Best of FT Money 2023: How to pay for private healthcare

Peter Hatcher, 71, of Nuneaton, Warwickshire, had been living for two and a half years with a painful left knee joint — the result of sports injuries and arthritis. “The pain, at times, was unbearable. Not being able to join my wife and friends on regular walking trips, play golf or walk the dog — my quality of life was being impacted on a daily basis,” he says.

However, Hatcher was told his condition was not serious enough to qualify for NHS treatment, he says. There would need to be more degradation of the knee joint before he would even be put on the waiting list.

So Hatcher went private and paid up. In December 2022, he booked a consultation with an orthopaedic surgeon at Spire Bushey Hospital in Hertfordshire, part of independent healthcare group Spire Healthcare.

He had an X-ray, followed by an MRI scan and, after further discussion of the risks and complications, proceeded with a partial knee replacement. He says: “I’m lucky to be able to self-pay for this treatment. Even at £14,000, I feel it’s absolutely been worth it.”

Hatcher is one of about 830,000 people who last year underwent treatment outside the NHS, typically for knee, hip and eye problems — a record figure.

Most — 550,000 — had private health insurance, the dominant way of financing private treatment. But the number of self-payers, like Hatcher, is rising rapidly as people without insurance decide to bite the bullet in the face of soaring NHS waiting lists, driven up by the pandemic and its after-effects.

While the number of insured people undergoing treatment last year was down slightly — by 30,000 — on 2019, the number of self-payers rose by 73,000, or nearly one-third, to 272,000, according to the Private Healthcare Information Network (PHIN), which publishes information on the private sector.

The surge in self-paying — often among retired people — comes with the numbers taking out health insurance also increasing, mostly via workplace schemes. Aviva, one of the larger operators, reported a 25 per cent rise in health insurance revenues last year and a further 25 per cent rise in the first quarter of 2023.

Both developments look set to continue in the face of those NHS waiting lists, especially if there are more strikes of the kind announced this week by senior doctors. Some 7.42mn people are now waiting for consultant-led elective care, against 4.39mn in March 2020, according to figures from the British Medical Association.

Nor is private treatment the preserve of the rich. The latest briefing from health think-tank The King’s Fund shows people across the income spectrum are choosing to fund private treatment. 

Sally Warren, director of policy at The King’s Fund, says: “People are now making a judgment about the personal cost to them (in terms of pain, anxiety, lack of work) of waiting many months for treatment on the NHS, balanced against the financial cost of being treated more quickly by a private provider.”

FT Money looks at the options faced by those fortunate enough to be able to afford private healthcare, whether via insurance or self-payment or a mix. With inflation driving up the costs of treatment and healthcare premiums, careful planning and budgeting is vital.

Self-pay or insure or both

Almost one in four adults now pay for some form of health insurance, according to data from Statista, after a sharp surge in sign-ups last year. The research firm says that in a survey of UK adults, those paying for private health insurance jumped from around 12 per cent in the three years to 2021, to 22 per cent.

Workplace schemes dominate, with individuals paying their own premiums making up only a fifth of the market, according to the Association of Medical Insurance Intermediaries (AMII).

The self-insured include many older people no longer covered by employers, though Spire Healthcare says that more younger people, especially the self-employed, are paying for private treatment than in the past.

Isaac Feiner, managing director of LifePoint Healthcare, an intermediary, and an executive committee member of the AMII, says there are two types of client: “[There are] those who would rather not spend money on holidays but instead divert money to something that’s important to them, and those who are seeing friends and family members going through the pain of waiting lists.”

Still, with inflation high, and household and company budgets under pressure, Axa Health warns the cost of living crisis could cut spending on private healthcare among smaller businesses and individuals.

Insurance comes with many strings attached. By the time you need treatment, it’s usually too late to insure. So you wait or pay yourself.

Over the past four years, among insured patients therapeutics (chemotherapy) was consistently the most common treatment. But combined data on self-pay and insured patients shows big increases in the number of operations for hip replacement (76 per cent), knee replacement (64 per cent) and inguinal hernia repair (56 per cent) from 2019 to 2022, according to PHIN.

The shift to self-pay may also be happening because private medical insurance (PMI) cover is not always comprehensive — policies vary in terms of cover and financial limits.

These variations are far more pronounced in individual policies than company schemes. As you leave an employer, you’ll often be offered a continuation of PMI cover. However, brokers warn these “carry-on schemes” can be expensive and are reporting a surge in interest in low-cost cover, according to Benenden Health, a health insurer.

Even if you’ve had individual medical insurance for decades, FT readers report premiums that rise prohibitively as they get older, sometimes to £10,000 per person per year. 

