Brexit: reciprocal healthcare Contents

Chapter 6: The implications of Brexit for the NHS and insurers

The NHS and healthcare providers

77.In the words of the Health Minister, Lord O’Shaughnessy, reciprocal healthcare is:

“Quite a decent arrangement, because it means that the money stays locally in the economy but the public service bill, if you like, is picked up by another Government. If you think about it, it is like a little economic sector that we have exported into another country—which is perhaps not how pensioners would like to be thought of.”110

78.The Joint Report makes no provision for future pensioners retiring to countries such as Spain: to some extent, NHS and social care capacity planning relies on a number of UK pensioners being cared for in other countries, with the NHS meeting the costs. We have already noted that it is cheaper for the NHS to care for pensioners in this way.

79.The ending of reciprocal healthcare arrangements could therefore put a financial strain on the NHS—though it is difficult to quantify its severity. Partly this is because reciprocal healthcare arrangements form part of a wider package of citizens’ rights linked to membership of the single market and freedom of movement. While the BHA suggested that the financial implications for the NHS would be significant, they acknowledged that a full assessment was impossible “without knowing what the impact [of Brexit] on the UK economy as a whole is likely to be”.111

80.These caveats aside, witnesses attempted to evaluate the impact that changes to the reciprocal healthcare regime might have on the NHS. The BHA believed that “if [the] arrangements were to be discontinued in the future, it is reasonable to assume that a proportion of [UK] pensioners, many of whom may have chronic conditions or more complex healthcare needs than younger citizens of working age, would return to the UK and that planning and funding provisions would have to be made for them in the UK’s NHS.”112

81.The concerns that we have just outlined relate primarily to UK citizens already exercising free movement rights, and may have been in large part allayed by the provisions in the Joint Report. But we also heard concerns about the future of reciprocal healthcare post-Brexit. Lord O’Shaughnessy acknowledged that if “a multilateral agreement with the entirety of the EU for continued reciprocal healthcare rights” were not possible, the UK might need to fall back on bilateral reciprocal healthcare agreements with individual EU Member States.113

82.Raj Jethwa of the BMA said that “while there may be other options” for reciprocal healthcare, “such as modelling the reciprocal arrangements we have with, say, New Zealand or Australia, they are far less effective in actual terms than what we have at the moment with the European Union”.114 And the BHA told us that should no EU-wide reciprocal agreement be achievable, the significant costs of establishing bilateral reciprocal arrangements with EU and EEA countries in the future would fall on the NHS:

“Managing access to health services by non-EU citizens is bureaucratically more burdensome than managing access for EU nationals currently … in the event that the current reciprocal arrangements with the EU were to be discontinued, [it] could have considerable resource and administrative implications for hospitals in both the UK and the EU.” 115

83.The RCPCH made a similar point:

“If UK health services are required to implement another system of recovering cost of care provided to EEA nationals, it could increase the pressure on medical and nursing staff to support the cost recovery process … The primary duty of clinical staff is to treat patients, not to recover costs or decide who is eligible for treatment. Applying the existing non-EEA cost recovery measures, or new alternatives to EEA visitors and UK residents would also require significant resources and place a considerable additional burden on NHS providers.” 116

84.Other witnesses criticised the UK’s lack of experience in successfully recouping healthcare costs from other countries. The Law Society of Scotland, for instance, suggested that “as the NHS has never been very effective in reclaiming the fees owed to it by overseas visitors to the UK, the UK may find itself substantially worse off financially when new arrangements for funding cross-national use of health services are put in place.”117 In his evidence to us, Lord O’Shaughnessy conceded that there was a “job to be done” by the NHS on cost recovery.118

Box 9: Cost recovery in the NHS

The UK has a residency-based healthcare system where eligibility is generally determined by patients being ‘ordinarily resident’ in the country and not by past or present payment of National Insurance Contributions or UK taxes. The Department of Health and Social Care explained that “ordinarily resident means, broadly speaking, living in the UK on a lawful basis and being properly settled for the time being”. Since 6 April 2015, non-EU/EEA nationals need to pay an Immigration Health Surcharge when applying for a visa to stay in the UK for over six months.

A Visitor and Migrant NHS Cost Recovery Programme has recently been established to support the NHS to better identify and recover costs from individuals not eligible for free NHS care. This includes the introduction of an EHIC incentive scheme, where NHS trusts are paid an additional 25% of all EHIC activity that they correctly record. The value of claims made by the UK to recoup the costs of NHS treatment for individuals insured by other EU/EEA countries and Switzerland has risen by £16 million (32%)—from £50 million in 2014/15 to £66 million in 2016/17.

Source: Written evidence from Department of Health and Social Care (BRH0021)

85.The Department of Health and Social Care told us that it had been planning for various outcomes of the negotiations:

“Our plans for the future of reciprocal healthcare arrangements have been designed to provide the flexibility to respond to a range of scenarios, including a negotiated agreement, as well as the unlikely eventuality of leaving without a deal … Implementing the first stages of contingency plans in the coming months should not be interpreted as an expectation that talks with the EU should not be successful. [The Department] remains committed to our stated aims of continuing with current reciprocal healthcare arrangements for pensioners and those on a temporary stay in the EU.”119


86.We received a large amount of evidence expressing concern both that the loss of existing reciprocal healthcare rights would impose significant additional future costs upon the NHS, and that the introduction of new reciprocal healthcare arrangements might impose a significant administrative burden.

