Published 15 September 2026 · Last reviewed 15 September 2026 · Next review 15 December 2026 · 7 min read
The short answer
Private health insurance is an annual contract: you pay a premium, and the insurer pays for eligible private treatment of new, acute conditions. The journey runs GP referral, insurer pre-authorisation, treatment at a recognised hospital, and the insurer settling the invoice directly. Chronic conditions and pre-existing conditions are usually excluded. Policies re-rate at renewal.
PremierPMI is an insurance broker, authorised and regulated by the FCA (FRN 1029667). We may receive commission if you take out a policy. How we are funded.
What to know about how private health insurance works
A claim begins with a referral, usually from a GP or the insurer’s own virtual GP service. Read more
Before anything is booked, the insurer must confirm eligibility and agree the fee in advance. Read more
Treatment follows at a recognised facility, with the insurer settling the invoice directly. Read more
Every stage produces a written record, which is what governs if a dispute arises later. Read more
What the contract actually does
Private medical insurance is an annual contract between you and an insurer. In exchange for the premiumPremiumWhat you pay the insurer, monthly or annually, to keep the policy in force., the insurer agrees to pay for eligible private treatment of acute conditionsAcute conditionA condition that starts suddenly and is expected to respond to treatment and resolve. that arise after cover starts. The standard journey runs: GP referralReferralA GP’s letter naming a specialist, which most policies require before they will pay., insurer pre-authorisationPre-authorisationGetting the insurer’s agreement to treatment before it happens., treatment at a recognised facility, and the insurer settling the invoice directly. The Association of British Insurers reported 6.5 million people covered in 2024, with a record £4 billion of individual and workplace claims processed that year. [1]Association of British Insurers, reported by The Independent21 January 2026
Two structural points shape everything else. First, cover is for acute conditions — treatment intended to return you to your previous state of health — and not for chronic conditionsChronic conditionA long-term condition needing ongoing management rather than a course of treatment that ends. that need ongoing management, which remain with the NHS. Second, almost nothing is paid without authorisation in advance. Our guide to what private health insurance covers maps the covered territory in full; this guide stays on how private health insurance works.
The UK private medical insurance market at a glance (ABI, January 2026) — scroll sideways to see all columns
Measure
Figure
How to read it
People covered, 2024
6.5 million
Individual and workplace policies combined
Claims processed, 2024
£4 billion
A record annual total across the market
Covered through work
Around 4.8 million
Employer schemes are the larger part of the market
Year-on-year growth
Around 4%
Growth in covered lives, 2023 to 2024
Thinking about how private health insurance works
What works well
✓Direct settlement means you rarely handle large invoices yourself.
✓Authorisation confirms eligibility before you commit to treatment.
✓Recognised networks keep fees agreed in advance.
What to watch
−Skipping authorisation is the most common route to a declined claim.
−Facilities outside your hospital list can trigger shortfalls.
−The summary of cover is not the contract — the full wording is.
The journey of a single claim
A claim begins with a referral — usually from your NHS GP, sometimes from the insurer’s own virtual GP service. You then contact the insurer before anything is booked: it checks the condition is eligible under your underwriting basis, confirms the benefit applies, agrees the fee and names recognised specialists and facilities. Treatment proceeds, and the insurer settles recognised invoices directly. Every stage leaves a written record, and that record — not the marketing summary — is what governs if a dispute arises later.
Ask the insurer for the authorisation reference, the recognised facility and any personal contribution in writing before each stage of treatment. Whatever the specifics of how private health insurance works, the discipline that protects you is always the same: get the insurer’s position in writing before treatment, keep the documents, and compare like with like. The CMA’s private healthcare market investigation imposed order-backed requirements on the private hospital market precisely because opacity on price and information harms patients. [4]Competition and Markets Authority1 October 2014 The Private Healthcare Information Network exists to publish comparable performance and pricing information for private hospitals. [5]Private Healthcare Information NetworkUpdated 16 June 2026
PremierPMI is a specialist private medical insurance broker and the publisher of The Health Guide. If you want to talk through what this means for your own cover, you can start there.
