Health insurance vs a health cash plan

If you’re wondering whether to invest in a health insurance policy or a cash plan, the right choice often depends on your circumstances and what you want to cover. This article examines the main differences, advantages and disadvantages to help you decide.

What’s the difference between private medical insurance and a health cash plan?

The main differences between a health insurance policy and a health cash plan are what they cover, how they pay for treatment, and how you access care. 

Private medical insurance (PMI) is designed to cover unexpected medical costs such as major surgery, cancer treatment, or tests, scans, and consultations with specialists. Health cash plans, on the other hand, typically cover expected medical costs, such as routine dental appointments, eye tests, and prescriptions. 

With health insurance, you pay a monthly premium, and if you need treatment, you’ll make a claim, and your insurer will pay your specialists and private hospital directly up to your policy limits. Conversely, with a health cash plan, you pay your dentist, optician, or physiotherapist, then claim cashback from your health cash plan provider, again, up to annual limits.

The table below shows the common differences between private medical insurance and a health cash plan.

Health insurance
Health cash plan

What it covers
For unexpected, often major medical costs
For often predictable, minor medical costs

How it works
Comprehensive cover for medical conditions
Money back on everyday healthcare bills

Plan limits
Often high, some aspects unlimited
Usually modest, with strict limits

How it’s priced
Cost based on age, where you live and cover options
Often covers trips to the dentist, optician or physio

How much it costs
From £30-£200+ per month
From £15-£60 per month

Past conditions
Pre-existing medical conditions are excluded
Pre-existing conditions usually covered to plan limits

How does private health insurance work?

When buying private medical insurance, you’ll choose between several insurers and customise your policy to fit your needs. Health insurance is an annual reviewable product, meaning you can choose to renew, switch to a different provider, or cancel every 12 months. 

In return for a monthly or annual premium, your insurer will agree to pay some or all of your medical expenses if you need private hospital treatment. Importantly, health insurance will only pay for treating acute medical conditions that you can recover from reasonably quickly. Chronic conditions, which by their nature can’t be recovered from and require management over your lifetime, are excluded. 

Unlike a health cash plan, with health insurance, you must speak to your insurer and get authorisation for claims before starting treatment. Once approved, they’ll pay any hospital and specialist fees directly, less your chosen excess.

How does a cash plan work?

A health cash plan pays cashback on routine health treatments and check-ups. Health cash plans can also pay a fixed sum if you receive NHS treatment, such as overnight hospital stays. Many providers also offer support services, such as access to private GPs, counselling and health advice online or by telephone.

There are several providers whose health cash plans offer various types of cover. As with private medical insurance, you pay a monthly premium. However, you’ll have to pay for appointments and treatments yourself and then claim money back by sending your cash plan provider a receipt.

What does health insurance cover?

Private medical insurance policies vary in the cover they provide. However, most policies include “core cover,” which usually includes in-patient and day-patient hospital treatment. You can tailor your health insurance by adding optional extras such as out-patient consultations and mental health cover to give you more comprehensive benefits.

Here’s a quick run-through of typical inclusions:

Private hospital treatment

Most health insurance policies cover the cost of being treated in a private hospital as an in-patient or day-patient, where you’re admitted for a day or overnight. Insurers also tend to include out-patient surgery in their core products, but out-patient consultations are usually only accessible by taking out optional out-patient cover.

Your private medical insurance will cover your accommodation and treatment costs, including operating theatre costs, surgeon fees, and anaesthesia. It may also cover pre-operative scans and even some complex scans, such as CT, MRI and PT scans, but unless you’ve opted for the optional out-patient cover, you’d need to be diagnosed via the NHS or pay out of your own pocket for private diagnosis before your insurance would kick in.

Cancer treatment

Cancer Research says that 50% of us will get cancer at some point, so cancer treatment is an essential part of private medical insurance policies. Most policies cover surgery, chemotherapy and radiotherapy, while some include various support services, such as nutritional support and advice on wigs. You might also find cover for other treatments, such as reconstructive surgery or stem cell therapy.

Insurance policies vary, so it’s worth checking what’s included as standard. Some insurers let you pay an additional premium to enhance your cancer cover.

Counselling and CBT

Full mental health cover is typically only available if you pay to add it as an optional extra. However, most insurance provides some mental health support. Some insurers run specialist mental health helplines that signpost you to support and treatment.

You’ll usually be able to access 8-10 counselling or CBT sessions without a GP referral.

Virtual GP services

Every insurer has a version of a digital GP service which provides telephone consultations or online video appointments 24/7. Some let you book appointments online, while others have an app where you can enter your symptoms and request a callback.

You can use the service for advice, referrals, or private prescriptions. They may not be the right choice for more serious conditions, but they can be great if getting an appointment with your NHS GP has become challenging.

Post-surgery rehabilitation

Standard health insurance policies typically only include rehabilitation treatments such as physiotherapy, osteopathy or chiropractic treatment if you need them after surgery. Your in-patient coverage will often include post-surgical rehabilitation up to a specified number of sessions or financial limit.

You’ll need separate cover for physical therapy and rehabilitation without surgery, which insurance companies usually offer at an additional cost.

Full out-patient treatment (optional extra)

A basic policy may include some out-patient procedures, consultant appointments, or tests. However, if you want your private health insurance to cover a broader range of treatments, you’ll need to add out-patient cover to your policy.

For example, if you have a hip problem, you may eventually need a hip replacement, but your doctor may initially recommend less invasive treatments like steroid injections or physiotherapy. With out-patient cover, you can ask for a GP referral, and your insurance will pay for your initial care. Without it, you’ll have NHS treatment first and can only use your health insurance when you need surgery.

