Health is a major concern for people as they grow older, although we are generally fitter and hardier than previous generations. With little sign yet of any major improvement in NHS waiting lists, more and more people are turning to the private health sector, even though this can be a major financial burden.
In the past, most people gained access to private healthcare by buying private medical insurance (PMI). However, it is becoming prohibitively expensive; the cost of premiums has almost doubled over the past 10 years. Instead, an increasing number of people are dipping into their own pockets to pay for private treatment.
As a result the majority of people who are covered by PMI are members of their employer's schemes. Although members of an employer's scheme are taxed on this perk, it is still cheaper than taking out your own policy as employers are able to negotiate substantial discounts with insurers.
So, if you're approaching retirement and want access to private healthcare, what are your options? Many company schemes allow you to remain a member as a retiree and will continue to cover members of your family if they do so already. Your membership is likely to cost you more, however, as the discounts available will fall - although you'll no longer be taxed.
Before taking up this option, check carefully by how much the discount is reduced and that the cut in the discount is a one-off and won't fall further over the years. If it does, it could soon be as expensive as an individually held policy.
Atransfer facility is available from some company schemes. This enables you to switch to an individual policy with the same insurer on the same terms and conditions as the company scheme.
Alternatively you can shop around to see if you can find a cheaper insurer, but the new company may exclude pre-existing conditions, either permanently or for a limited period, and impose a higher excess (the amount you have to pay yourself if you need treatment).
The other problem is that most insurers increase their premiums as you get older and don't necessarily use the same trigger points. There are some providers which don't impose age-related increases in premiums, but this usually only applies if you're under 65 when you join.
However, Exeter Friendly Society is one of the few whose premiums don't increase with age, whatever age you join - which you can do at any time before your 80th birthday. Saga does increase its premiums with age, but has no age limit on when you can take out a policy.
For anyone moving out of a company scheme or anyone who is taking out PMI for the first time, there are a number of ways of reducing your premiums - although they will, inevitably, limit your cover. These include opting for a lower grade hospital for treatment, restricting the choice of hospital, only receiving private treatment if you can't be treated on the NHS within six weeks, or limiting cover to specific conditions which have long NHS waiting lists.
A growing trend is the use of higher excesses to reduce premiums. A few providers offer no claims discounts though, as with excesses, there are wide variations in the way in which these operate.
If you do opt for a higher excess you will, of course, have to make sure you have enough money set aside to meet the initial costs of your treatment.
The best way of doing so is to ringfence some of your savings in a "health fund" which, if you can keep topping it up, will allow you to opt for a bigger excess to further reduce your insurance premiums. But this is very a much a balancing act which, depending on your state of health in the future, may or may not work in your favour.
The same goes for the increasing number of people who have turned their backs on insurance and opted to pay for private healthcare as and when they need it. Although anyone doing so has to arrange their own treatment, many private hospitals now operate self-pay schemes with fixed price packages.
Another way of helping foot the bills is a new variant on medical insurance launched by Western Provident Association. Its self-pay protect policy reimburses 30% to 75% of hospital charges. The premiums are much lower than for a conventional PMI policy, although you can't claim back the money until after you've paid the bill yourself.
Who to call
You should contact a specialist financial adviser who is a member of the Association of Medical Insurance Intermediaries, tel: 0800-421-216. And look at the PMI booklet published by The Association of British Insurers, available on www.abi.org.uk.
www.carehealth.co.uk explains how to fund private healthcare and allows you to compare products and premiums.
Other sites which give comparative PMI quotes are www.moneynet.co.uk and www.moneysupermarket.com.
For an annual fee of £34.95, www.goprivatehealth.co.uk will find the best insurance quotes and help self-payers find the best hospital package. Health Care Navigator, tel: 0870-727-0140, at £60 a year, offers a similar deal. This week, PPP healthcare launched an information and guidance service for self-payers on tel: 0845-600-1696.
