Medical Insurance - Sorry, you're not covered!

In the UK around 7 million people spend around £3 billion a year on medical insurance. One in seven policies are taken out by individuals with the balance being put in place by their employers. The problem is that Medical Insurance is complex and few policyholders take the time to really study the details of their cover. As a result, many misunderstand what will be covered. If you expect medical insurance to pay every health claim, you're mistaken.

Medical Insurance is designed to provide protection for curable, short-term health problems and allow policyholders to jump the NHS queues to see consultants, be diagnosed, receive surgery or be treated. That sounds fine, but before you buy you need to appreciate the treatments and situations that fall outside the scope of the cover.

But first a word of warning. This article does not relate to any specific policy and the terms and conditions issued by individual insurers do vary. So please ensure you also check your policy documents. After reading this article, you'll know what to look out for!

Sorry – it's a chronic condition

If a condition can be cured and is not a long-term problem, your insurance company will classify it as acute and should meet the cost. If your problem is incurable or it's a problem that, despite appropriate treatment, will be with you for a long time, then your insurance company will classify it as chronic - and no, you won't be covered.

But deciding whether a condition is acute or chronic is fraught with problems. It's rarely a black and white decision and this can lead to a major area of conflict between policyholder and insurer.

It's clear that asthma and diabetes are chronic conditions as you're almost certain to suffer from them for the rest of your life. So those categories of illness are not covered.

Problems arise when Doctors initially consider a patients' condition to be curable, but the condition later deteriorates and the medical team changes its' mind, it's now become incurable. This can sometimes happen, especially in the treatment of certain types of cancer.

In these circumstances, the condition is initially defined as acute and is therefore insured, but deteriorates and becomes chronic - and outside the terms of cover. This is possible as insurers retain the right to reclassify a condition from acute to chronic during treatment.

Sorry - it's too long term
The insurance company will not pay out for long term treatment. But you need to check your policy documents to see how they define "long-term". You can find the situation where a course of drugs extends for say 12 months, but the insurer will only pay for ten months.

Sorry – it's preventative
Your insurance is designed to pay for the treatment and cure of conditions when they arise. It is not designed to pay for treatments that are used to prevent an illness.

Again, the problem of definition arises. Sometimes it is arguable whether a treatment is preventative or a cure. Take the drug Herceptin for example. This drug can be used in the early stages of breast cancer. Research shows that Herceptin can halve the incidence of cancer returning for women who have a particularly virulent form of the cancer known as HER2. In this situation, is Herceptin offering a cure or is it a preventative?

Insurance companies are split on the debate. Norwich Union, WPA, BUPA and Standard Life Healthcare will pay for Herceptin for HER2 patients whereas Legal and General and Axa PPP will not.

Sorry – the drug is not approved
Two of the main attractions for taking out medical insurance are: to jump the queues at the NHS, and to get the latest treatments and drugs. But there's a rider.

The Institute for Health and Clinical Excellence exists to approve the use of new drugs by the NHS in England and Wales. Until that body has approved the drug your insurer is unlikely to pay for its use. The problem is that the Institute's brief is to perform a cost/benefit analysis to ensure that the financial benefits to the nation from using the drug, outweigh the costs of using it in the NHS. A difficult brief and it has placed the Institute under scrutiny for the extended delays in drug approval.

The compromise hit on by the Financial Ombudsman is that if your medical policy won't pay for the use of experimental treatments, then it should meet the cost of an approved conventional treatment with the policyholder footing the bill for the balance if the experimental treatment is more expensive.

Sorry – it's a pre-existing condition

The basic principle is that if you are already suffering from a condition when you start a policy, then that condition "pre-exists" the policy and any claims for its treatment are invalid.

For this reason, insurance companies insist you complete an exhaustive questionnaire before they agree to insure you. After all they need a clear picture of your medical condition before they quote. For many applications, the insurer will, with your approval, also write to your GP for specific details of your medical history. They like to have a complete picture.

So lets say some years ago you twisted your knee playing tennis. It appeared to recover but now it turns out that you have a torn cruciate ligament and it needs to be operated on. Your medical insurance company could argue that the ligament damage was a pre-existing condition and you have to pay for the operation.

Some insurers try to accommodate these grey areas with a moratorium provision within your policy. These provisions typically say that so long as you have been symptom free for two years relating to any condition you've suffered from within the last 5 years, they will pay for subsequent treatment. Not all policies have these moratorium provisions and the time periods do vary between insurers. You should carefully read your policy.

Sorry – its not covered

Medical Insurance is an annual contract – just like your car insurance. So when it comes to renewal, your insurer is at liberty to review not only your premium but also change the conditions on which your cover is provided.

Therefore, if your policy comes up for renewal mid way through a course of treatment, it's possible to find that your new policy no longer covers that particular treatment. This means that you will have to foot the bill for the balance of the treatment.

Furthermore, with ongoing advances in medical research, more and more conditions are becoming treatable. This progress has the effect of shifting back the dividing line between chronic and acute conditions.

This hits the insurers' pocket in two ways. With more conditions being reclassified as acute, the number of claims is increasing. And there's also a trend for new treatments to cost more – Herceptin being a good example. The net result is that the insurers are finding themselves having to pay out far more. This is inevitably passed back to you through increased renewal premiums. And in an attempt to reduce their risk exposure, insurers have a tendency to adjust their definitions and exclusions. This means that you must read your renewal notice closely before you decide to renew.

So if you're tempted to buy Medical Insurance, be aware that everything is not always black and white. If you've got insurance and need treatment, you're well advised to contact your insurer without delay and get them to confirm that they will meet the cost of your proposed treatment.

By Michael Challiner