Therapies cover (optional extra)

We’ve mentioned physiotherapy as part of out-patient cover. However, many insurers now cover physical therapies separately. Therapies coverage typically includes physiotherapy, osteopathy, and chiropractic treatment.

Some policies also provide alternative therapies like aromatherapy, reiki or homoeopathy.

Extended mental health coverage (optional extra)

While every private health insurance policy includes some basic mental health support, this is typically limited to a few counselling or CBT sessions, which may not be enough to resolve more serious conditions.

Extended cover typically includes a broader range of therapies and in-patient, out-patient and day-patient care if needed. It’s ideal if you have a stressful job or want to ensure you can get the best care when necessary.

Optical and dental care (optional extra)

If you meet the relevant age or medical criteria or receive certain benefits, you can qualify for free NHS dental treatment, eye tests, glasses, and contact lenses. You can learn more about free dental care here and free eye tests here.

Otherwise, you will need to pay for private dental check-ups and eye care. Adding optical and dental coverage to your health insurance can be a cost-effective way to pay for your care. Most policies include regular dental check-ups, routine treatments, and eye care, including check-ups, glasses, and contact lenses if your prescription has changed since your last test. 

Coverage varies, so always check the small print.

An extended hospital list (optional extra)

We’ve mentioned that all health insurance includes a standard hospital list. While these lists usually cover hospital stays across the country, they exclude areas where healthcare costs are highest. If you live in London or another major city, you could find that a standard list doesn’t cover your local hospital.

Paying an additional monthly premium gives you access to an extended list of hospitals in cities like Birmingham, Manchester or Glasgow and all the hospitals on the standard list. An extended list with central London is the most expensive as costs are highest in the capital. However, it enables you to receive care close to home if you live in London.

Health insurance exclusions

Health insurance doesn’t cover every medical condition. It pays for care for acute conditions that arise after you take out the policy. If you have a chronic health condition such as asthma, diabetes or high blood pressure that requires long-term monitoring, you’ll need to stick with the NHS.

Some exclusions depend on your medical history. If you sought medical advice or treatment for a condition in the five years before buying the policy, it’s classed as a pre-existing condition. These are excluded for the first two years but can be added later if you stay symptom-free.

Insurers also have standard exclusions. These vary but typically include cosmetic surgery, emergency care and straightforward pregnancy and birth.

What does a health cash plan cover?

A health cash plan pays cashback on your routine healthcare costs and can also pay out if you receive NHS care. 

Health cash plans cover the costs of routine healthcare and check-ups, which typically include:

Dental treatment and check-upsEye care, including tests and scansGlasses and contact lensesPhysiotherapy, osteopathy and chiropodyTelephone GP services

You can usually claim cashback for any costs, whether you paid for private or NHS care. Most health cash plans also pay a fixed sum for hospital stays and when you give birth or adopt a child.

Each health cash plan has different levels with increasing financial limits depending on your premium. Some health cash plans pay 100% of your costs, while others pay a fixed percentage. Each health cash plan varies in the treatments it covers, so always check if something is particularly important to you.

Do health cash plans have any exclusions?

Health cash plans don’t exclude pre-existing medical conditions like health insurance does. For example, say you have an operation and spend the night in an NHS hospital. Private health insurance may not cover your care because of a pre-existing medical condition, but you can still claim a fixed sum from your health cash plan.

A cash plan can be a great way to reduce routine healthcare costs for people needing regular care for pre-existing medical conditions.

However, cash plans sometimes require a waiting period. For example, you can often only claim a baby bonus if you’ve had your cash plan for at least ten months.

Health insurance vs cash plans: advantages and disadvantages

Whether you choose health insurance or a health cash plan depends on your needs and circumstances. Here are a few of the advantages and disadvantages of each to help you decide.

Advantages

Medical insurance and cash plans offer some of the same advantages, with cash plans increasingly providing virtual GP services, health helplines and reward schemes. Here are some of the benefits that are unique to each.

Health insurance

Private medical insurance lets you access high-quality private healthcare more quickly than you’d receive it via the NHS. You’ll have a private room and access to cutting-edge therapies and drugs not yet approved for NHS use.

Your insurer will recommend consultants if you ask them to and pay your costs, apart from any excess that applies to your policy.

Cash plans

A health cash plan is typically cheaper than insurance and encourages you to look after your health by covering all or most of the cost of your routine health treatments and checks. A cash plan can also cover some NHS prescription costs, compared to private prescription medicines that are often more expensive.

Disadvantages

With any healthcare cover, you may spend more than you claim. It’s wise to check whether your chosen policy or cash plan will help you save money in other ways, for example, by giving you discounts on your regular healthcare costs or expenses such as holidays or gym membership.

Health insurance

Comprehensive health coverage can be costly, depending on your chosen coverage and other factors such as location and age. If you have several pre-existing conditions, you may face significant policy exclusions and chronic conditions aren’t covered at all.

Cash plans

 If you choose a cash plan, you must arrange your treatment and pay for it upfront. This is ideal if you have the funds and are happy to research appropriate providers, but it’s less so if you’re busy and have limited cash flow.

It’s also worth considering how much you usually pay for care and whether your cash plan will save you money.

Getting professional advice

MyTribe guides help you understand your private healthcare options. Advice from a specialist broker lets you learn more about private health insurance. Contact us for a comparison quote, and we’ll connect you with a regulated, high-quality broker for tailored advice.

Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.