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. 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. 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 underwriting you answer health questions upfront and exclusions are stated before you buy. Under a moratorium 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.

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 list, you can be left to pay and reclaim — sometimes only partially, because of a shortfall 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 wording 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.

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). 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. 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 exclusions 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 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.

Health insurance

How does private health insurance work in the UK?

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.

Written by Stuart Hendy. Reviewed by Parvoz Haydarov.

Published 15 September 2026. Last reviewed 21 September 2026. Next review due 15 December 2026.

People covered by PMI, UK, 2024: 6.5m ^[1]
Claims processed, 2024: £4bn ^[1]
Covered via workplace schemes: 4.8m ^[1]
Growth in covered lives, 2024: ~4% ^[1]

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 premium, the insurer agrees to pay for eligible private treatment of acute conditions that arise after cover starts. The standard journey runs: GP referral, insurer pre-authorisation, 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]

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 conditions 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)
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] The Private Healthcare Information Network exists to publish comparable performance and pricing information for private hospitals. ^[5]

Related guides

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] 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] 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 underwriting you answer health questions upfront and exclusions are stated before you buy. Under a moratorium 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]
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 list, you can be left to pay and reclaim — sometimes only partially, because of a shortfall 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 wording 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]
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] 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] 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 exclusions 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] 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

Association of British Insurers, reported by The Independent. Record £4bn in claims processed by health insurers in 2024 — ABI. 21 January 2026 (primary source)
Financial Ombudsman Service. Medical insurance complaints. Accessed 15 September 2026 (primary source)
UK Parliament (legislation.gov.uk). Consumer Insurance (Disclosure and Representations) Act 2012. Enacted 8 March 2012 (primary source)
Competition and Markets Authority. Private Healthcare Market Investigation Order 2014. 1 October 2014 (primary source)
Private Healthcare Information Network. About private hospital pricing in the UK. Updated 16 June 2026 (primary source)
Department of Health and Social Care. The NHS Constitution for England. Updated 17 August 2023 (primary source)
HM Revenue & Customs (gov.uk). Insurance Premium Tax. Updated 6 March 2019; rates unchanged as accessed 15 September 2026 (primary source)
HM Revenue & Customs. EIM21762: Particular benefits — medical insurance and medical treatment. Accessed 21 September 2026 (primary source)