Keep workplace health insurance after you leave

Individuals risk watering down their private medical cover by not remaining loyal to their workplace health insurer if they have been made redundant, resign or retire.

Millions of people have private medical insurance (PMI) through an employer scheme, where it is offered as a taxable benefit.

Corporate PMI is less expensive and more generous than policies bought on the open market, as the workforce is signed up at a discounted, flat rate without exclusions applied on pre-existing medical conditions.

But with the recession creating widespread job losses and business closures, many employees are walking away from their workplace PMI without realising that they could take their policy with them.

Most large corporate health insurers, including Bupa, Axa and WPA, offer a “continuation option” for departing employees who want to keep their PMI, which offers benefits including private hospital rooms and faster access to treatments than on the NHS.

While employees cannot expect to keep their subsidised premiums, they can keep their cover for pre-existing conditions, which can be a valuable perk, particularly for older workers.

“As soon as you go onto the individual market, you will have to declare those medical conditions and this will lead to exclusions
on a new policy,” explains Mike Blake, compliance director with PMI Health Group, which manages
PMI schemes.

Those who would most benefit from continuing cover are employees with common medical problems, who would struggle to find a new policy on the same terms.

“Where a group leaver has a condition such as heart disease or arthritis, it is important that they take up the continuation option – providing that this condition was covered under the group scheme,” explains Kevin Amphlett, managing director with Chase Templeton, the independent PMI intermediaries. “This will provide cover if they need to claim in the future.”

But the continued cover option may only be possible for employees who have never claimed on their corporate cover. And those that have claimed may face exclusions on a new individual policy.

People who choose to transfer to an individual scheme should also expect to have premiums repriced near market rates.

“We have experienced premiums being loaded from anywhere between 20-50 per cent depending on the risk,” says Amphlett. “However, particularly for those with ongoing conditions, this can still represent good value.”

There are some circumstances where a corporate leaver might be better off buying a new policy on the open market. Most senior executives with corporate PMI will be on the equivalent of a comprehensive policy and, if they are in good health, it would be better to shop around for a competitive deal, say advisers.

In general, continuation options must be taken up within 30 days of the termination of the group policy.