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Private health insurers put a cap on payouts?

Private health insurers are reducing what they are prepared to pay for operations, a wide range of medical procedures and outpatient treatments like chiropractors and physiotherapists. What impact will this have on you?

Published 31 October 2012:

Veteran Panorama reporter Tom Mangold has paid for private medical insurance for over 30 years as he wanted to ensure he’d get the best possible care if anything went wrong. When he recently developed cataracts, Tom was confident he’d get the surgery he needed when he wanted it and from his choice of surgeon.

AXA PPP informed him that he could have the operation – there was just one small catch, he would have to pay an extra £600 per eye on top of the insurance premium he’d already paid for the cover.

Despite increasing his premiums by 8% this year AXA PPP told Tom they wouldn’t pay the full fee for his selected surgeon.

And Tom found he wasn’t the only one going through this situation.

When Gareth Brocklebank was told he needed surgery on a prolapsed disk, AXA PPP agreed to pay in full.

However shortly before the surgery the pain had subsided so it was postponed. Just under a year later the pain returned and it was decided the operation should go ahead. But in that time AXA PPP’s position on the matter had changed.

Gareth told us “A week before the operation, I had a phone call from AXA PPP telling me that there was going to be an £800 shortfall in the surgeons fees. They said it was because they’d capped my surgeon’s fees between the last surgery that was supposed to happen and this year…I’ve never missed a payment and this is the only major claim I’ve made with them. And I feel they’ve pulled the rug out from underneath me and I’ve been left with hundreds of pounds left to pay.”

Insurers do offer policyholders an alternative rather than forcing them to pay the shortfall. That is, to have the operation performed by a surgeon recommended by them. But Professor Richard Packard, deputy chairman of the Federation of Independent Practitioner Organisation, says that patients are not happy about the changes.

“They’ve paid a lot of money and they suddenly find when they do come to claim they’re not getting what they thought.”

Jacqui Wigg would certainly agree with that. Just like Tom, she developed cataracts and her GP referred her to an experienced surgeon who charged £1200 per eye.

“I expected to have at least a fairly major contribution towards that but I was told that there would be a 75% shortfall and I would only get £289 per eye.”

Jacqui was told if she wanted an operation without paying extra she could go to a well-known high street optician. But to her that didn’t seem fair. After all, over the years she had spent tens of thousands of pounds on medical insurance – and expected the best.

So could it be that private medical insurers are reducing what they’re prepared to pay because doctors and consultants are over-charging?

Professor David Gartry, the consultant ophthalmic surgeon who performed Tom Mangold’s surgery, says,

“We haven’t put our fees up for nearly 20 years. We’ve all adhered to the guidelines as set by BUPA in 1992. By making this decision they’ve effectively given surgeons a massive pay cut. Those who have signed up to the new contract are recouping by charging more for extras.”

So if private medical insurers are saving money on surgeon’s fees, presumably they’re passing the savings on by reducing insurance premiums?

According to the Association of British Insurers, the number of people covered by health insurance fell by nearly 300,000 between 2009 and 2011. But the amount spent on private medical premiums increased by nearly £104 million.

So, despite paying more for medical insurance patients are being told to expect less for their money. Is private health insurance itself now on the critical list?

Company Responses


A spokesperson from AXA PPP healthcare says,

AXA PPP healthcare has more than 70 years’ experience offering a first rate service to our members. We offer a variety of products and services to meet a diverse range of customer needs and budgets. We pride ourselves on the value for money and the peace of mind that we provide.

Our members are our priority and we are always there when they need us, sometimes in very challenging and distressing circumstances. We pay around 97 per cent of the fees submitted to us for treatment in full, and we strive to communicate with our members fully and transparently, supporting and helping them through the process.

We continually review the way we pay a small number of consultants who, in some cases, have chosen to inflate their fees to such an extent that it would be detrimental to the long term benefit of our members if we were to pay them unchallenged.

We strongly encourage our members to call us before seeing a consultant. In the small number of cases, including the two you have shared with us, where we are unable to meet the inflated fees of the consultants in full, we will discuss this with our member in order to clarify the amount that we are able to contribute. We will do this as early as possible so that our member can fully understand the level of any potential shortfall. We will also discuss alternative options and offer to find another suitable and experienced consultant whose fees will be met in full. Our members have the ability to choose which consultant they wish to use and we will always talk through all of the options and be transparent about the costs involved.

We are working to avoid increases in premiums due to some consultants charging two or even three times more for procedures than is usual and customary. There is no published medical evidence to suggest that our members will receive a better quality of care from the two or three per cent of consultants who charge significantly inflated fees.

Watchdog Case Studies

We have thoroughly investigated the two case studies you have shared with us. In both cases, we can confirm that we did discuss the potential shortfall that would exist should they proceed with their chosen consultant and we also advised that alternative options were available that would enable them to have the full costs of their procedures covered. Both members opted to proceed with their choice of consultant in the full knowledge that we would be unable to meet the full cost of the inflated fees of the procedure. We are proud to say that we have provided both members with excellent value for money and good customer service during their time with AXA PPP, which in Mr Mangold’s case has been since 1978.

A spokesperson from The Association of British Insurers says,

“Private medical insurance provides many people with a valuable way of funding their healthcare and insurers pay out over £7 million a day. Insurers want customers to understand the cover they purchase and policies will clearly state benefits and any limits, which both the customer and insurer agree to when the cover is taken out. There is a lot of competition within the private medical insurance market with insurers offering a range of affordable options and varying levels of cover for customers to choose from.

