Health Insurance

087 | Advising on Health Insurance

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  • Dr. Keith Klintworth, Deputy CEO, VitalityHealth
  • Karl Hewstone, Head of IFA Health Sales, VitalityHealth

Learning outcomes:

  1. The rationale behind PMI and how it can benefit your clients
  2. The important medical conditions where insurance is concerned
  3. How to build a PMI plan for clients


Health Insurance
Learning outcomes: 1. The rationale behind PMI and how it can benefit your clients 2. The important medical conditions where insurance is concerned 3. How to build a PMI plan for clients PRESENTER: In this learning module, we’re going to be looking at private medical insurance, PMI. In some detail, we’ll look at the rationale behind private care and how you can use this form of insurance to benefit your clients; some of the important medical conditions where insurance is concerned and how to build a PMI plan for clients. Our two tutors, Dr Keith Klintworth and Karl Hewstone, both from Vitality health, will demystify some of the apparent complexities in these areas. So let’s look at what we’ll be covering. Keith is going to cover private medical insurance and the NHS; key differences in treatment and care; the difference between acute care and chronic care; what exclusions mean; how clients should make a claim; shortfall and when it occurs; how consultant and hospitals are chosen; and he’ll remind us of the key benefits of PMI. Then Karl is going to take you through building a PMI plan for your clients with some case studies. He’s going to cover underwriting options, hospital choice and what sort of cover there is available and optional extras. In the studio, I began by asking Dr Keith Klintworth, does private medical insurance replace the NHS? KEITH KLINTWORTH: No, it’s not, most definitely not. I think if you look back at the history of the NHS, you know, formed in 1948, free at point of service. When insurance started to arise in the mid-50s, it was really to give customers a little bit more choice and speed of access to service, and as it’s evolved over time it’s tried to complement the NHS where the NHS is maybe battling. So we’re all aware of the news media as it is today and the issues facing the NHS usually from cost perspective, the cost of delivering the service. We’ve got an ageing population. New treatments are becoming more expensive. You know, is it a sustainable financial model is a question that is open to government, and what private medical insurance is trying to do is to complement and to basically provide alternative care and relieve some of the burden on the NHS. And whether that’s in the primary care space, and a lot of insurers might not focus on that area in their private medical insurance but some do, whether it’s on preventative services. And we know with the NHS with the change to funding, some of the funding for, most of the funding for prevention moved into local councils. So there’s a little bit of a disconnect and we’re trying to as an insurer bring that more together through our wellness and health proposition. And then with the rationing of care, and unfortunately with any public sector throughout the world you having to a degree do a degree of rationing of healthcare. And whether that’s no longer relying on access to expensive cancer drugs or having very strict guidelines of when you’re allowed access to it, whether it’s on age, and that’s where private health insurance really comes into its own to try and give people peace of mind for additional cover that the NHS can’t provide. PRESENTER: So it’s important to think about private medical insurance to cover certain patient requirements. What would they be? KEITH KLINTWORTH: So the key one we cover is acute and elective conditions. So most insurers focus on that as a primary benefit that they offer, and then they have nuances in the primary care feeding into acute. And then on chronic conditions, this becomes a little bit more complex. As we’ve evolved, obviously cancer is a chronic condition because it’s something you live with for a long time, so in the definition of chronic it probably fulfils it, and that’s really the only true chronic condition we cover. PRESENTER: So what in your view would be the key differences between treatment via the NHS and privately via a PMI policy? KEITH KLINTWORTH: So to be clear I think we’ve got to state now that the quality of outcomes it should be no different between NHS or private. If you look at our peaks and troughs in our sales of uptake of health insurance, it’s been driven by concerns over the NHS. So when NHS said they’ve scaled the MRSA and the superbugs, you suddenly get the fear in well let’s go private they’re cleaner. Well that’s not always true. So the quality of care should be standardised. I think what is the difference between private health and care is the facilities. So the NHS hasn’t been able to spend a lot on its maintenance and upgrading of its facilities. Private trusts excel itself in private rooms, private bathrooms, a lot more personalised care, but I think the key one is speed of access and choice. So when we talk about choice, customer