Jeremy Gates reports as figures show about £4bn is spent on private medical insurance each year.

WITH the NHS poised for the most drastic shake-up in its 62-year history, it isn’t only the health unions and politicians who are alarmed by a dramatic step into the unknown.

Many potential patients worry too – which helps to explain why about £4bn is spent on private medical insurance (PMI) each year.

PMI policies cover around six million adults altogether – with three quarters of that total through company schemes arranged by employers.

But as many as 1.6m people pay their own way, even though the financial burden can be formidable – particularly when they get beyond 60.

With Health Secretary Andrew Lansley saying that NHS patients will be entitled to free treatment at private hospitals under a major expansion of individual choice in the latest shake-up, some wonder if money spent on PMI is worth it.

Ben Heffer at Defaqto, an independent financial research company, says: “What you buy is peace of mind, the knowledge that things happen quickly in the event of an acute illness.

“There is a quick consultation, and an early decision on what treatment is needed.

“PMI is a highly competitive business, in which firms make big efforts to attract customers from other providers.

“If they offered consistently attractive rates to existing customers for a longer period, these firms might avoid chasing customers – which must drive up their costs.”

But there are some things PMI plans won’t cover: accident and emergency; pregnancy; long-term chronic illness; and usually, existing medical conditions known to doctors when a policy is taken out.

However, finding out what different plans do cover is not always easy.

Mr Heffer says old divisions in PMI – between full and budget plans, often marketed as gold, silver and bronze – have been largely replaced by “modular2 policies.

“The client is presented with innumerable choices about types and level of cover to be included in their plan,”

he says.

“Some leading providers, including AXA PPP, Aviva and Standard Life Healthcare, utilise a free month’s premium offer to bring down relative costs in year one.”

Martin Howell, at medical insurance broker MediSearch, thinks PMI is becoming more user-friendly.

“For years, the choice of PMI plans was restricted to a few insurers: Bupa PPP, WPA and a few others,” he says.

“Policies available were all very similar – and didn’t necessarily meet the needs of consumers.

“People are always getting upset about rises in premiums.

For one couple, facing a bill of £11,000 a year when their policy came up for renewal, we did a simple bit of broking and got their bill down to £3,000, for effective cover with a good brand name.

“The fact is that once you have been in a private hospital and experienced the high levels of service and their hotel-type environment, you may be reluctant to give it up.”