PremierPMI is an insurance broker, authorised and regulated by the FCA (FRN 1029667). We may receive commission if you take out a policy. How we are funded.
Common questions
Why does authorisation have to happen before treatment, not after?+
Pre-authorisation is how the insurer checks a condition is eligible and agrees the fee and facility before any cost is incurred. Skipping this step means the insurer has made no commitment, so it can decline to pay or settle only part of the bill. Doing it first also protects you: you learn whether a condition is excluded, whether a specialist is recognised, and what you might owe before you commit to anything. Treat the authorisation reference as part of your policy documents, not a formality — it is frequently the deciding document if a claim is later questioned.
Who normally starts the referral that leads to a claim?+
Most referrals come from an NHS GP in the ordinary way, after which the insurer is contacted before booking. Some insurers also offer a virtual GP service that can issue a referral without a face-to-face appointment, which can shorten the first step. Either route then follows the same path: the insurer checks eligibility, agrees the fee, and names recognised providers before treatment goes ahead. The source of the referral does not change what happens next — authorisation and direct settlement work the same way whichever route started the claim.
What should I keep a record of while a claim is in progress?+
Keep the referral details, the authorisation reference the insurer gives you, the name of the recognised facility and specialist, and any note of a personal contribution such as an excess or shortfall. These documents matter because the written record, not the marketing summary of the policy, is what is used if anything is later disputed. Ask for confirmation in writing at each stage rather than relying on a phone call, and keep everything together with your policy documents so it is easy to find if you need it.
Is private health insurance a replacement for the NHS?+
No. Emergency care, GP services and the long-term management of ongoing conditions remain NHS services, and holding a policy does not remove or reduce any NHS entitlement — the NHS Constitution applies to you regardless. [6]Department of Health and Social CareUpdated 17 August 2023 What a policy adds is a parallel, paid route to planned treatment of new, eligible conditions: prompt diagnostics, a choice of recognised facility and a settled invoice rather than a wait.[1]Association of British Insurers, reported by The Independent21 January 2026 Whatever your question about how private health insurance works, frame it as “what does the contract pay for, alongside the NHS” — never “which system instead of the other”.
Do I have to declare my medical history when I apply?+
It depends on the underwriting basis. Under full medical underwritingFull medical underwritingUnderwriting where you declare your medical history and the insurer decides cover up front. you answer health questions upfront and exclusions are stated before you buy. Under a moratoriumMoratorium underwritingUnderwriting that automatically excludes recent medical history for a set period, usually five years. you answer no medical questions, but conditions from a recent look-back period are automatically excluded until you complete a set trouble-free period. Either way, the Consumer Insurance (Disclosure and Representations) Act 2012 requires you to take reasonable care to answer questions accurately and not mislead. [3]UK Parliament (legislation.gov.uk)Enacted 8 March 2012
Will the insurer pay the hospital directly?+
In most cases, yes — that is the point of pre-authorisation. You contact the insurer before treatment, it confirms the condition is eligible, agrees the fee and the facility, and then settles recognised invoices directly with the hospital and the specialists. If you go ahead without authorisation, or use a facility outside your hospital listHospital listThe set of hospitals your policy will pay for you to be treated at., you can be left to pay and reclaim — sometimes only partially, because of a shortfallShortfallThe part of a private medical bill your policy does not pay, leaving you to settle it. between a consultant’s fee and what the insurer recognises.