choice is quite an interesting point because you need, with choice comes responsibility and with the environment we work in of trying for a customer to understand which is the best consultant, which is the best hospital, with the quality of our information that’s available is really difficult, and what PMIs or health insurers try and do is facilitate that process to give customers more choice. PRESENTER: And also to be able to keep the same consultant throughout the treatment? KEITH KLINTWORTH: They can, absolutely. So in the NHS you tend to get who’s ever around, you get the more junior reg, you get the consultant at a time, but in a private treatment path you tend to stay with the same consultant. But you can still choose to switch. You can get second opinions and you can choose to switch your journey if you so deem for whatever reason. PRESENTER: The Daily Mail often points out that this drug is being rationed on the NHS or that drug you can no longer get or that treatment is too expensive. Is this where private health care can step in or are there similar restrictions do you believe? KEITH KLINTWORTH: So any restrictions we place on drugs are those that are truly experimental. So if they’re in phase 1 trial, you would need to have quite clear justification from the oncologist or the treating doctor for the rationale for it. We tend to cover phase 2 and phase 3 drugs, do a trial basis, but any drug that’s on code and is approved by NICE is actually funded by all insurers. PRESENTER: Now, you mentioned earlier acute and chronic, just simplify that for us, what’s the difference between acute and chronic, briefly? KEITH KLINTWORTH: So chronic care is any pre-existing or lifetime condition that you’re not really going to recover from: you’ll never return to your original baseline. Things such as hypertension, asthma, diabetes, often precipitated by lifestyle factors, and those are generally not covered by any insurer. Acute or elective procedures are things that you’ll have an acute flare-up and you’ll return back to a normal base, we will cover that. However, within the chronic conditions, if you have an acute flare-up of your condition, and I’ll use the example of a diabetic having a heart attack. It’s linked to the diabetes. We will cover the heart attack component, but we won’t cover your chronic maintenance and monitoring of your diabetes, so paying for your insulin or your monthly checks. PRESENTER: So that’s quite an important distinction for an adviser to know about: acute versus chronic. Now, you mentioned the notable exception earlier being cancer, expand on that just a little more for us. KEITH KLINTWORTH: Because cancer’s deemed by the public as being such an important product benefit that they expect private medical insurance, it’s expanded over the years to really cover cancer from the time of diagnosis to the time of cure, including stem cell transplants. PRESENTER: OK. The term exclusions, ah, you often see that on an insurance policy, and there is a fear at the back of some people’s mind that somehow what they’ve got is going to be excluded by the insurance company. Deal with exclusions for us, Keith. KEITH KLINTWORTH: Exclusion’s in two broad terms. One is a general scheme exclusion that irrespective of any past history we’re going to exclude as insurers, and those will include things such as renal transplants, cosmetic surgeries, diseases related to alcohol or drug dependency, and there’s some others, you know, a prosthetic arms and limbs and those type of things we don’t cover; however, other exclusions are directly related to the sales process. So the four main categories of underwriting, which I’m sure a lot of advisers will be familiar with, but for full medical underwriting you are giving your pre-existing conditions and those have been put as exclusions on your policy. But that’s clear at point of sale and you should know as a consumer. The other form of underwriting is a moratorium, which is a little bit more complex with a consumer to understand, which means you can’t have any pre-existing condition or history of seeing a doctor for that type of symptom in the five years prior to inception of policy and then for a two rolling year periods that you don’t claim for that or seek advice for that condition. And that you generally manage at point of claim. So customers will only have certainties in a point of claim whether it’s covered. But full medical underwriting, medical history disregarded, continual personal exclusions, you know at the point of sale what you are excluded for. So we try and give that clearness and transparency to consumers. PRESENTER: There’s always something that advisers worry about and that’s the amount of paperwork involved in making a claim. What do you say to that? KEITH KLINTWORTH: I think all insurers are on that route of really making their journey a lot better, using technology to really enable the process, whether you’re using Telemed Solutions to go through GPs, so you don’t have to go through the cumbersome pathway of seeing an NHS GP first to be referred, and then online facilities. So whether you are able to do a claim authorisation online