Halfway house puts cover within reach

The luxury of private medical insurance (PMI) is beyond the pockets of many people and with companies keeping a tight grip on their purse strings, employee benefits of this nature are now hard to come by.

However, hoping to fill a gap in the market, Britain's biggest medical insurer is now offering consumers a hybrid healthcare product that offers some of the benefits normally associated with PMI, but with a much cheaper cash plan price tag.

"This is aimed at people looking for a low cost scheme to help them gain early diagnosis, when a cash plan would not be enough for what they are looking for but they don't require all the benefits of full health insurance," says Bupa's Emma Exelby.

Bupa is already a leading provider of both PMI and healthcare cash plans but has now expanded its repertoire with the inclusion of this new, halfway-house cash plan. There are three levels of cover to choose from starting at £11.70 per month for individuals under 40. Traditionally, cash plans are designed to meet everyday costs such as dental and optical bills, but with the new Bupa Patient Cash the focus is on early access to consultants. Unlike most cash plans, it covers 100 per cent of bills for diagnostic scans up to £600 a year and offers a high level of cover for consultations and therapies, again up to a maximum of £150 on the cheapest plan and £600 on the most expensive. Cover for dental and optical bills must be added on at an additional premium of at least £9.75.

In comparison, the cheapest cash plan from Simplyhealth, another big provider, costs £9.75 and covers 100 per cent of dental and optical bills up to £77 each, but only 75 per cent cash back up to £50 for therapies and £150 for consultation, with no provision for diagnostic scans or hospital stays.

The question is, however, if everyday costs for dental appointments and glasses are not covered with Bupa's new offering without an additional premium, is the benefit of early diagnosis really worth paying for as a standalone product, or should consumers stick with either a standard cash plan, or dig a little deeper and pay for PMI?

"This is a new breed of product so it's important that it's not compared fully to PMI and traditional cash plans, because it isn't claiming to be either. It's offering something different, something you might previously not have been able to afford," says Emma Walker, the head of protection at Moneysupermarket.

Consumers are often directed towards healthcare cash plans as a more affordable, yet far less comprehensive alternative to PMI, but the truth is that these are very different products.

In its simplest form, a healthcare cash plan is a budgeting tool – each month you put away money which can then be claimed back to cover medical expenses. PMI is taken out as an alternative or supplement to the NHS, providing cover for acute conditions, defined as curable, short-term illnesses. The benefit of PMI is that you get to avoid NHS waiting lists and enjoy treatment in a private hospital, with a choice of when and which consultant will provide that treatment.

In contrast, healthcare cash plans are typically designed to cover any non-NHS bills, including dentists, opticians and alternative therapies. In addition, some plans will pay compensation for time spent in hospital.

"These are actually quite complementary to each other. Cash plans cover general everyday healthcare treatments while PMI is more of a rainy-day insurance covering you for unexpected procedures," says Raman Sankaran, the sales and marketing director at Simplyhealth.

The real benefit of a healthcare cash plan over PMI is the cost, with monthly premiums starting from under £10 for basic cover. In comparison, taking out one of Bupa's PMI products, Heartbeat health care (select 2), would cost a 30-year-old clerical worker, non-smoker with a clean medical history £71.05 per month with a £100 excess. Obviously, the older you are and the more complex your medical history the pricier the cover.

Children are often covered at no extra cost under some cash plans. For example, Medicash covers dependent children up to the age of 16, or 19 if in full-time education, and HSF covers both partners and dependent children as standard. Crucially, to become a member of a cash plan, you will not need to undergo any medical examination whereas with PMI, individuals in poor health may find they have to undergo one.

The key to finding the right cash plan policy for your needs is to compare cover not just price. There will be limits on the level of contribution to your medical costs, which will typically be in the form of a cash back percentage (basically a pre-agreed percentage of the total cost of the treatment you are receiving) and a maximum annual payout. On the plus side, there will not be a limit on the number of claims made per benefit, so you can claim as many times as you need up to the annual limit.

For example, HSF offers five levels of cover ranging from £6 per month to £30 per month, with the cheapest paying out 50 per cent of optical and dental bills up to a maximum of £50. Medicash, on the other hand, offers eight tiers available ranging from £6.50 per month to £39 per month, and although its cheapest option also pays out up to £50 for optical bills and routine dental work, unlike HSF it will cover 100 per cent of your bills.

"It's vital to be absolutely clear what you're covered for and to understand the amounts you're covered for as well as the key terms and conditions that support that cover," says Mr Sankaran.

Other things to watch out for are time limits on claims and exclusions. At Medicash, you have 26 weeks from the date of any treatment or discharge from hospital to make a claim. There is also usually a qualifying period of anything from one month to a massive six months after signing up before you are eligible to claim, to prevent people from taking out a policy to cover an existing illness, claiming the cash, then cancelling the policy.

That said, most policies will not cover pre-existing conditions anyway, which typically include any condition for which you took medical advice in the 12 months prior to joining. Very often the small print will reveal other barriers such as the need to have a GP referral to validate claims, so always check your policy details carefully.

Health cover tips

Emma Walker, Moneysupermarket

"This is a good hybrid product and certainly worth investigating. It offers an opportunity to get something you may not traditionally have been able to afford, but it's important to recognise what it is that you want the product to do for you before you dive in.

"Bupa is a fantastic brand, with a great proven track record and a wealth of knowledge, so it will be interesting to see if there is more development of this kind over the next few years."