One problem with ageing in the UK is the difficulty that many people find in securing and maintaining Private Health Insurance for their retirement years.
The cost of Individual Health Insurance in retirement rises with age, so many people will face higher prices for their cover as they get older and affording these premiums can be a concern.
The problem is especially acute for those who may have enjoyed extensive Health Insurance cover during their working lives thanks to a Group Health Insurance policy that was offered by their former employer.
This might have included wide-ranging cover, including coverage for pre-existing medical conditions depending on the insurer and the scheme in question.
Part of the problem is the differential between what it costs to insure someone in their sixties as part of a group scheme and how much individual Health Insurance can cost.
“The average age of members in a group company scheme tends to be between 35 and 45,” explains Farid. “But, historically, around 40% of the individual PMI market is aged 65 and over and, according to PMI insurers, 98% of the premiums of an average 60-year-old’s Health Insurance will be spent on claims.
“This explains why individual health insurance costs generally twice as expensive as group cover,” he says.
Due to elderly policyholders making more claims, individual health insurance providers hike up the cost of premiums for retirees and those over 65.
Previously, a number of insurers offered ‘retiree Health Insurance plans’ to older Britons, which enabled employees of larger companies to transfer their cover on reasonable terms.
However, Bupa recently closed some of its retiree group plans and requested that members aged 65 and above transfer out. We expect to see other larger PMI providers following suit.
Until recently, a number of affinity schemes also offered discounts to groups such as farmers or civil servants but these are also now rescinding the discounts they once offered to older members due to the increase in individual health insurance costs when covering seniors.
While technically insurers can’t refuse individual cover to an existing group scheme member, they’re free to increase premiums and reduce cover as they see fit.
However, the reality is that few insurers are likely to consider taking on a transferring member who’s claimed in the last 12 months.
Nadeem Farid
Health & Wellbeing Expert at Drewberry
Another way to get reduce the cost of Private Health Insurance for older people is to consider self-funding some procedures. This can be cheaper than insurance, especially if you consider the impact it will have on your premiums over time. However, it means putting something aside in an ISA or a similar savings vehicle so that the cash is always there if you need it.
“If you manage to go up to 5 years without making a claim,” says Nadeem, “then you’re in a position to switch between providers, which could also significantly reduce your Medical Insurance premiums.”
This means that securing PMI cover in later life can often be a two-stage process: the first stage is to secure affordable cover; the second stage is to review your cover options at each renewal. With luck, if you’ve avoided making a claim, you’ll be in a position to reduce your premiums by switching providers, or increase your cover.
Nadeem points out that: “A large proportion of our individual PMI business is with older people who are often seeking out PMI cover for the first time. The best advice for Britons at this stage of their lives is to start thinking like an insurer.
“Apart from the small minority of clients to whom price is no object, at this stage in your life, it all comes down to managing your health on a holistic basis where PMI cover is just one of the solutions.
“For most people, this means the best approach will be to look at private health insurance options like adding an excess to your Medical Insurance policy. This can help reduce premiums by up to 20%. Adding a 6-week NHS deferment option will also bring you individual health insurance cost down, as will removing non-core options such as therapy or outpatient benefits.
Often, securing appropriate private medical cover in retirement is a lot like car insurance: it all comes down to protecting your ‘no claims bonus’. There are plenty of options for older people, but it means deciding what’s most important, setting a ceiling for your individual health insurance cost and managing your claims appropriately.
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