Self-pay is being hailed as the new PMI. Claire Ginnelly explains the jargon that surrounds it
Self-paying for medical treatment has been hailed by many as an alternative to private medical insurance (PMI).
And for many people it is now clear that self-pay has a positive role to play in healthcare planning.
But the real benefit is best felt when self-funded smaller treatments are supported with the reassurance of PMI cover for the larger risks.
There are many buzzwords and phrases related to self-pay, PMI and financial planning.
Here's a glossary of some of them:
Self-pay - Where a person organises and pays direct from their own funds for treatment with a consultant/specialist at a hospital.
The patient is personally responsible for all the costs.
Consultation - A private meeting or examination with a specialist consultant/surgeon
Referral - A patient wishing to use the services of a consultant/surgeon needs a letter of referral from a GP.
Fixed price package (or all-inclusive package) - An all-inclusive price is fixed at the time of booking an operation or procedure, and includes all clinical and hotel costs.
It may not include charges for further treatment or complications.
Hotel costs - Non-clinical costs that include accommodation, food, TV or computer use.
Healthcare planning - As more people realise that healthcare costs are increasingly met by a mixture of NHS provision, self-pay treatments, building a health fund through savings for private care, and medical insurance, they pay greater attention to these issues within their personal financial planning.
The phrase `healthcare planning' has been coined to explain this.
Health fund - A regular or lump sum savings vehicle set aside specifically to use any capital and growth for funding future healthcare needs.
Back-up PMI - While many people who self-pay understand that cataracts can be operated on for a few thousand pounds, or that a hernia repair is under £2000, few understand the true cost of treating more serious illnesses or dealing with complications that arise.
A heart by-pass starts at £10,000 and can cost nearer £20,000, and it is entirely feasible for certain cancer treatments to cost £50,000. Back-up PMI, where cover kicks in above a threshold or excess, is proving increasingly popular with the discerning self-payer.
And, because the insurer is not covering the smaller treatments such as hernia repairs, premiums can be up to 80% lower than traditional PMI.
Self-pay threshold (excess) - When people decide they are happy to self-pay for medical treatment they should establish the level to which they are willing or able to go.
Switch - Switching is what occurs when someone wants to change from one insurance company to another for their private medical cover.
Treatment information service - Not all hospitals offer the same packages at the same price. While the peace of mind of back-up PMI can offer some extra security for larger or unexpected medical bills, Standard Life's self-pay PMI plan Choices has a treatment information service to give people all the information they need about treatment options, whether they are above or below their excess level.
Self-pay is a sensible choice for those people who understand the options and have taken out provision for larger or unexpected bills.
At a time when healthcare is in the spotlight, this new addition to financial planning is adding a whole new exciting dimension to PMI for insurers and intermediaries alike.
Claire Ginnelly is national intermediary sales manager at Standard Life Healthcare