for and given immediate decision making, or another point of channels of communication, whether you’re using our messenger or whether you’re calling or emailing to get an authorisation. So we try to make the process a lot easier. Customers get issued with a claim authorisation number, which they then pass on to their consultant or their provider, hospital provider in order for them to ensure their bills are paid in essence. PRESENTER: OK. I have to confess in the few times that I’ve used it, it seems to have got a lot simpler and easier these days from when I’m sure we both remember it being put into practice. KEITH KLINTWORTH: I think the key change that’s happened in the market is that even providers are now looking at it from a customer perspective. PRESENTER: Keith, explain to me about shortfall. Isn’t this where the bill comes to £1,000 but the insurer will only pay £750 for that particular consultant and therefore the patient has to pick up the £250 themselves. That’s shortfall isn’t it? KEITH KLINTWORTH: That’s a true definition of a shortfall. And those shortfalls can vary depending on the reasonable and customary rate – R&C rate – that the insurer sets for each consultant. PRESENTER: OK. So you, as a body, the insurance company, and the insurance industry have rates that they believe that the consultant should charge, a reasonable rate that has been as it were market tested. KEITH KLINTWORTH: Well market tested is probably a bit of overstretch; I think most insurers set their reasonable and customary based on what the lowest common denominator is. PRESENTER: OK. Choosing a consultant, how would a private medical insurance customer know which consultant to see? KEITH KLINTWORTH: This has been probably the most challenging change in this environment after the CMA investigation, in that the consultants are believing and the GPs are believing that they know better. Consumers are faced as I said with no information about quality of outcomes, who’s the best, is it just your GP’s golfing buddy as an example, and I think that’s been the challenge in the market. So if I look back five, six years ago, probably only 5% of referrals coming through to insurers were open referral or unnamed consultants, and those customers were saying to the insurer I need a consultant can you refer me? So insurers have devised different products and different journeys for customers to go in. You can either set up a network, of which any unnamed referral coming in to my business goes to a dedicated consultant network that are peer reviewed and quality measured and all of those good things, or you can be referred to a hospital group to find, select a consultant on your behalf, or you can just have a very broad blanket or have a list of consultants who agree to your terms and fees and reasonable customary fees you charge and you refer them as the insurer on to that consultant. PRESENTER: OK. But that’s all part of the discussion when a patient comes on to the service as it were in the first place. KEITH KLINTWORTH: So a lot of patients will raise at the point of even having their named consultant they will say how good is this person. And we will say well if we do know we’ll let them know that they’re fine. If we’re not sure or don’t know we’ll say would you like to go to rather a network where they can choose the most appropriate. PRESENTER: OK. What about hospitals, does that work in the same way? KEITH KLINTWORTH: So hospitals, so it’s interesting, you look at health insurance over the last decade, it was always set up on a hospital list structure, that you chose your hospital list. And I’ve always contended you never choose your hospital, you choose your consultant who chooses the most appropriate hospital. So policies and products have also moved to give a more consultant-led approach, but still giving people choice. So, just as the NHS has moved to choice, so you can select the NHS trust you would like to go and have your operation in, we’ve tried to maintain that in the private health industry. But is it really the right way, it’s open to debate. I still think the consultant chooses or should choose. PRESENTER: OK. In that case briefly sum up for us what you see as the key benefits of PMI, private medical insurance? KEITH KLINTWORTH: So private medical insurance can depending on the insurer cover a broad breadth of stuff that the NHS is batting with. And whether that is primary care for GP services is something you should be focusing on as a consumer. The other one is speed of access. Waiting times are continually published. It’s raised in the press all the time. Waiting times in private are, significantly they don’t occur. You need access, urgent access, you will get urgent access. The peace of mind over any rationing of health care is removed. And I think also we’re deeming into a product that adds on the preventative wellness side. So you’re not only getting a benefit from a policy when you’re sick but also when you’re healthy should be the key benefits of health insurance. PRESENTER: On that note, Keith, thank you very much indeed. KEITH KLINTWORTH: My pleasure. PRESENTER: Now let’s turn to Karl Hewstone to help