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SHOULD I pay for health insurance through my company or personally? The answer is not a simple “yes” or “no”. When it comes to private medical insurance, everything must be evaluated on a case by case basis, as no two people, or companies, are the same. The same applies to the insurers themselves; they all have a different way of evaluating risk — and what could be risky to one may not be as risky to another.
If you speak directly to an insurer, their role is only to give you options and prices, not to advise you on what could work best for you. So it is imperative to speak to an independent and FCA advisory broker, such as Healthcare Clarity, to make sure your best options, interests and individual circumstances are taken into consideration. An advisory broker will give you recommendations and explain why they feel one insurer is better for you than another.
Over the past year, I have seen more first-time clients getting into medical insurance on small two- or three-person group schemes than ever before. Sometimes this can be the most cost-effective entry to medical insurance. The allure of being able to put the policy through the company accounts and write it off against corporation tax is great. However, I’ve also seen many small two- or three-person group policies receive their first renewal invitations to be shocked by the increase; we have then found more cost-effective options for them on individual plans for year two.
Group policies’ renewal premiums predominantly are calculated on a “loss ratio” basis. For example: if you are paying £4,000 annually for cover and the insurance company pays out £2,000 on your behalf due to claims, your policy will have a 50 per cent loss ratio. This leads to an increase at renewal to the total premium, regardless of whether one or all the members have claimed. Essentially one member’s claim affects all other members’ premium increases.
Individual policies work differently. Generally, insurers calculate the renewal increase on individual plans by one of three methods: claims-rated (increase depends on the cost of your claims), no claims discount or community-rated (increase depends on the performance of the community of insured members on your type of plan). There are pros and cons to all three options. For instance, if community-rated, your premium will increase every year but will be far less than if you are on a claims-rated or no claims discount-rated plan. However, if you don’t claim you are still penalised for everyone else’s claims.
The older the average age is on a group policy, the less likely it is to be the most cost-effective way to have medical insurance. This usually coincides with when people start thinking about retirement — late 50s to early 60s. As we get older, the likelihood of needing to claim increases, as does the cost of medical insurance.
A mistake people commonly make is thinking that when they leave their job (due to retirement or change of employment), the only insurer that will offer a continuation of cover is the one they are currently insured with through their employer. This is rarely the case and will usually be one of the most expensive options. The two most important times to seek independent, impartial advice is when you leave or change employment, or are thinking about taking out medical insurance for the first time. You must ensure you are on the most cost-effective and relevant cover levels and that you have the correct underwriting. Underwriting is the insurer’s way of deciding if a condition is eligible for cover.
As we hear more and more about non-essential appointments and procedures being delayed due to the NHS’s tireless efforts to control the Covid-19 pandemic, it is important to make sure you have the correct cover levels. Everyone’s circumstances are different. You may be better off on a company plan — but the only way to be sure is to check with an expert.
Niall Scott is director of Healthcare Clarity