How does private health insurance work?

Roman Danaev

19 December 2024

In the UK, we’re lucky to have the National Health Service — a service that provides essential care when we need it, free of charge. It’s a lifeline that shows its value every day, especially in difficult times.

Private healthcare offers another option, as it allows people to skip NHS waiting lists, choose their specialists, and access treatments that are not available through the NHS. Although it comes at a cost, private health insurance makes faster, more tailored care within reach. The question is — how does private health insurance work? We’ve broken down some of the most common questions to make it easier to understand.

What is private health insurance for?

Private medical insurance (PMI) helps cover the costs of private healthcare and protects you from high medical expenses. It’s not required in the UK, as most UK residents have access to free healthcare through the NHS. Still, many choose private insurance for quicker access to treatment, a wider choice of specialists, and a more personalised experience.

How health insurance plans are structured

Health insurance plans revolve around a key relationship between the three main parties: policyholders, insurers, and healthcare providers. Policyholders are the individuals or families who buy health insurance coverage. By paying premiums to the insurer, they receive financial protection against medical expenses.

Insurers are the companies that offer health insurance policies. They collect premiums from policyholders and use that money to cover medical expenses when those individuals need private treatment. Insurers define the terms of the coverage and detail the services that are included and any limitations or exclusions that are present.

Healthcare providers, such as doctors, hospitals, specialists, and clinics, are the professionals and facilities that deliver medical care. When a policyholder needs treatment, the healthcare provider bills the insurer directly for the covered services. The insurer then pays the provider according to the policy terms, but the policyholder may be responsible for any deductibles, copayments, or other out-of-pocket costs specified in their plan.

What does private health insurance cover?

A health insurance plan covers treatment for new medical issues that arise after your policy begins. Most insurers include core cover for essentials like inpatient and day-patient treatment, and often cancer treatment; examples: Freedom and The Exeter.

You can usually customise your plan by adding benefits and adjusting limits to suit your needs. These extras may include:

• Outpatient visits
• Physiotherapy treatment
• Alternative therapies (such as osteopathy, chiropractic care, acupuncture, or podiatry)
• Dental and vision cover
• Mental health support
• Access to a private GP

Each benefit may have certain limits, but you can adjust these based on what you want in a health plan.

What is not covered?

Most health insurance policies come with exclusions, though these also vary by provider. Common exclusions include:

• Health conditions that existed before your policy began
• Chronic illnesses needing ongoing, long-term treatment without a cure
• Elective or cosmetic surgery
• Fertility treatments
• Pregnancy and childbirth services
• Accident and emergency care

How exclusions and waiting periods work

How does private health insurance work in terms of exclusions and waiting periods? Exclusions are specific long-term conditions, treatments, or services that your policy doesn’t cover. Each health insurance plan has its own list of exclusions, and some of them are listed in the previous section.

Waiting periods are time frames after you purchase a health insurance policy during which certain benefits are not available to you. For example, if your policy has a six-month waiting period for a specific treatment, you won’t be able to claim for that treatment until the waiting period is over. Insurers implement waiting periods to manage risk and prevent immediate claims for medical conditions that may have existed before clients obtained coverage.

How pre-existing conditions are handled

When you apply for insurance, you’re required to tell the provider about any health issues you already have. If the insurer excludes coverage for these conditions, you won’t be able to claim for any related medical bills. Others might cover them but require you to wait a certain period before you can access benefits.

If you already have a health issue, shopping around can help. Different insurers will have different terms or specialised plans for people with specific health needs.

Cover limits

Health insurance policies have various claims limits that can impact your coverage. These limits include total annual caps on claims, specific limits for each condition, and restrictions on certain types of treatments. For instance, your policy might have a maximum amount it will pay out in a year or set limits on how much can be claimed for particular health issues.

What types of private health insurance are available?

