Health cash plans: good value-for-money medical insurance?

Health cash plans offer a cheap way to cover you and your family.

My brother approached me for advice about private medical insurance, but he was concerned about medical insurance rip-offs. He'd been told first-hand by a doctor that some of the more expensive care you pay for on the insurance doesn't really add to what you get on the NHS, sometimes not even making it quicker.

There is also evidence that some of the costs included in the premiums can be unnaturally boosted. For example, the Competition Commission recently reported that: “Many private hospitals face little competition in local areas across the UK, leading to higher private medical insurance premiums and charges for private patients.”

It also pinpointed inappropriate incentive schemes to put patients with one private provider for diagnosis and treatment over another.

You can avoid the rip offs

I've got a diverse background in insurance and have otherwise developed ways to build a picture of which insurance policies seem likely, in my opinion, to lead to less than optimal outcomes for people like you and me.

Sadly some of the cover that you get with full private medical insurance has some of those tell-tale signs, even if it is certainly not the worst insurance. That's why I do not write off the insurance altogether – by no means! For many people the full cover is still a worthwhile and good choice.

For a guide on how to keep the costs of a good medical insurance policy down, read How to pay less for private medical insurance.

However, there is a cheaper medical insurance policy that I think avoids many of the potential problems and I have seen enough of the tell-tale signs that show it is probably good value.

This particular policy is called a healthcare cash plan.

Avoiding one of the Competition Commission’s problem areas

He was concerned about potential rip offs, particularly in private hospital treatment so, after discussing his other needs, I knew this was the sort of medical insurance for him.

Healthcare cash plans don't offer private hospital treatment, but they do offer cover for an initial private consultation, and related tests, scans and other investigations, which means my brother can get a second opinion, or a first opinion if he wants to simply cut the NHS queue for a diagnosis.

Healthcare cash plans reduce stress

He and his partner could afford to pay for just about any private care they want from their own savings. Usually you shouldn't buy insurance if you can easily afford to pay for something yourself, but this case is a bit different.

If you're ill or injured, you might not want to add to your stress by agonising over whether you should take the chance with the NHS or pay large bills for quicker private investigations and swifter diagnosis. My brother didn't either.

No pre-screening

You can often get healthcare cash plans that don't test your level of health before telling you how much you have to pay. Instead, the prices are the same for everyone, rather than high for those who have less than optimal health.

Pre-existing conditions are still excluded, normally at least for the first three years, and you usually can't expect much in the way of help for chronic conditions with this insurance. But that's also the case with many private medical insurance policies.

Use NHS or private doctors

The cost of this insurance is further kept down because you can use NHS or private and send in the bills to the insurer, which is useful if you want routine or emergency dental work.

More valuable benefits and extras

The provider my brother eventually went for is Medicash. You can see a summary of the benefits it offers on its website.

Bear in mind that I didn't do a full comparison of all providers for him, as he didn't expect me to spend days on it. So it's possible there was a better one, and it's also possible another insurer would be more appropriate for your particular needs.

Despite being a fraction of the price of full private medical insurance, healthcare cash plans like Medicash's typically include eye tests, costs for glasses and prescription sun glasses, complementary therapies such as physiotherapy, and alternative therapies such as allergy testing.

You also usually get paid a bit of cash for pre-booked day stays in hospital or for inpatient stays of two nights or more. A representative at Medicash told me that all prescription charges, including any fees for ongoing prescription charges, are covered too.

Plus, you get payments on the birth of any children (but not within 12 months of starting the policy), which are covered automatically under the policy.

Less valuable benefits and extras

You also might be offered cash payments for specific kinds of accidents, such as loss of sight in an eye or loss of use of a limb. However, I don't think this should be a deal-breaker for you. Convincing circumstantial evidence leads me to believe that this type of cover is generally not particularly valuable – even if people who have successfully claimed would undoubtedly disagree!

You also might get access to a stress and support helpline or a  medical advice helpline, for example for a second opinion on a diagnosis from leading experts in their fields. These aren't usually benefits that you pay for in your premiums, however – even if they are sold as such. Rather, they are helplines that you usually pay for through an 0845 or similar number. They could still be very useful, but consider the NHS' 111 medical helpline, or support alternatives that you also pay for through the phone charges, such as the Samaritans.

Finally, your insurer might offer you access to discounts from retailers, which seems to be an increasingly obligatory extra from so many service companies now. However, most people end up paying out more, not less, when they use discount websites. That's almost the whole point of their existence. So be sure you really need what you're buying through them and that you can't get a cheaper alternative elsewhere.

Claims limits

With healthcare cash plans, each section you can claim on has narrow limits.

Looking at Medicash, for example, depending on the level of cover you choose, you can get between £50 and £230 of routine dental work paid per adult, per year, and have between £100 and £500 of private initial consultations and diagnostic tests paid. Children's limits are usually half that.

Naturally, these limits help to explain the low price, so if you want cover that is closer to limitless, you'll need to take out full private medical insurance.

Read the small print

You have to read the small print, because each policy is different. It's really worth reading through it. If it helps, many healthcare cash plan providers have unusually clear terms and conditions. I consider that another good sign.

What do you think? Do health cash plans offer good value for money? Or are you better off going for the comprehensive cover of a full private medical insurance policy? Let us know your thoughts in the comment box below.

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