What is a community-rated scheme? UK health insurance explained.
Introduction to private healthcare in the UK
While healthcare is free in the UK thanks to the NHS, many people prefer to hold private health insurance too. When you go private, you can often be seen by a doctor much faster, you have a choice of where you receive your treatment, and you may even receive a higher standard of treatment.
However, you may be concerned about the cost of your insurance premiums and how claims will affect them over time.
Health insurance premiums are based on a variety of factors
To begin with, most health insurers offer you a range of premiums based on age, gender, health history, health coverage needed and other factors (tobacco users pay more, for example). A general rule of thumb with insurance is the more claims you make, the more it costs to renew your policy. On the other hand, if you don’t claim, you build up a no-claims bonus, and you’ll see lower costs.
A community rating works differently from a no claims discount
Community-rated health insurance schemes set premiums using different criteria from standard insurance, as illustrated above. If you are worried that you may make more claims than average or are concerned about the impact of one large claim, community-rated schemes could help you pay less in the long term.
What does community-rated mean?
Community rated means that insurers base their future premium rates on the claims made by the entire membership of the scheme rather than members’ individual claims. If you’re a member of such a scheme, your personal claims do not affect your renewal costs. The price you pay depends on the community rating.
The cost of claims is spread across the membership
If you’re a community scheme member and make a claim, the entire membership bears the future cost of that settlement. While it generally costs more to join a community-rated scheme than a standard health insurance policy, it can work in your favour, particularly if you make a claim.
For example, if your insurance company has not had many payouts over a year (even if you have claimed), your renewal premium won’t rise significantly. The risk is that if your insurer has settled many claims, you’ll likely see higher premium rates, even if you haven’t claimed.
The pricing system for health insurance is all about risk. The insurance company wants to minimise the risk of losses by grouping members with a more favourable age or health status and members with higher expected health care costs on large group plans. Community rating means they can lower risk while still providing high-level services.
How does it differ from a traditional no-claims discount?
With traditional health insurance policies, the medical costs you claim affect the renewal price.
If you claim your health plan, you will pay higher premiums to renew your policy. If you claim many times or make one large claim, your renewal cost could rise significantly.
On the other hand, if you don’t claim, you build up a no-claims discount (or bonus), so when it’s time to renew, your premiums likely won’t change significantly.
Community-rated schemes don’t allow you to build up a no-claims discount.
“I requested a policy review having been with Bupa for over 10 years and was astonished by the savings I’ve made on mine and my husband’s policy. If you’re thinking about reviewing your policy do it, you won’t be disappointed. “
by Erica – 27th April 2022
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Benefits of a community-rated scheme
Your claims history doesn’t affect your premium at renewal. Premiums based on the risk rating of the group take precedence.You can make a claim without worrying about losing your no-claims discount. If you need medical services, go ahead.If your insurer has a good year, your premiums won’t increase much.
Disadvantages of a community-rated scheme
You can’t build a no-claims discount. You could lose out if your medical history is good and you rarely claim on your health insurance.If your community insurer has an expensive year with multiple payouts, your premium could rise by a more considerable amount than if they only looked at your personal history.
Which health insurers offer community-rated schemes?
Only four of the UK’s nine leading health insurance providers offer community-rated schemes.
The Exeter
The Exeter is one of the few health insurers that offer community-rated schemes to new customers between the ages of 70 and 80. Other insurance firms only provide cover to younger people where the risk rating is lower.
With The Exeter, insurance carriers can choose between a traditional no-claims discount or a community-rated scheme for their health coverage, which is unique in the marketplace.
WPA
WPA is highly rated for its flexible health coverage packages and excellent service. However, its policies are strictly based on age, with health insurance only available when the person’s age is under 65. You need to be younger than 65 to take advantage. But, if you’re the right age, WPA could be a great option.
Freedom Health Insurance (with exceptions)
Freedom offers a community-rated scheme. However, when we spoke to the company, we discovered some exceptional factors in its terms and conditions, where it may increase premiums for individuals if they make multiple claims.
This catch somewhat undermines the scheme, as you’ll only get the community rating if your claims history matches their self-determined boundaries.
National Friendly (claims won’t affect renewal premiums for the first 5 years)
At National Friendly, things are slightly different. For the first five years of your term with National Friendly, neither your claims nor the community’s claims will affect your premiums. Instead, your insurance premiums will vary based on your age and health status inflation.
After these five years, you’ll have a review where you’ll get new premiums based on factors, including your claims history.