you build an individual plan for PMI to meet various client-specific needs. Karl is going to take you through some case studies where he’ll give you an indication of some of the issues and responses that you may consider. KARL HEWSTONE: Thank you, Tony. Most insurers’ products are modular or flexible which allows you to build a plan to suit your customer’s needs. However, what you will find is that the process is very similar for most insurers. So let me use some case studies to show how you might go about building a plan for your customer. What I should say is that I’m using the Vitality health product to demonstrate this process; however, anything that I say here in the case studies we use shouldn’t be seen to be advice or form any form or recommendation. So there’s four very simple steps: number one, choose your underwriting; secondly, decide what treatment path you’d like to use; thirdly, build the PMI component of your product; and fourthly you will find that some insurers will offer you optional extras such as travel or dental that you can include in your plan. So let’s look at underwriting. There are four types of underwriting and let me start by looking at full medical underwriting. This is where the applicant will complete an application form and ask a series of questions with regard to their health. The underwriter will assess that information and decide whether they can provide them with cover and if they do whether they would need to include any exclusions or not. The advantage of this approach is that because the underwriting is taking place right at the start of the policy you are much less likely to need a claim form should you need to claim later on down the line. Alternatively, you could consider moratorium. This is where any pre-existing conditions that have occurred in the last five years will be excluded for the next two years of cover. So assuming you have no reoccurrence of that previous condition it would be covered after the two years. If however you do have a reoccurrence in those two years, you’ll need to wait another two years clear before you’ll be able to claim. The third type of underwriting is what’s called continued personal medical exclusions, and very simply you carry the underwriting that you have from the policy that you’re currently insured with and you take that to your new insurance company. The last type of underwriting is called medical history disregard. I’m not going to cover much on this session because it’s generally used for group or business insurance only, but broadly speaking this is where your medical history is disregarded and you’re able to claim for pre-existing conditions pretty much immediately. In terms of cost, you would generally find that full medical underwriting will be cheapest, then moratorium, then CPME and lastly medical history disregard. So one good way of understanding how that might work is looking at some case studies. So let’s look at Clare’s situation. CLARE: I’m interested in getting some private medical insurance as I’m concerned about getting treatment should I need it on the NHS. I often have to wait several weeks for a doctor’s appointment. I’ve never had any medical insurance before. I’ve never had any previous illnesses or injuries. KARL HEWSTONE: So in Clare’s situation we know because she’s not had cover before and she’s got no pre-existing illnesses or injuries. So she can consider either moratorium or full medical underwriting. As we said before the advantage of full medical underwriting is that she will have a plan with no exclusions and should she need to claim in the future, it’s very unlikely she would need a claim form because we’ve already done the underwriting. Alternatively, if she chose to have a moratorium, the application process will be very quick; however, the underwriting effectively is going to take place should she make a claim in the future and therefore you increase the likelihood of maybe needing a claim form at that stage. Let’s now turn and have a look at George. GEORGE: I’ve never had insurance before. I did injure my knee running about a year ago. But I had some physio and it seems to be OK now. OK. So what we know about George that he also hasn’t had any insurance before, but he has declared that he’s had a knee injury in the last year or so. If he was to consider a moratorium, that knee injury would be excluded for the next two years. However, after two years, as long as he’s had no reoccurrence, he would be able to claim. However, if during those two years he had a reoccurrence of that injury, he’d have to wait two years free of symptoms or problems before he would be able to claim. If he went for a full medical underwriting, it is likely that the underwriter may consider an exclusion on that knee which would stay on his policy for life; however, some insurers may allow you to review that exclusion in the future. However if that was to happen any costs such as a GP report would have to be borne by the member. So now let’s look at David’s situation. DAVID: I have been insured with someone else for years. I suppose I’m interested to see what other options are out there for me and my wife. I did