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Health Insurance

Health insurance can be defined as a provision which helps people to cover their health-care costs. There are medical insurance programmes which may include disability or nursing care cover. Health insurance providers can be government-sponsored or private companies. An individual can purchase a health insurance cover for himself or a company may decide to pass on the health insurance cover benefit to it employees. Many countries have government-funded social welfare programmes which take care of an individual's healthcare expenses.

A health insurance contract is established after ensuring the payment capability of an individual or a firm and the amount covered is decided after estimating the comprehensive cost of risk for medical care. A periodic payment structure is agreed upon, which may be either in the form of a premium to be paid monthly or annually for private insurance companies, or an annual tax if the health cover is in the form of social welfare.

Health insurance companies rely on the principle of 'anti-selection'. In a broad sense it means that medically challenged people, expecting huge health care expenses, are more likely to go in for health insurance cover, than physically fit people. Reasonably enough, the healthy people may consider a health insurance an avoidable expense, especially if they visit a doctor once a year. Annual premium costs for health insurance may turn out to be greater than annual doctor visit for him. Thus the risk of insurance companies is pooled out amongst healthy individuals.

UK has a publicly-funded healthcare system called the NHS (National Health Service). General taxation takes care of the funding for the running of NHS centres. However, due to an ever-increasing demand, the NHS is under pressure and one may have to wait for a long period of time before being treated at the NHS. People who do not want to wait have an option in private health insurance. One must bear in mind that the services offered by NHS cannot be replaced by private medical health insurance as accidents and emergencies are beyond the capacity of most hospitals.

In the UK, health insurance plans can be mainly categorised into:

  • Private medical insurance
  • Critical illness insurance
  • Income protection insurance

Private medical insurance

This insurance is designed to cover medical costs borne by a patient while receiving treatment for acute conditions. Acute conditions are those which are sudden in onset but are most likely to respond quickly after treatment, with the patient returning to normal state. When one opts for a private medical insurance, he can decide the date and time, the specialist and the hospital for treatment. The patient will usually have the choice of en-suite private room and other homely comforts.

Insurance premiums increase with age as older people require healthcare treatment more frequently. Hence, in order to plan for the future it is advisable to ask for premium quotation from health insurance company for a person who is 5 years older than yourself. Other cause of increase in premium amount could be medical inflation.

Conditions such as drug abuse, HIV/AIDS, infertility, cosmetic surgery, self-injury and kidney dialysis are usually not covered by a private health insurance policy. Hence, it is important to read insurance policy documents before entering a contract.

Critical illness insurance

Many medical conditions such as cancer, heart attack or stroke may not cause immediate death to the patient as medical advances ensure survival, although, with a reduced quality of life. These conditions can severely impair or prevent patients from continuing in their profession. Such patients have to rely on the state for survival. The situation becomes more complex if one has debts at the time of the sudden diagnosis. Critical illness policies ensure that the patient gets a lump-sum amount at the time of either diagnosis of stated conditions in the policy document or during the period of their progress to an agreed state. The insurant is free to use the amount for debt repayment or even leisure.

Income protection insurance

Income protection insurance is helpful when accidents and illness often force people to stop work and loose their source of income, especially so if they are self-employed. Typically, the limit of benefit payable is about 75 % of gross income. These payments are free of tax and are paid on a weekly or monthly basis. Normally a policy's payment can be availed some time after the date at which the insurant stopped working. The amount of premium is inversely proportional to this period. One must read and understand the definition of disability mentioned in the policy document to avoid uncomfortable situation when making a claim. One should also be aware of various flexibilities offered in payment of premiums.