The ˜yes' factor

Over the last few weeks the press has been full of stories about healthcare, and in particular the state of the NHS. The stories emanate from a cross-section of coverage taken from the whole spectrum of the national press, including both the tabloid and broadsheet newspapers,

According to the media, hot topics of the day range from hotel charges for hospitals and patients being treated abroad, to debate over whether there should be more private sector involvement in the NHS.

Most recent press reports have been debating what has been done about the NHS and asking who will pay for it. Interestingly, there has been little reported on patients' expectations, which is surprising when you consider the NHS is bankrolled by taxpayers, most of whom are end users of the service.

The cost of healthcare is a bottomless pit and always will be. There will always be increasing demand for more sophisticated treatment, new techniques, new cures, immediate access, better clinical facilities and accommodation.

Challenges ahead

The challenges are the same for the private sector. Premiums are increasing because more sophisticated treatments are now available privately and more people are making use of their cover. It is not unusual to hear customers say that premiums are so high they are determined to use the cover for anything they can legitimately claim for. Not too long ago, people with full refund private medical insurance (PMI) would opt to be treated in the NHS for relatively simple procedures in order to help their insurer keep premiums low. When was the last time a client said that to you? Not surprising when you consider what the NHS alternative has to offer.

Another challenge is the ageing population. The over 60s are big claimants.

The Government encourages us to look after ourselves by going to the gym and workplace technology requires us to sit at computers all day. The resultant muscular skeletal repair costs are very high. Those of us who deal with large group claims analysis see this every day. This is at the top of the list of the most claimed for conditions time after time.

There is no panacea to the problems that bedevil the NHS, but confusion reigns and the more the public considers the issues the more insecure about the future of the health service they become.

Insurance practitioners will know, that since the concept of insurance first began, our fledgling industry responded to public demand. Changing times have continually imposed this challenge on the industry and insurers have always risen to it.

What we are seeing now is insurers' rush to respond to the high prices they are forced to charge for healthcare. Innovative new products are coming onto the market, for example, high excesses, inpatient only, outpatient only, specific illness cover and newly reworked six-week plans.

One new product which shows innovation in the individual sector is Western Provident Association's (WPA) Self-Pay Protect. This is a cross between self-pay and insurance. Clients decide whether they want to pay 30%, 50% or even 75% of any treatment themselves, and WPA pays the rest of the cost.

A new market

Another rapidly expanding opportunity arises from the greater reliance on contractors, consultants and self-employed home workers in the business community. The boundaries between the individual and small company markets are diminishing as technology enables companies to use people with relevant skills to work from offices at home. The premiums for company schemes are considerably cheaper than for individual cover, but this situation does not reflect what is actually happening in the business world. When it comes to premium rates, self-employed individuals who make up the bulk of the new off-site workforce are currently disadvantaged ' but that is set to change.

There is already one company at least that offers a group scheme for one member, provided the premium is company paid. This is a clear sign that providers are slowly but surely responding to changing market conditions. Other schemes would require two, three, or more company members to form a group scheme, but would be prepared, for example to 'split' a married couple to create two registrations.

Norwich Union's (NU) Fair and Square First plan is a reasonably priced product which gives clients the option of using the NHS and receiving a generous cash benefit if this is a viable option for their particular condition. If not, they can go private. The benefits are good and the Fair & Square First policy includes psychiatric treatment which is not normally included in NU's Express Care plan. Products which recognise the full gambit of healthcare solutions and services available to the consumer and match peoples' needs are the ones which will succeed.

We sometimes get complacent in the private healthcare industry. NHS deficiencies should fuel a rush to buy private healthcare but, regrettably they have not. Growth in the individual sector, as many industry commentators are only too quick to point out, is a dream. The reality is that privately-purchased PMI is in decline and it will probably remain so until we see more innovation and product development geared to what the consumer wants and at a price they can afford.

Taking advantage

The problems and difficulties facing the NHS are not going to go away. However, this means the opportunity for the private sector to use the situation for its own marketing advantage will also remain ' long into the future.

It is laughable that the latest batch of NHS patients to be sent abroad because we can not cope with them, is being sent to France, a country that has its own healthcare problems.

Nevertheless, if the NHS can get patients treated cheaply abroad, in countries where clinical excellence can be assured, shouldn't the concept be on private insurers' shopping lists as a potential way to reduce costs and break the strangle-hold private hospitals have on premium pricing in the UK market? Reasons for arranging treatment elsewhere in Europe may be different for public and private sectors, but it is a question some clients are already asking.

Among the many equally huge problems the NHS faces is the shortage of nurses. This is not unique to the UK. In Canada people have been urged not to go to Accident & Emergency if they needed urgent treatment, but, instead, to make use of the private walk-in clinics in the first instance. They were warned that if they went to A&E they must expect at least an eight-hour wait. This was a direct result of the shortage of nurses.

We need to get things into perspective. Businesses are prepared to pay for items such as first-class train tickets and expensive training courses, but not PMI. Annual health insurance premiums, depending on the type of group scheme, could amount to less than either of these costs. The premium for an individual would be something like double this, but nevertheless, clients still get good value for money.

Clients' views

So what do clients think about the new innovations to reduce individual healthcare premiums? In general people who enquire about cover are not as surprised at the price as you might think. The adverse publicity about private healthcare costs could actually be doing the market a favour.

People tend to prefer a fully comprehensive policy with an excess, rather than reduced benefits at the time they need to claim. They forget the cost savings they have enjoyed and mistakenly expect the insurer to pay out, whatever the circumstances. Some additional benefits, while they may sound attractive in the product literature, clearly add to the cost of cover. For example, do we need GP helplines and stress counselling on individual products? The clients do not think so and resent the cost of what they see as unnecessary frills.

We know what happens. One insurer bolts on a benefit to create a unique product identifier in the market place. Closely followed by another insurer, then another, until all the products look the same again and premium prices go spiralling upwards. But did anybody do their product research and ask the customer if they wanted that benefit in the first place?

Most people want to know they have appropriate cover for their needs and how much it is going to cost in the future. Although policies are annually renewable, once they are in a healthcare scheme and a medical condition occurs, clients do not feel able to give it up. That is the inertia or 'locked in' factor.

As an industry we clearly have not got the answer yet. Product developers and underwriters need to ask consumers what they want, what they can afford and what they will actually buy. Then advisers can sell something tangible in the individual market again and get this sector moving ahead. Providers have been consumer focused and innovative in the past ' they need to start doing it again.

Liz Hammond is a director of Private Medicine Intermediaries Limited