What is the health insurance system rated by the community? (UK guide)

An introduction to private healthcare in the UK

Although healthcare is free in the UK thanks to the NHS, many people prefer to have private health insurance. When you go privately, the doctor can often see you much faster, you have a choice of where to be treated, and you may even receive a higher standard of treatment.

However, you may be concerned about the cost of your insurance premiums and how claims will affect them over time.

Health insurance premiums are based on a number of factors

For starters, most health insurers offer you a range of premiums based on age, gender, health history, required health insurance and other factors (tobacco users pay more, for example). The general rule of thumb with insurance is that the more claims you make, the more it costs to renew your policy. On the other hand, if you don’t claim, you’ll build up a no-claim bonus and see lower costs.

Community rating works differently than no-claim discounts

Community-rated health insurance programs set premiums using different criteria than standard insurance, as shown above. If you’re worried about making more claims than average, or worried about the impact of one big claim, community-rated programs could help you pay less in the long run.

What does community rating mean?

Community rating means that insurers base their future premium rates on the claims of the entire scheme membership rather than individual member claims. If you are a member of such a scheme, your personal claims do not affect the cost of renewal. The price you pay depends on the community rating.

Claims costs are distributed by membership

If you are a member of a community scheme and make a claim, the entire membership bears the future costs of that settlement. While it generally costs more to enroll in a community-rated program than a standard health insurance policy, it can work in your favor, especially if you file a claim.

For example, if your insurance company hasn’t had many payouts during the year (even if you’ve made a claim), your renewal premium won’t go up significantly. The risk is that if your insurer has settled many claims, you are likely to have a higher premium rate, even if you have not made any claims.

The health insurance pricing system is based solely on risk. An insurance company wants to minimize the risk of losses by grouping members with more favorable age or health status and members with higher expected health care costs into large group plans. A community rating means they can reduce risk while still providing a high level of service.

How does it differ from a traditional no-claims discount?

With traditional health insurance policies, the medical expenses you claim affect the cost of renewal.

If you claim your health plan, you will pay higher premiums to renew your policy. If you file many times or if you file one large claim, your renewal cost could increase significantly.

On the other hand, if you don’t file a claim, you get a no-claims discount (or bonus), so when it comes time to renew, your premiums probably won’t change significantly.

Community rated schemes do not allow you to create a discount without claiming.

Benefits of the Community Assessment Scheme

• Your claim history does not affect your renewal premium. Priority is given to premiums based on the group’s risk rating.
• You can apply without worrying about losing your no-claim discount. If you need medical services, go ahead.
• If your insurer is having a good year, your premiums won’t increase much.

Disadvantages of the community rating scheme

• You can’t build a discount without a claim. You could lose out if your medical history is good and you rarely make health insurance claims.
• If your community insurer has an expensive year with multiple payouts, your premium could rise by a more significant amount than if they were only looking at your personal history.

Which health insurance companies offer community rated programs?

Only four of the nine leading health insurance providers in the UK offer community rated schemes.

Exeter

Exeter is one of the few health insurers to offer community rated schemes to new customers aged between 70 and 80. Other insurance companies only provide coverage to younger people with a lower risk rating.

With The Exeter, policyholders can choose between a traditional no-claims discount or a community-rated scheme for their health insurance, which is unique in the market.

WPA

WPA is highly rated for its flexible health insurance packages and excellent service. However, its rules are strictly based on age, and health insurance is only available if a person is under 65 years of age. You must be under 65 to take advantage. But if you’re of the right age, WPA could be a great option.

Free health insurance

Freedom offers a community-rated scheme and is very transparent about how it works. Unlike some providers, they will offer a renewal discount if the market allows it. In 2021, only 0.59% of policies fell outside the community rating at renewal (due to an unreasonably high frequency of claims), with more than 83% at a discount. This level of transparency around how the community rating scheme works is rare and should give people confidence in Freedom.

Nationally friendly (requirements will not affect renewal premiums for the first 5 years)

At the National Friendly, things are a little different. For the first five years of your tenure with National Friendly, neither your claims nor community claims will affect your premiums. Instead, your insurance premiums will vary based on your age and health inflation.

After those five years, you’ll have a review where you’ll get new premiums based on factors, including your claims history.