Standard Life launches a new cut-price product

Standard Life Healthcare have introduced what they call a ‘Guided Option’ into their product range. This provides for a 15% discount on standard premiums across all products if the member is prepared to forsake choice of consultant and hospital.

Under the scheme, which is only available to new customers, members will have to tell their GP to issue an open referral letter which Standard Life then will use to nominate a consultant and a hospital where they have agreed suitably low charges. Initially, this will be only at hospitals owned by BUPA Hospitals or the Capio group, thus excluding around 65% of the private hospital market; but Standard Life expect to sign up other hospitals in due course. The new plan is flexible enough to permit individual members of corporate plans to make their own decisions as to whether or not to take the new option, as long as their employer permits them to do so.

Standard Life say that they are taking this initiative because they feel that consumers will not continue to pay the ever escalating costs of medical insurance when the NHS is increasingly devoid of waiting lists. It seems, however, that they have also removed many of the usual features that people associate with going private. When launching the product, a Capio spokesperson said: "It doesn't allow choice of consultant, patients won't be guaranteed a single room, and they won't have the same choice of menu."

While it is always good to see insurers trying new things, this initiative is unlikely to have a wide appeal in the corporate sector. Premiums for business are lower than for individuals and are not rising as fast. Furthermore, the pared down nature of the product will cause employees to put less value on what their employer is giving them as compared to what they might get elsewhere.

Nonetheless, there is no reason for employers to actively prevent employees from taking the new option if they so wish. There are some parts of the country where the only private hospital in the locality is owned by BUPA Hospitals or Capio, and employees living in these areas may decide that since they have, in practice, very little choice of provider, it is worth opting for something that will reduce their tax liability and the cost of adding family cover.

We have experience of just such a situation that has worked to the benefit of one of our clients. This is not with Standard Life, but with Norwich Union, who are operating a similar arrangement with Nuffield Hospitals on a trial basis. Our client is in an area where their local Nuffield hospital is the only choice available for most employees, and encouraging them to use it has not greatly increased patient numbers. Despite this, Nuffield have reduced their charges to Norwich Union and have also guaranteed the company priority booking where previously there had been problems in getting immediate access due to, among other factors, the high occupancy by NHS-sponsored patients.

This sort of tactical use of preferred option plans can make sense for some employees and some companies. Getting closer to their customers may also help hospitals develop other business lines such as health screening and occupational health services generally but, since they are having to discount existing business to do so, it is unlikely that they will be happy unless they can get people to use their hospital when ill rather than a competitor’s. In the corporate sector, this seems unlikely.

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