Premiums rise with age and with fast-growing medical inflation. The Reward and Employee Benefits Association predicts UK healthcare costs will increase by 7-12 per cent this year. Brokers report that even insurers known for controlling their charges are reporting 15 per cent rises at renewal time in 2023.

So while some FT readers are paying the rising premiums, others are mixing budget private medical insurance cover with funding some treatments themselves, or ditching insurance altogether and using the premiums saved to create their own “health fund”.

Insurers expand services

FT reader Harry* is in his 60s and a firm fan of insurance, with a Bupa policy for several years. He says: “I used to think that private health was just a faster, more convenient version of the NHS offering. My experience is that this is no longer the case. The private sector provides a better quality of service too.”

Exactly what is covered by private health insurance varies between providers and cover levels. Dr Katie Tryon, director of health strategy at health insurer Vitality, says insurers have expanded their offering over the past 20 years so now it can include “full care including cancer and primary care”.

Comparison website GoCompare reports virtual GP services are now a standard benefit, often with the ability to schedule same-day appointments, direct referrals and prescriptions.

Some providers offer preventative healthcare too. Vitality incentivises customers to look after their own health through a points-based system which can deliver lower increases in premiums.

Brokers recommend people approaching retirement with company PMI schemes, start exploring individual policies while they are still in good health. Feiner at LifePoint Healthcare, says: “We are getting lots of phone calls from people who are too late to insure — a condition has already been diagnosed or they are symptomatic.”

With full medical underwriting, which requires lots of detail about your health, some insurers might cover a historical condition — at a cost. 

Some FT readers with insurance are wary of claiming for fear of boosting their premiums. They use the NHS when they can, and turn to insurance only when waiting lists are very long. They might also self-pay for the occasional consultation or small operation.

Independent reviews from private healthcare research group My Tribe Insurance, rank two not-for-profit insurers top, singling out WPA and Exeter for making sure claims don’t impact renewals. But comparing like for like is tough.

Pick and mix

FT reader Paul* recommends the “pick and mix” approach. If you want to keep insurance as a backstop but reduce the cost, consider dropping mental health cover or physiotherapy. Applying a hefty excess, say £500 or £1,000 a year, can also cut the cost substantially, as can adding a clause that says you will use the NHS if the wait is less than six weeks.

But look out for “directional care’’ — it’s a popular cost-cutting option where the insurer provides a restricted list of doctors and hospitals. Feiner warns: “Some top specialists in specific fields might not be on the list.”

Chris Steele, founder of My Tribe Insurance, says: “Many leading insurers such as The Exeter, Axa Health, Aviva, Bupa and Vitality offer lower-cost, treatment-only plans.” These cover major surgeries but exclude outpatient bills for consultations, tests and scans, he says. In most cases, with a treatment-only plan, you need an NHS diagnosis or to self-pay for consultations and scans. Once you’re diagnosed, you can claim for private treatment.

Cheapest isn’t always the best. Dr Penny O’Nions, principal of Buckinghamshire-based The Onion Group, a PMI adviser for 40 years, says: “It might mean claims are not paid promptly. And don’t imagine they will always remain cheap. Always understand the limitations of a policy.”

Save the money in advance

Still, some experts advise against insuring for routine operations such as cataracts. James Baxter, founder of Tideway Wealth says: “Buying insurance against near-certain expenditure is always very expensive.”

He suggests researching common operation costs and estimating how many you might need. Then compare creating a reserve fund with paying a health insurance premium — the average cost of health insurance, according to My Tribe Insurance is £86.07 per month, rising to £112.90 per month for a 60 year old. Baxter suggests setting up an Isa. “Unneeded funds can be put towards other things.”

Self-paying is not only for those who have never had individual insurance but also for those switching out of insurance. Tom* is 76 and his wife is 77. He says they stopped their health insurance when the premium was about to rise substantially, mainly due to age and maybe also because of claims.

So instead of paying more than £7,000 a year to an insurer, the couple started saving into a bank account earmarked for medical expenditure. At first they paid £800 per month into the account, now it’s £1,000, says Tom.

You need to be prudent to self-manage such a fund — to avoid raiding it for holidays and to take careful account of medical inflation and the likely need of increasing care with age.

Clearly, a private hospital may appear better because you get a room on your own and better food. Nevertheless, many private hospitals don’t have full emergency facilities. If things go wrong, you may be transferred to the NHS.

In the end, it comes down to risk appetite. Jason Witcombe, chartered financial planner at Empower Partners, says: “Ultimately, you need to ask yourself how much more relaxed you and your family would feel if you paid for this insurance and then go with what your gut tells you.” 

*Names have been changed.

Letter in response to this article:

Private healthcare is far from immune to the plight of the NHS / From Dr David Levine, Retired Consultant Physician, Sennen, Cornwall, UK