There are many health insurance products and plans available; for example, you might choose coverage for:

• Just you, on an individual policy
• You and your partner, on a shared policy
• Your family, including children and dependents
• Your child alone, providing focused coverage for their needs

Basic medical care policies mainly cover inpatient treatments, such as tests and surgeries. If you’re looking for broader coverage, higher-tier plans include outpatient services, which allow access to specialists and consultants. Some of these plans may even provide a fixed payment for each night you stay in an NHS hospital.

Here’s a brief overview of the different plan levels (generalised)

Costs and payments

Here’s what you need to know about what affects costs and payments:

How premiums are calculated

The cost of your health insurance policy is influenced by a few key factors:

These factors not only affect the price but also influence your options. For example, some insurers won’t cover incurable conditions.

Do private health insurance premiums change?

Yes, insurance premiums can change over time. Premiums typically increase with age, and insurers may also adjust costs based on the number of claims you make or general healthcare cost trends. Some providers raise rates each year, and others adjust premiums only at certain intervals or due to specific factors.

How do you pay for private health insurance?

Most private medical care providers offer flexible payment options, so you can decide to pay monthly or annually. Annual payments sometimes offer a discount, but monthly payments provide more budget flexibility.

Will my health insurance policy renew each year?

Many insurers renew automatically each year, which means you won’t need to reapply. However, at renewal, premiums may adjust, and policy terms or coverage options can also change. You’ll typically receive a renewal notice with any updates so you can review the policy and make any needed adjustments.

Making and managing claims

The health insurance claims process differs from one insurer to another and even between plans, so make sure to review your policy documents for specific details. Generally, here’s how the process works:

1. If you’re unwell, start by seeing your GP, who can assess your condition and provide a referral to specialist treatment if necessary.
2. Next, reach out to your insurance company to initiate your claim and obtain pre-approval for your treatment.
3. Once your claim is approved, you can proceed with your treatment, knowing it’s covered.
4. After your treatment, your insurer will either pay the hospital directly or reimburse you, depending on your plan. If you have an excess, this amount will usually be deducted from what the insurer pays.

Learn more about excesses here:

For certain benefits, like dental cover, you typically won’t need a referral. You can pay upfront, and if your plan covers it, the insurer will send the money straight to you to cover your claim.

What to do if your health insurance claim is denied

Your insurer may deny your claim for several reasons:

• Policy not active at the time of the event
• Claim involves something not included in your coverage
• Inaccurate information or failure to disclose details
• Withholding information or misleading the insurer
• Falling behind on premium payments
• Not following the proper claims procedure
• Claiming more than entitled

If your claim is denied, your insurer must provide a clear reason for their decision, and their reasoning must be valid. If you believe the denial is unjust, discuss the matter with your insurer. If that doesn’t resolve the issue, file a complaint through their established complaints process.

Pros and cons of private healthcare

Private healthcare comes with several advantages but also has some downsides to consider. Here’s an overview:

How to choose the right health insurance plan

Picking the right health insurance plan can feel a bit daunting, but focusing on how different plans work can make the process easier:

• Evaluate your coverage needs — Consider the types of medical care you use frequently (routine visits, specialist consultations, specific treatments). Identify a plan that covers the services you require.
• Compare premiums and costs — Look at monthly premiums, deductibles, and out-of-pocket expenses. Remember that the cheapest plan may not provide adequate coverage, so balance cost with coverage quality.
• Review policy details — Check for exclusions, waiting periods, and claim limits.
• Consider personal details — Take into account your age, medical history, and family needs, as these factors will influence the type of coverage that is best for you.

Comparing health insurance providers

If you don’t look at different insurance plans, you might end up underinsured or paying too much for coverage you may not need. Also, comparing different plans is one of the simplest ways to save money — leading you to better coverage at a lower price. Take the time to do this to make a more informed decision about your health insurance.

Final words

To sum it up, private health insurance works by covering the costs of private medical treatment and allows you to receive care quickly and without the long waits often associated with the NHS. It’s personalised to meet your specific needs, taking into account factors like your medical history, treatment preferences, and budget.

However, it’s important to choose your provider wisely to make sure you receive coverage that aligns with your healthcare needs.