The private medical insurance industry is facing a crisis as individuals cancel policies which have spiralled in price, choosing instead to buy operations from hospitals directly - or even go abroad in search of cheaper treatment.
Figures out this week from healthcare analysts Laing & Buisson reveal the number of individuals with private medical insurance has fallen steeply since the mid-'90s.
In 1996, 2.7m Britons bought individual medical insurance policies, but this has fallen every year since to number just 2.1m in 2000. The reason is not difficult to deduce; since 1996, the average price of an individual medical insurance policy has jumped by 48% to £1,007 per head from £678, far outstripping the rate of inflation.
Yet jumping NHS queues by going private is more popular than ever: what is happening is that individuals are turning away from insurance and simply paying for treatment directly should they need it. In 1998, about19% of private hospital users were "self-pay", in other words paying the bill themselves, while today the figure is closer to 25% and rising fast.
Roy Church, 73, a retired jeweller living in Eastbourne, Sussex, is typical of the new generation of "can-pay, won't pay" elderly people who are junking insurance policies in favour of self-pay.
Until three years ago, he held a medical insurance policy for himself and his wife with market leader BUPA, but saw his premiums soar to about £2,500 a year. "I spoke to my surgeon who said that I'm reasonably fit and would not expect to pay more than about £6,000 for an operation. I cancelled my policy with BUPA and haven't had any problems since, so I've saved £7,500. The premium rates they charge seem to be aimed at getting the elderly off their books, and the withdrawal of tax reliefs has also made it more expensive," he says.
If Mr Church had remained with BUPA, his premiums would be even higher today. John Creed of brokers First Health Insurance estimates that Bupa would now charge a premium of about £3,000 a year under its "local care" scheme for a 73-year-old man with a 68-year-old wife.
BUPA admits rocketing premiums are behind a drop in take-up of insurance policies, but says it has lost fewer customers than competitors, while the company private medical insurance market remains robust. It also kept premium increases to below 10% this year for the first time in many years - but admits they are still way ahead of the general rate of inflation.
"The key issue for us is making private medical insurance more affordable and appealing. Healthcare is expensive, and technological advances are producing more treatments that are lengthening and improving the quality of life. We are seeing more people making more claims," says Bupa deputy managing director Alison Platt.
But she warns against naive estimates about how much self-pay will cost: "Cardiac care/heart by-pass operations can cost around £13,000, while cancer treatment plus care afterwards can ring up £15,000-£20,000."
The industry is desperately thinking up new ways to cut premium costs. One option is higher excess levels. It is now becoming common to have a £1,000 excess where the policyholder pays the first £1,000 of treatment costs, which has the effect of cutting premiums by 20%-25%. Crude age definitions are also being revised, with BUPA looking at setting premiums according to health rather than age.
Policyholders should also ring round insurers every year in the same way they do with their car insurance. David Worth of Medical Fees Insurance Agency says that only this week, he saw a husband and wife whose Norwich Union policy had jumped from £1,114 a year to £1,906 because they turned 60. He is switching them to Exeter Friendly Society at £1,325.
An increasingly common alternative is to have your op in the sun. In India, cataracts operations cost as little as £60, compared with £2,000 in Britain, while in South Africa a hip replacement can be done for £4,000-£5,000 compared with £12,000-£15,000 in European countries.
