The potential for growth in the UK's private healthcare system could be £2bn a year if the sector makes key improvements around value, accessibility and transparency, Bupa has projected.
At the launch of Bupa's research into private health, Dr Damien Marmion, managing director at Bupa Health Funding said that private medical insurance (PMI) was at a "tipping point" resulting from high medical inflation and adverse economic conditions.
However, private spending on healthcare could grow from £3.7bn to £5.8bn a year if private healthcare was made more accessible to consumers, particularly if greater price controls were implemented.
If this were implemented, spending on private healthcare could free up £1.1bn a year of NHS resources, according to the insurer's analysis.
Bupa's report showed while economic and employment figures were improving, the number of private healthcare customers continued to decline.
This has the potential for a "downward spiral" effect exaggerated by excessive price rises, it warned.
In this scenario, price rises lead to drop-out rates among those with the lowest claim rates, leaving a pool in those with the highest claim rates, leading to even higher costs, prices and a decline in the size of the insured pool.
If the rate of volume decline is high, it could lead to a substantial drop in the value of the market to the detriment of insurers, independent hospitals and privately-practicising doctors alike, the report said.
This could impact individual and corporate schemes in different ways. Those covered by corporate schemes tend to be younger than individual PMI customers resulting in lower spending on healthcare purchased from doctors and hospitals. PMI price rises at a higher rate than overall staffing and benefits costs may tip corporate decisions against the maintenance or expansion of PMI schemes.
However, Bupa has argued there is a "bright future" for the sector if changes are made, including a greater focus on transparency and quality.
In part this could be driven by the Competition and Market Authority's remedies for private healthcare reform but also needed to be driven by industry innovation, Bupa said.
It called for the development of a cross-industry body for the private healthcare sector and the encouragement of non-traditional providers to enter the sector.
Marmion also said he believed the introduction of 'digital' distribution channels could encourage new customers to take up policies.
Additionally, he said the insurer would like to see an agreement from hospitals to dedicate efficiency savings for use in partnership with insurers to promote private healtcare and bring new customers to the sector.
Bupa is currently seeking a price reduction of up to 15% or more from hospital providers so such cost savings can be passed onto consumers. Marmion confirmed the insurer is still in talks with private hospital groups.
Dr Damien Marmion, managing director at Bupa Health Funding added: "This is both a challenging time for the private healthcare sector. This report confirms there is an appetite for private healthcare and an opportunity for growth is we respond to customers and deliver more affordable healthcare in a way that suits their lifestyles."
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