Do You Need to Catch the Health Insurance Bug? ; as the Political Parties Bicker over the NHS's Future, James Daley Looks at How to Cover Your Future Needs

Article excerpt

The age-old debate on how to raise standards in Britain's tired National Health Service has re-ignited in recent weeks, as each of the main political parties has come to blows over how far we should go down the road towards privatisation.

Last week, Tony Blair horrified the left of his party by talking about plans to extend the Government's use of the private healthcare sector, promising to plough billions of pounds into giving patients the 'choice' to use either public or private hospitals free of charge.

This week, the Conservatives followed up by arguing that Labour's ideas did not go far enough. The Liberal Democrats believe the plans are pushing in the wrong direction altogether.

If Blair's controversial new proposals make it through Parliament, they will work something like this: by 2008, every patient will be given a choice of five local hospitals when they are in need of treatment " one of which will be private. Hence, for those who believe they will be better served by their local private hospital than by the NHS, the Government says it will pick up the tab.

At first glance, this appears too good to be true. If every patient is genuinely offered the option of going private " for free " every time they have a medical problem, there would be no more need for private medical insurance (PMI).

In practice, however, few " aside from the Government " see such a strategy working. The British Medical Association (BMA), the medical profession's trade body, believes that, while choice for patients is good, the side effects of the Government's strategy could be disastrous.

Given that NHS hospitals receive funding based on the number of people they treat, the BMA is concerned that the drift of patients to the private sector will steal a large amount of the revenue that state-owned hospitals rely on.

Others believe the inflow of patients into private hospitals will inevitably create a two-tier private sector. Philip Blackburn, an economist for Laing & Buisson, healthcare sector analysts, says: 'What will probably happen is that some of the private hospitals will start separating NHS work from true private work. And are conditions and standards for the NHS patients going to be comparable with the private sector as it is now? Probably not.'

Whether such reforms prove to be the much-needed cure for the NHS remains to be seen. In the meantime, the demand for private medical insurance does not appear in doubt.

Although perceptions of the NHS have improved in the past year, there are still concerns over sanitation and the spread of MRSA in state-run hospitals, as well as worries about the quality and speed of many NHS services. And, while most acknowledge that the Government has helped to reduce waiting-lists, the journey from GP's surgery to specialist is often still far too long. Many wait several months before they even receive a proper diagnosis.

As a result of these and other concerns, the number of individuals buying PMI policies increased for the first time in almost a decade last year, with almost 4.2 million people willing to pay up to protect themselves from the NHS.

Nye Jones, head of intermediary services at Axa PPP Healthcare, says the longer-term decline in PMI sales was a result of the rise in cost. With medical inflation averaging almost 6 per cent a year for a decade, the cost of the average PMI policy has almost doubled since 1994.

However, a concerted effort by the industry in recent years to make health insurance more affordable has helped to kick-start a resurgence in the product's popularity.

The flip side of such reform is that the typical PMI policy today is very different to those sold 10 years ago. Although you can now buy private health cover for a few pounds a month, it usually has large excesses or major exemptions.

If you agree to forfeit your right to claim for cancer-related illnesses, for example, you may be able to reduce premiums by hundreds of pounds a year. …