If you’ve had private health insurance for a while, you may have noticed that your health insurance premiums slowly rise as you age, but why is that? Here, we explore what affects health insurance rates, why premiums are increasing, and what you can do to make them as affordable as possible.
What does health insurance cover?
Health insurance plans vary depending on the level of coverage you choose. However, one aspect they all have in common is that the policies only cover acute medical conditions – these are illnesses that start suddenly and can be resolved with treatment, such as broken bones.
The opposite of acute diseases are chronic conditions that are not covered by health insurance. Chronic conditions cannot be cured, but they can be managed; examples include diabetes, arthritis and heart disease.
In addition to covering treatment for acute conditions, most health insurance plans typically include:
- Access to a general practitioner 24/7
- Access to mental health wellbeing and support
- Hospital treatment (where you stay in the hospital for at least one night)
- Choice of hospital and private room
- Cash benefits if you choose to use NHS treatment instead of making a claim
Most, but not all, policies also include cancer care. In some cases this will give access to the latest treatments that may not be available on the NHS.
To increase your health insurance premium, you can add add-ons to your policy, for example, physiotherapy, acupuncture and counselling.
What are the health insurance premiums?
How much you pay for health insurance depends on several factors. However, to give you an idea of the cost, we’ve carried out extensive research and found that the average health insurance premium in the UK is currently £86.07 per month (or £1,302.84 per year).
What affects the price of health insurance premiums?
As with other types of insurance, health insurance companies will consider your risk profile, in other words, how likely you are to make a claim. The higher the chance, the more you can expect your insurance to cost. Considerations include:
- Your age – is an extremely important factor in calculating health insurance premiums, and policies tend to increase as you age.
- Your lifestyle – smoking can increase health insurance premiums because of the associated higher health risks.
- Your medical history– if you have suffered from health problems or already have some health conditions, this could mean that you pay more for health insurance or have more exclusions than someone who does not
- The policy you choose – the more features your policy includes, the more you can expect to pay.
- Where do you live – some regions are more expensive than others when it comes to treatment costs. Also, some areas have a negative impact on health, for example, densely populated places with heavy infrastructure and higher levels of pollution. So if you live in a big city, you can expect to pay more than someone the same age who lives in a rural or less stressful environment.
Why do health insurance premiums increase with age?
So why does age significantly affect health insurance premiums? Basically, the older we are, the greater the risk of injury or developing disease. Also, diseases that might develop are usually expensive to treat, for example, cancer. In fact, according to Cancer Research UK, half of all cancers are in people over the age of 70. One in two of us is also likely to develop cancer in our lifetime.
Some health insurance companies will gradually increase prices as you get older – for example, health insurance costs go up every time you renew your policy. Others will charge premiums based on age groups, so you might see a sudden price increase when you move into a new group (for example, from 20-30 years old to 31-40 years old).
Why else are health insurance premiums rising?
As well as your circumstances (age, lifestyle and place of residence), health insurance costs are also affected by:
Your claim history
If you’ve recently applied, you can expect your health insurance premiums to increase at renewal unless your policy is set up using a community rating or pooled risk. If you don’t make a claim, some insurance companies will give you a no-claims discount (similar to car insurance).
Population movement
While the good news is that most of us are living longer, an aging population is placing increasing strain on all medical services and service delivery. Insurers must take this into account when setting health insurance rates, which could mean higher premiums for all policyholders.
Inflation
Inflation increases the prices of everyday things. This can affect the cost of all hospital services, even if they are not medical costs. For example, increases in the price of food and energy can lead to higher premiums.
Medical inflation
In addition to general inflation, health insurance premiums are also affected by medical inflation. This affects health care costs, such as medical technology, treatments, procedures, and even prescription drugs.
It is worth noting that medical inflation is particularly sensitive to technological improvements. So while discoveries can help cure diseases and improve overall medical care, the cost of providing those services can increase your health insurance rate.
Insurance premium tax (IPT)
IPT is charged on most insurance products, including private health insurance. It is currently set at 12% and is usually passed on to you as the insured. This means your insurance provider will add 12% to your premium.
Although the IPT has remained the same since 2017, it could rise at any time. Remember that if your basic premium goes up, adding IPT will increase the total cost even more.
How can I lower my health insurance premium costs as I age?
If you’ve started to notice that your private health insurance costs are slowly rising, or you’re considering buying a health insurance policy for the first time, here’s what you can do to keep costs down:
1. Consider your policy level and extras
Buy only the policy you are most likely to use. It sounds obvious, but it’s easy to get carried away with accessories. Compare what health insurance options each provider offers and weigh what you’re most likely to need.
2. Increase your surplus
Increasing your excess can help reduce your overall insurance premium, but it’s worth checking how your provider charges excess in the first place.
Some insurance providers will only charge you the excess once, no matter how many times you make a claim within 12 months. Others will charge you for each claim you make, which can add up if you need to make several claims in one year.
It’s also worth checking what happens if your policy comes up for renewal while you’re still in treatment; you may need to look for your new policy to continue treatment. Since this would technically be a new claim under the new policy, you may have to pay the excess again.
3. Maintain good health
You can keep your premiums low by maintaining your health, for example, by quitting smoking or reducing your alcohol consumption. Some providers will even offer discounts if you stay within a healthy weight range.
Other incentives include gym discounts and step monitors with points awarded for reaching goals, which trigger a discount on your premium. Ultimately, the healthier you are, the less likely you are to claim it.
4. Choose the hospital networks you will use
When you choose a health insurance policy, you’ll usually have access to a national network of hospitals, but unlimited access can be expensive.
Instead, you can limit the hospital network where you want the treatment to take place. For example, if you would prefer to be treated close to home, you can select your regional network and remove all others.
5. Limit the choice of consultants
Some providers will let you choose the consultants you see, but this usually comes at a cost. If you don’t mind who you see and just want quick treatment, you can avoid paying more by letting your provider choose for you (you may also be given a list to choose from).
6. Add family members
Some providers offer a discount if you are a couple or if you add more family members to your policy.
How to choose the right health insurance for me?
Health insurance can provide peace of mind knowing you can avoid long waiting lists if health issues arise. With so many policies and health insurers out there, deciding which one is right for you can take time and time.
Let us know if you’d like to explore your options further. We can connect you with a regulated broker who can explain what’s available and offer advice based on your needs and budget.
We’ve also put together a series of guides that can help you better understand how private healthcare works:
Waiver: This information is general and what is best for you will depend on your personal circumstances. Talk to a financial advisor or do your own research before making a decision.
