Healthcare with a £1,000 excess. Bupa quoted £1,192.80 for its Fixed Price Plus scheme, with premiums fixed for five years. Standard Life Healthcare quoted £698.74 for its Choices scheme, with the £1,000 excess (based on separate policies because of the difference in age). However, premiums are reviewable every year.
I was not convinced that Bupa’s five year price fix was providing value for money. The calculator came out and showed that Standard Life’s premiums would have to increase by more than 25 per cent per year for the total cost of the cover to exceed the cost quoted by Bupa over the five-year term.
However, what do high excess schemes cost when you have to make a claim? We put together a table (below) which showed costs in three scenarios:
• Scenario 1 – No claims made Shows basic premium for one year. If you are not making claims, the high excess schemes look good.
• Scenario 2 – Best claims basis Shows basic premium for one year, with one member making one claim that triggers an excess payment.
• Scenario 3 – Worst claims basis Assumes client goes through a bad patch healthwise. Shows the basic premium for two years, with both members making claims for two separate medical conditions (which straddle the Bupa renewal dates).
Although the last scenario is rare, would you want to be the adviser responsible for the client having to cash in his savings account to pay the excess on his medical treatment bills?
Finally, we looked at the Medios Optional Healthcare Policy from OHRA/Norwich Union Healthcare. By opting for all three sections of the policy, the client would obtain similar benefits to both the Bupa and Standard Life policies, except for alternative treatments and out-patient physiotherapy before hospital treatment. The excess on the Medios Optional Policy, however, is only £500 per policy year. In addition, the excess is not applied per person but only once during a policy year.
The quotation provided for the Medios Optional Policy was £804 per year. Although slightly more expensive than Standard Life, the liability in the event of a claim is considerably less. In our claims scenarios the total costs come out at the same level as a standard comprehensive policy with no excess.
In “healthy” years the premiums were lower. In those years when medical treatment is required, the total costs including his excess payment would not exceed what he would expect to pay for standard comprehensive cover. Also, the Medios Optional Healthcare policy offers “age at entry” pricing, which could make its premiums even more advantageous in the long term.
The moral of this tale is that when you are asked to look at high excess health insurance schemes, you should also consider the traditional alternatives – then you can give a clearer picture of the cost implications of claims.
l Michael Payne is an independent adviser with Essex-based Health Plan