“Consultants set their own fees and customers are free to choose their preferred consultant, but should be aware of any costs which may fall outside the scope of their insurance policy.”


A BUPA spokesperson says:

Bupa has no shareholders and the vast majority of our members' premiums are used to fund essential medical care, including advanced drugs for cancer patients. Paying private doctors excessive fees for routine operations would lead to unnecessary increases in our members' premiums.

Our members can choose from over 10,000 highly qualified, experienced private consultants whose fees are covered in full by Bupa. We offered Mrs Wigg the choice to have her operation with all the costs paid by us. Mrs Wigg decided to have her cataract surgery carried out by Richard Packard, with the full understanding, in advance, that he would send her an additional bill.

Richard Packard charged £1,200 for cataract surgery, the most common operation performed in the UK and a procedure that normally takes only 15-20 minutes. Many other experienced consultants are happy to undertake this routine operation for our standard fee level, which is considerably higher than the NHS consultant rate for this surgery.

Bupa has not seen any evidence that Mr Packard’s outcomes for cataract surgery are better than those of any other cataract surgeon, and we can therefore see no justification for the fees he has sought to charge Bupa, equivalent to an hourly rate of £3,600 for a routine operation.

Q: Why are you changing your reimbursement to consultants for surgical procedures?

A: From time to time Bupa changes what it pays consultants for specific operations, putting some fees up and reducing others where they are out of line. These fees are paid for by our members’ premiums, so we need to make sure we pay a fair price on their behalf. If we are paying excessive amounts for a particular type of operation, this unnecessarily increases the premiums our members pay. We judge a fair price according to the level of skill, risk and time required to do the operation.

By ensuring that we pay a fair price to consultants, our members are able to continue to access advanced treatments such as the latest life-saving cancer drugs, and not see their premiums go up by more.

Naturally some consultants may want fees for all procedures to increase, however, we know that the cost of health insurance is a big issue for our members. Insurers currently spend over £1billion on consultants fees. Further inflation would quickly translate into significant increases for our members.

Q: Why have you reviewed what you pay consultants for cataract surgery?

A: Cataract surgery is one of the most common operations in the UK, with over 330,000 being performed last year in the NHS in England alone (Royal National Institute for the Blind – 2011). According to the Royal College of Ophthalmologists, the procedure normally takes 15-20 minutes (The Royal College of Ophthalmologists. Cataract Surgery Guidelines. September 2010).

The rate we were paying for cataract surgery had become significantly out of line with what consultants charge for other operations and we were paying the equivalent of over £2,000 per hour for a routine operation. This is more than is charged by surgeons doing complex brain or heart surgery.

We do not believe this is a fair rate for our members to fund when many other experienced consultants are happy to treat them for much less, and so we have brought the fee levels more in line.

Q: Are you pricing consultants out of the market?

A: No. On the contrary, since 2010 we have signed up over 2,750 new consultants and, in that same period, we have no evidence of any increase in the relatively small numbers of consultants who leave private practice each year, mainly as a result of retirement.

Despite the fact that the UK has been in recession and the number of people with health insurance has decreased in recent years, consultant private earnings have remained largely unchanged. Independent analysis of private consultants’ earnings shows that profits have been robust over the past five years. For instance, the average pre-tax profit for ophthalmologists from private practice in 2010 was £87,000 (The Royal College of Ophthalmologists. Cataract Surgery Guidelines. September 2010). The vast majority of consultants in private practice also work in the NHS, where they also earn an average salary of around £125,000 (Pay in the NHS – House of Commons Library – SN/SG/4286), so their total income is above £200,000 a year.

UK Consultants in private practice are among the highest paid in the world. The recent changes that we have made to a small number of reimbursement rates will have a tiny impact on most consultants’ incomes.

Q: How will your members know if their treatment will be covered by Bupa in full?

A: We always ask our members to contact us before arranging treatment so that we can confirm that their care will be covered in full. They can choose from over 10,000 highly qualified, experienced consultants and never have any extra to pay.

Q: Are you encouraging your members to go to less experienced, more junior consultants?

A: Absolutely not. Of more than 10,000 ‘fee-assured’ consultants whose costs are covered in full by Bupa, the average age is 50 years old; this is exactly the same as the average age of our non fee-assured consultants.

Q: Why has the cost of health insurance increased?

A: The cost of healthcare is going up around the whole world, as new drugs and treatments are developed and made available to patients. For example this year Bupa will spend several million pounds on brand new cancer drugs which weren’t available last year. However, some of the increase is because consultants and hospitals increase their prices. As we spend the vast majority of members’ premiums on doctors and hospital charges, we have no option but to pass these charges onto our members in the form of premium increases. We work hard to control these price increases by doctors and hospitals so that our members’ premiums do not go up by more than they have to.

Q: Why should people pay for health insurance?

A: Bupa health insurance offers prompt access to diagnosis and treatment by an experienced, specialist doctor in clean, comfortable surroundings.

Bupa is well known for its cancer cover which supports members at every stage of their treatment, including secondary cancers and palliative care. Bupa also funds many drugs and treatments that are not widely available on the NHS or have not been approved by the National Institute for Health and Clinical Excellence (NICE).

Q: Richard Packard is Deputy Chairman of the Federation of Independent Practitioner Organisations (FIPO), what is FIPO?

A: FIPO is a private consultants’ trade body which campaigns for higher consultant reimbursement.