Which is for me: private medical insurance vs. health cash plans

Insurance companies offer a wide range of healthcare products including health cash plans. These products are cheaper than private medical insurance, making them affordable for a larger number of people. However, many people misunderstand what health cash plan policies are, and mistake them for private medical insurance. As these are completely separate schemes it’s important to get to grips with the differences between the two, so you can buy the policy that’s right for you.

What are health cash plans?

Health cash plans are insurance policies which allow you to claim back cash when you incur healthcare expenses. Although the terms and conditions will vary from plan to plan, generally they consist of the following aspects.

  • You can reclaim a proportion of the costs back – The specific proportion depends on the individual policy you take out, it could vary between 50-80% although policies with higher pay out rates will generally be more expensive.

  • Usually covers dental and optical treatments – These include routine checks and any dental work or new prescription glasses that arise as a result of this.

  • A monthly premium is usually paid – As with any insurance policy, the more comprehensive the plan, the more it will cost you.

  • Can physiotherapy and osteopathy treatment – This allows you to access these treatments privately so you can avoid the waiting lists on the NHS. You will still need to visit your GP first though to obtain a referral.

  • Pay cash upfront – You pay for the treatment yourself and send the receipt off to your insurer to claim your cash back. This can take a few weeks so you need to have the money available in the first place for your treatment.

  • A medical is rarely needed – This speeds up the application process meaning you have fewer complicated forms to fill in.

  • Included in many employee incentive schemes free of charge – Before you take out a health cash plan it’s worth checking that you’re not included in one already. It’s included in the benefits package for many councils and large corporates as standard.

  • Cash limits – You can’t claim indefinitely under a health cash plan as there are limits on the maximum amounts you can claim back each year. More expensive policies generally offer higher allowances but it’s worth checking the terms and conditions to see exactly what you’re entitled to.

  • Qualifying periods – Most health cash plans have qualifying periods restricting you from claiming in the first 3 or 6 months of cover.

  • Hospital in patient cash back – Health cash plans can pay you back a set amount for every night you spend in an NHS hospital.

How do cash plans differ from private medical insurance?

  • Private medical insurance is designed to cover you to have secondary medical treatment privately, rather than using the NHS. A health cash plan won’t cover you for expensive surgeries and isn’t designed to replace the NHS as a source of secondary care.

  • You don’t have to pay upfront yourself for private medical insurance claims. Normally your insurer will give you an assessment number which will allow the hospital to invoice them directly.

  • There’s no qualifying period, you can make claims on the first day your medical insurance policy becomes active.

  • Private medical insurance is generally a lot more expensive. It’s a lot more extensive in scope than a health cash plan and has much higher, if any, limits.

  • With private medical insurance you have an unlimited budget for core cover under the policy, so if you need a series of extensive operations you can be covered even if they cost a considerable amount.

  • Dental and optical benefits can usually be added to private medical insurance policies so you can claim cash back for these treatments, but they are not generally included as standard.

  • As an incentive for choosing the NHS, many private medical insurers offer an NHS cash benefit for each night or day you spend in an NHS facility.

Can you take out both?

Yes, you can take out both, but the question is whether you really need to. If you can afford to take out private medical insurance you can just choose to add on cover for optical and dental treatments. Your private medical insurance should cover cash back if you decide to go on the NHS, and you’ve also got the peace of mind that if you want to, you can go privately for speedier treatment.

Health cash plans have a place if you can’t afford private medical insurance, but be careful, it may work out better value for you to put some money aside each month in a high interest savings account.

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