have an issue with my ear a few years ago. My current insurance excluded me for that. Other than that I don’t have any other medical history. KARL HEWSTONE: So in David’s situation we know he’s already got existing cover and he’s looking to move that cover from one insurer to another. We also know he’s currently got an exclusion on this policy. If he was to be able to answer the declaration questions for the new insurer what would simply happen is the policy would transfer from one insurer to another. And on his new policy certificate he would have the ear exclusion added because you’re simply transferring the underwriting from one insurer to another insurer. Alternatively, you may like to consider full medical underwriting. If the broker asked the member to complete the application form, you could then discuss that with an underwriter and ask them what they might do. And it’s quite possible they may decide that actually they’re happy to take that policy on and remove that exclusion altogether because they’re no longer worried about it. So that is something you could consider. This is effectively re-underwriting the policy and whilst it is a possible solution care should be taken if you go down that route. So we’ve looked at underwriting; now we need to think about the treatment path. Broadly speaking as Keith covered in his section there are two ways in which you can consider the choice of care that a member could take. Firstly, you could allow the insurance company to guide you to the most appropriate consultant and the most appropriate hospital for the condition that you present with. Alternatively, you may decide that actually you would like some choice, and therefore actually you would like to either select the consultant or maybe select the hospital that you would want to go at. So if the member’s priority is just to be treated very quickly at a local hospital at the appropriate consultant, then they might use some form of guided option that’s provided by that insurance company. Many companies would call that open referral; with Vitality we’d call that consultant select. If he has or she has a particular hospital in mind, then all you simply need to do is identify which hospital they want to use, which list that sits on with that insurance company and then select the appropriate hospital list. So again to bring that to life, let’s look at a couple of case studies. Let’s look at Clare first. CLARE: I’m worried that should I have an injury I could be stuck in a waiting list for a long time. My job relies on me being physically active. All I really want is to be treated as quickly as possible near to where I live. I’m not that fussed about which hospital is best; I suppose I’m happy to be guided on where the best treatment is for me. KARL HEWSTONE: So what we can see in Clare’s situation is that her priority is to be treated as quickly as possible in the hospital that’s local to her with the most appropriate consultant, and therefore the open referral model or in Vitality’s case consultant select would suit her needs. Let’s now look at David’s situation. DAVID: I was treated by a Dr Richmond for the issue with my ear. I’d really like to ensure that if it happens again, I’d have access to him. Do you know I think there are three private hospitals near to me; The Spa is the closest and I’d really like to be treated there. KARL HEWSTONE: So you can see in David’s situation he’s clearly determined that there’s a particular consultant he might like to use and he definitely knows which hospital he’d like to be treated at. So in that situation all you would simply do is identify which hospital it is, and which of the hospital lists it sits on for that particular insurer and make sure you select that when you build the plan. So we’ve looked at underwriting and we’ve looked at the treatment choice. Now let’s build the PMI product. And what you’ll find with most insurers that they have what they would perhaps call core benefits or standard benefits, and these are the benefits that are standard within all of the plans that they sell. And these will include a whole range of things including inpatient benefits and the other benefits that you can see on this slide. You’ll also find that each insurer will have a series of modular benefits that you can add to your PMI product. So again if we look at the Vitality product, we include things such as an outpatient benefit which allows the member to be able to claim for consultations or diagnostic scans. There’s a benefit you can add in to cover therapies. There’s also a benefit that you can add in for mental health. And also whilst not strictly cover, you could include an excess. Most people are familiar with how an excess would work where you would pay the first percentage or pounds with Vitality of any particular claim before the insurance company would pick up the liability. So again the way to bring this to life let’s look at some case studies. So let’s go back and look at Clare. CLARE: Of course I’m looking to get as much cover as I can for my money. Really I just want to make sure that I’m diagnosed as quickly as possible. I’m not really concerned about other