Health insurance premiums: Everything there is to know

26.03.2022 ∙ Roman Danaev ∙ 10 min read

Health insurance in the UK has seen an explosion in costs over the past few years as healthcare providers struggle to keep up with demand while managing soaring costs due to inflation and rising costs of pharmaceuticals and other medical equipment, to name just a few.

Health insurance premiums are based on several factors, including your age, your gender, the type of policy you choose, and where you live. Keep reading to find out how to calculate health insurance premiums, why they increase, and how to cut down on your premiums without sacrificing your coverage level.

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What is a health insurance premium?

The monthly amount you pay to keep your health insurance plan active is known as a premium. Health insurance premiums can cost hundreds of pounds a year, depending on your insurer and the coverage plan you choose.

So when you go to a hospital, your insurer will cover the cost of treatment up to a certain amount based on your policy, as long as you paid your premium that month and haven’t already reached your maximum out-of-pocket amount for the year.

What type of cover are you looking for?

You

Couple

Family

Business

Are health insurance premiums paid monthly?

Yes, private health premiums are generally paid on a monthly basis. Individuals that are covered by employers get a portion of their salary deducted. Moreover, there may be other costs associated with premiums, such as excesses, coinsurance, and tax deductibles.

How can I determine what my premium will be?

You can contact your local insurance provider directly to find out exactly how much you will pay. It’s also worth noting that UK residents aren’t required to buy or renew their policy from year to year if they don’t want to; only those living in certain countries need to have private medical insurance coverage by law.

What is a typical premium?

The average UK private health insurance premium is around£1,500 per year or £125 a month. However, depending upon a number of factors, you could find yourself paying more or less than that. As a general rule, young people in good health will be looking at lower premiums than older people and those with pre-existing conditions. At the same time, females are typically charged less than men due to their longer life expectancy.

However, it’s important to note that not everyone needs private medical coverage – for example, some employers offer it as part of an employee benefits package.

What is the minimum health insurance premium?

The minimum health insurance premium you will have to pay depends on which plan you go for, but if you’re a non-smoker and are in good health, you can expect it to be around £30.

This means that as soon as you turn 16, you’ll be able to receive any treatment needed privately without having to worry about paying an enormous bill at a later date. Before this age, your parents may opt to include you in their policy.

Health insurance premiums range from low to high depending on how comprehensive a plan you want. If you’re just looking for major medical coverage for yourself, then a cheap option is available; these plans typically only cover situations like accidents or hospitalization, making them ideal if you’re young and healthy.

However, if you’re older or suffer from a pre-existing condition, then inpatient cover alone not be enough – and so more expensive health insurance policies might be required. One thing worth mentioning is dental care.

As stated above, one of the main benefits of getting private healthcare coverage when turning 16 is avoiding large bills down the line – however, unfortunately, teeth are generally excluded from general cover, so many people end up missing out on regular checkups, etc.

Why do health insurance premiums increase?

There are a number of factors that contribute to an increase in health insurance premiums, mainly:

Inflation

Inflation is the decline of purchasing power of a given currency over time. For example, if you bought a toothbrush for £5 last year and the price went up by £2, then the same amount of money would be worth less. Similarly, health insurance premiums increase every year to accommodate the increasing prices of healthcare services.

Medical inflation

Medical inflation occurs when new procedures and treatments come with additional costs. While these aid in medical advancements and save countless lives, they are often very expensive. Thus, the price of your health insurance plan rises accordingly.

Age

As you age, your premium increases for one simple reason. Health insurance companies understand that, as you become older, you’ll require more medical attention. As a result, they’re more likely to be held responsible for higher medical bills on your behalf.

Claims

When you make claims, your insurance premium rises. A way to reduce costs is to ask for a ‘No Claim Discount’ when you renew your policy, but you can only do this if you haven’t claimed during the last term of your policy.

Lifestyle

A good example of this would be smokers. Tobacco usage directly impacts your health, which health insurance providers are aware of. Thus, an insurance company can charge smokers up to 50% more than non-smokers.

Do health insurance premiums increase following a claim?

Insurers raise your premiums based on your claim history, which includes the number of times and the amount you’ve used your health insurance policy. If you have chosen to change the benefits of your health insurance coverage, your premiums may rise.

When it comes to non-medical treatment like dental checkups, you need to check what your provider covers under your healthcare plan and find out if there are any exclusions.

Is a higher premium better?

When it comes to purchasing health insurance, you’re usually looking for a balance between price and quality. There are plenty of situations where a more expensive product will provide additional value (such as if you live in an area with limited providers or frequent emergencies).

Still, choosing a higher premium amount doesn’t necessarily mean that you’ll get better coverage. It all depends on your specific situation. So before going over-budget on premiums, take some time to assess what exactly you’re getting for your money. Research can save money and give you peace of mind knowing you spent it properly.

How to reduce health insurance premiums?

There’s no doubt that some extras within a health care package can prove extremely useful; however, they don’t always come at an appropriate price tag. If there’s something you know you will never use or require, simply decline that option when offered or select another provider where it isn’t included at all.

Follow these steps to reduce your health insurance premium without compromising on quality:

01

Increase your excess

02

Compare plans offered by various insurers; you may find one that fits your needs at a lower cost

03

Remove optional benefits

04

Adjust outpatient cover to your need

Are health insurance premiums tax-deductible?

This is debatable. If you have employer-sponsored insurance, you’re almost definitely already paying pre-tax funds for your premiums. If you’re self-employed, you can deduct your premiums if you buy private health insurance (but only the portion you pay yourself; you can’t deduct the portion covered by premium subsidies).

If you itemize your deductions and your overall medical expenses surpass 7.5% of your income, you may be eligible to deduct your premiums even if you aren’t self-employed. In that situation, you can deduct the percentage of your medical expenses that exceed 7.5% of your income level, including premiums.

The normal IPT rate for healthcare coverage in the UK is 12%.

The average increase in health insurance premiums by year

The average increase in UK health insurance premiums from 2012-2013 was a whopping 13.3%. This is substantially higher than increases in previous years (8.1% from 2011-2012 and 5.6% from 2010-2011).

A decade later, thecost of private medical insurance (PMI) in the UK continues to increase year on year,increasing 6% in 2020 and 7% in 2021.Currently, the averageannual health insurance premiumin the UK is £1,496.

Increases in health insurance premiums are not just limited to adult health care; they also include costs for young adults under 26 who have been part of their parents’ plan, as well as employee benefit plans offered by companies. This means that if you’re planning on applying for individual or family health insurance through an agent or company, you can expect hefty price tags attached to monthly payments.

Example of a health insurance premium

Insurers will always offer multiple plans to choose from. You can make a decision based upon your needs, budget, and any other coverage such as employee benefit plans. Here is an example to help you understand how to pick the right plan for you.

Suppose your insurer shows you two plans. The first plan offers a £100 monthly premium, with a £100 excess. The second plan offered by your insurer has a lower monthly cost of £50 but a £500 excess.

In terms of premiums, the first option will cost you more. Yet, if you have a few medical charges over the year, your medical costs will be lower than if you choose the second plan.

Final words

Health insurance is an extremely important aspect of our health and well-being. If you want peace of mind about your health, it’s worth considering paying for a good insurance plan. Just make sure that you shop around first; there are many different plans available, with different pros and cons to each. Make sure to be informed before making any decisions.

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