What can I do if the insurer refuses to pay?+
Ask, in writing, which clause of the policy wordingPolicy wordingThe full contract document that decides what is and is not covered. the decision rests on. Most refusals trace back to a small set of causes: the condition was pre-existing or chronic, treatment was not authorised in advance, the facility was outside the hospital list, or an annual limit had been used. Complain formally to the insurer first — it must give a final response. If you remain unhappy after that response, or after eight weeks, the Financial Ombudsman Service can decide medical insurance complaints free of charge for consumers. [2]Financial Ombudsman ServiceAccessed 15 September 2026
Are health insurance payouts taxed?+
Private medical insurance pays providers, not you, so there is usually no personal tax on settled claims. The tax points sit elsewhere: premiums carry Insurance Premium Tax at the standard rate of 12 per cent (the higher 20 per cent rate applies to travel and certain other insurance, not PMI). [7]HM Revenue & Customs (gov.uk)Updated 6 March 2019; rates unchanged as accessed 15 September 2026 If an employer provides your cover it is normally treated as a benefit in kind reported on a P11D, as set out in HMRC’s Employment Income Manual at EIM21762. [8]HM Revenue & CustomsAccessed 21 September 2026 Tax rules change, so confirm the current position with HMRC or a qualified tax adviser.
Can I switch insurer without losing cover?+
Switching is possible, but the underwriting question comes first. A new insurer will normally underwrite you afresh, and anything that has arisen since your original policy started can become a new exclusion. Some insurers offer continued personal medical exclusionsContinued personal medical exclusionsSwitching insurer while carrying your existing exclusions across, rather than being underwritten afresh. terms, which carry your existing exclusions across without adding new ones for the same history — but the offer, and its precise wording, must be confirmed in writing before you cancel anything. Never cancel the old policy until the new one is in force, and compare what is excluded under each, not just the headline premium.
Does my employer’s scheme affect what I can buy myself?+
An employer scheme and a personal policy are independent contracts. The ABI reports that around 4.8 million people were covered through workplace schemes in 2024, out of 6.5 million covered overall [1]Association of British Insurers, reported by The Independent21 January 2026 If you leave that employer, the cover usually ends; some schemes offer a continuation option on personal terms, which is often the cheapest way to keep the underwriting position you built up. Whether you also want a personal policy depends on gaps in the scheme’s cover — its outpatient limits, hospital list and excess — not on the scheme’s existence alone.
Sources and methodology
[1] Association of British Insurers, reported by The Independent.“Record £4bn in claims processed by health insurers in 2024 — ABI”.Published 21 January 2026.View source(opens in a new tab)Primary source
[2] Financial Ombudsman Service.“Medical insurance complaints”.Published Accessed 15 September 2026.View source(opens in a new tab)Primary source
[3] UK Parliament (legislation.gov.uk).“Consumer Insurance (Disclosure and Representations) Act 2012”.Published Enacted 8 March 2012.View source(opens in a new tab)Primary source
[4] Competition and Markets Authority.“Private Healthcare Market Investigation Order 2014”.Published 1 October 2014.View source(opens in a new tab)Primary source
[5] Private Healthcare Information Network.“About private hospital pricing in the UK”.Published Updated 16 June 2026.View source(opens in a new tab)Primary source
[6] Department of Health and Social Care.“The NHS Constitution for England”.Published Updated 17 August 2023.View source(opens in a new tab)Primary source
[7] HM Revenue & Customs (gov.uk).“Insurance Premium Tax”.Published Updated 6 March 2019; rates unchanged as accessed 15 September 2026.View source(opens in a new tab)Primary source
[8] HM Revenue & Customs.“EIM21762: Particular benefits — medical insurance and medical treatment”.Published Accessed 21 September 2026.View source(opens in a new tab)Primary source
Stuart brings over 20 years of experience advising on UK private medical insurance. He is a key member of the private medical insurance team and Head of the Publishing Team, gathering detailed client requirements, liaising with insurers on tailored quotes, and running training on insurer product changes and underwriting nuance.
Parvoz founded PremierPMI as a specialist private medical insurance brokerage. He sets the direction of the firm — insurer relationships, service standards, compliance culture and the editorial bar for everything published under the PremierPMI name — and personally reviews the largest corporate and family cases before they go to market.