things such as mental health. No, I don’t think so. KARL HEWSTONE: OK. So what we’ve seen in Clare’s situation is that her priority is getting quick diagnosis should there be something wrong. So what we know is that she definitely needs an outpatient benefit to cover her consultations and her diagnostic tests. She could have this unlimited however we know that price is important to her as well. So it may be worth considering putting in a limit. Whilst this will reduce the annual premium, it’s important to remember that should claims exceed that annual limit she would be liable for any costs over and above that. She could add therapies, if that’s important, but she’s already said that mental health care is not important to her. An excess may be worth looking at because again we know that price is an important factor. So it will be worth pricing in a zero, maybe £100 and perhaps the £250 excess just to see the impact on the price to help you build that product. So now let’s have a look at what George needs. GEORGE: I’m saving for a house so I want something that’s relatively cheap. It’s the main reason for wanting health insurance is to make sure I can get private hospital treatment in my own room should I need it rather than staying in NHS ward. I mean for everything else I’d be more than happy to use the NHS. I don’t mind paying a bit extra if this keeps my monthly premiums down and reduce my payments. I guess I’m used to doing this with my car insurance actually. KARL HEWSTONE: So here we’ve got a customer who’s very cost conscious and he’s clearly said that he’s not too worried about consultations or diagnostic, what’s really important to him is making sure he’s treated as an inpatient, and therefore in this situation he may either have no outpatient or maybe considering having a small outpatient benefit for his policy. It doesn’t look like therapies are that important to him, but again it’ll be important to check that with him, and likewise he hasn’t shown an interest in mental health but it would be important to check that. He’s clearly said that he’s prepared to consider an excess to help reduce his premiums, so again it would be worth costing a couple of different options so you can assess what the price impact would be to try and help him meet his budget in particular. Finally, let’s look at David’s requirements. DAVID: I would like to make sure that I’ve comprehensive cover for my wife and for me. I really don’t want to worry about having to pay excess bills over any limits. Do you know both my uncle and my sister suffered from mental health issues so I’d want to make sure that I’m covered for this – that’s quite important to me. KARL HEWSTONE: So David has already got a policy in place, and it may be that the benefits he’s got he’s happy with, but it would be advisable to reassess those needs to make sure they still, the product still suits those needs. So what do we know about David. Well he’s told us already that he’s worried about any payments, or hidden or surprised payments. So in terms of his outpatient benefit which he’s going to need for his consultations and his diagnostics might be worth considering unlimited, because if he has any caps then, there is a possibility of a payment should he exceed those caps. He hasn’t mentioned about therapies, so it would be worth checking, but he has made a mention about some mental health concerns he has, and therefore it may be worth looking to add that benefit into his policy. Whilst he hasn’t explicitly said about an excess again it would be looking to price up some options to see the impact on the price for the policy to make sure we’re meeting the needs of the customer but also the pricing point. So, so far, we’ve looked at underwriting. We’ve looked at the treatment choice, we’ve built a plan. The last piece to consider is what are the optional extras that you may want to consider adding to your policy? And again different insurers will have different approaches to different things that they can offer. If we look at Vitality for an example, for a personal plan, you could add travel insurance or dental insurance, and under our group product there are additional benefits which you’ll see here on the screen. So once you’ve selected those additional benefits you’ve done, you’ve built your plan. You’ve chosen your underwriting choices, you’ve chosen your treatment choice, you’ve decided and built a PMI product, and you’ve selected whether you want any optional extras added to your plan. And there you go: the four simple building blocks to build your client’s own personal healthcare plan. PRESENTER: In order to consider the viewing of this module as structured learning, you must complete a reflective statement to demonstrate what you’ve learned and its relevance to you. By the end of this session, you’ll be able to understand and describe the rationale behind PMI and how it can benefit your clients; you’ll be able to understand and describe some of the important medical conditions where insurance is concerned; and you ought to be able to begin to build a PMI plan for clients. Please now complete the reflective statement in order to validate your CPD.