Private medical insurance is always evolving to meet new challenges. Nothing stands still and the latest evolutionary trend appears to be a move towards “open referral”, a device for insurers to help control increasing claim costs. ">

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What is open referral?

In short, open referral allows your private health insurers to better manage their costs by setting maximum fees they will pay to hospitals and consultants, which they place on pre-approved lists.

Which private health insurance providers work with open referrals?

  • BUPA first set the open referral ball rolling by introducing its “fee assured” concept in 2012. This limited its policyholiders to a choice of consultants who had already agreed to BUPA’s fee structure.
  • AXA PPP Healthcare joined the fray last year launching a Fee Approved Specialist scheme.
  • Aviva has yet to embrace open referral for its individual policyholders but has introduced it to its company health insurance through the GuideWell scheme – again with the logic being to keep premiums sustainable and affordable.

Is open referral good or bad for me?

Unfortunately this isn’t a black and white issue. On the one hand, by controlling the amount they pay out in claims, insurers can reduce their costs and therefore offer their policyholders reduced premiums – keeping health insurance affordable.

Also, with consultants and hospital fees capped, policyholders don’t need to worry about the possibility that they’ll need to top up their insurer’s settlement – such shortfalls do occur but appear relatively rare with AXA PPP claiming an incidence rate of just 3%.

But on the other hand, that reassurance comes only if policyholders secure treatment via the insurer’s approved list. And therein lies the issue, as obviously, under open referral, choice is limited.

So it’s a trade-off. In return for more affordable insurance premiums and removal of any need to worry about shortfalls or awkward discussions over medical fees, policyholders accept that they’ll have to select from a shortlist of pre-approved, appropriately qualified and experienced consultants.

Such a trade-off is not limited to the open referral concept as other insurers also grapple with medical cost inflation. In 2014, APRIL UK launched inSpire, a private medical insurance plan it says is designed to be “simple and easy on the pocket.” As the name suggests it involves a partnership with Spire Healthcare which means members of the plan are exclusively directed to one of its 38 private hospitals. In return they receive comprehensive cover which includes full in, day and out-patient cover with no mandatory excess; although an optional £100 excess can be employed to further trim premiums.

Is open referal the only option?

There seems little doubt that with two of the biggest private health insurers adopting open referral for individual private health insurance that the concept will gain further traction in the market. Indeed if PMI is to remain attractive to the many, open referral seems inevitable, as unless premium inflation is controlled, many people will be priced out of the market.

But it seems equally inevitable that there will always be a market, albeit a smaller one, for those who are free from financial constraint and demand the full monty: to be seen by whom they want, when and where they want.

It’s notable that AXA PPP has opted for a softly-softly launch of its Fee Approved Specialist scheme and, as yet, has not stated if it plans to make it mandatory for all. The insurer appears to be testing the water to see where the limits may lie, to whom open referral is relevant and to whom it isn’t. This seems sensible. A key attraction of private medical insurance has always been the rejection of one size fits all and the embracement of choice. Going forwards it seems clear that open referral will have a role to play – and a big one – in the development of the market but that it must be only one of several options available.

Can Chase Templeton help you?

From knowing which policies include open referrals to recommending a health insurance policy to suit your budget, our Advisors are always avaliable to offer free and impartial advice – contact us today.