87.We urge the Government, as part of its contingency planning, to clarify further whether it will seek UK participation in the EHIC, S1 and S2 schemes as a non-EU Member State; set up a separate scheme with the EU27; or explore the possibility of reaching bilateral arrangements with individual Member States.

88.Whichever is the case, we call on the Government to ensure that NHS procedures and practices are sufficiently robust to secure reimbursement for the healthcare of EU27 citizens provided by the NHS post-Brexit. Should the Government look to establish an independent scheme for reciprocal healthcare, we propose that it set out publicly its financial modelling of that scheme, including how the extra administrative costs will be met.

89.In the event that no future reciprocal healthcare agreements were agreed with EU countries, we would ask the Government to explain how NHS and social care capacity planning will secure sufficient capacity to care for future generations of retired people. In so doing, we suggest that the Government engage closely with the NHS and with those groups that will potentially be affected.


Box 10: Features of the UK private medical insurance market

The estimated market value of the private medical insurance market is £4.83  billion.

There are around 4 million private medical insurance policies, affecting 6.89  million lives. This accounts for around 10.5% of the UK population.

About 3 million policies, covering about 5.5 million lives, come under companies’ private medical insurance.

Just under 1 million policies (928,000) come under consumer private medical insurance. These cover around 1.47 million lives, representing about 2.2% of the UK population.

Source: Q 61 (Hugh Savill and Stuart Scullion)

Issues facing insurers

90.Private insurance could in principle fill any gaps in healthcare provision occasioned by a disruption to reciprocal healthcare provisions, but we heard that travel insurance companies were already concerned about the implications of possible changes for their planning cycles. Hugh Savill of the ABI reported that, because most policies sold were multi-year, insurance companies needed to “start thinking about how [to] take into account these extra costs and set up these facilities from March 2018 … By April, we will be selling policies that will still be in force after [the UK has] left the European Union.”120

91.Stuart Scullion of the AMII told us that private medical insurers needed “a steer from government”.121 Both the ABI and AMII expressed concern about the insurance industry’s ability to plan for any future changes to the S1 regime for those people wishing to move to the EU after Brexit. Hugh Savill noted that “until we know what the Government have negotiated to replace S1 … it is quite difficult to know what the role of the private sector” would be.122

92.For the travel insurance industry, the future of the EHIC system is more important than the S1. Mr Savill noted that:

“The basis of contingency planning is quite simple. It is EHIC or no EHIC. We are not modelling different relations with the European Union; we are just looking at those two basic scenarios … We are looking at how we will underwrite these additional costs and how we will set up claims assistance facilities or expand them in these countries to cope with the increased number of claims.”123

93.To help with their planning, the insurers underlined the desirability of a transition or implementation phase following the UK’s departure from the EU. Hugh Savill saw a transition period as “extremely important”, and urged that it be “based on the current single market arrangements”.124 Mr Savill called for future arrangements to include “access to the European Market”, and for European insurers to be able to continue to trade in the UK.125 Stuart Scullion sought clarity about the new arrangements “as soon as possible”.126

Opportunities for the insurance industry

94.Alongside the insurers’ concerns, Mark Dayan suggested that there might be “an element of opportunity” for the industry to offer private health insurance to those currently covered by the S1 scheme.127 Professor Martin McKee of the London School of Hygiene and Tropical Medicine had “no doubt” that changes to reciprocal healthcare leading to increased premiums represented a “wonderful opportunity” for the insurance industry.128 Furthermore, Stuart Scullion thought that if the UK were no longer part of the EHIC scheme, this “could be considered to be an opportunity”, if it led to more people buying private medical insurance. Some policies could add new benefits to “compensate for the loss and lack of an EHIC”.129

95.Hugh Savill, on the other hand, felt that the opportunities were not altogether clear.130 The ABI had started to look into the “possibility of increased markets overseas by stand-alone UK free trade agreements”, but Mr Savill called this “a very long-term strategy”.131 Stuart Scullion noted that the industry had been “quite vibrant” in responding to market changes, but underlined that it might take time to identify new products: “the insurance market is now more conservative with a small ‘c’ in its product development”.132

96.Mark Dayan stressed that while changes to healthcare provision could present opportunities for the travel and private medical insurance markets, altered reciprocal arrangements should not be considered “an opportunity for Britain as whole”.133 As we have already seen in our discussion of people living with long-term conditions, many patients will suffer significant disadvantages from moving to a system with greater reliance on private health insurance. Such a system would involve greater individual responsibility in paying close attention to what an insurance policy covered, and would potentially raise the need for greater legislative or regulatory oversight. Lord O’Shaughnessy related how his Department had been:

“talking to [insurers] about what they would do in contingency situations. We think that they would respond with additional products or maybe even higher premiums as a result. We are also aware that that could have differential impact on different social groups or more vulnerable people, so this is one of the things that we have to take into account in our planning for various scenarios. EHIC provides equally for everybody. It is not obviously the case that another scenario would do that, so it would need to be adjusted accordingly.” 134


97.Time is now short for the Government to provide much-needed clarity to the insurance industry to help with planning, particularly for multi-trip travel insurance policies that will include the period beyond March 2019. The European Commission has proposed a transition period that will expire on 31 December 2020, during which existing reciprocal healthcare arrangements will be maintained. This period will be essential for the insurance industry as it plans for the future arrangements that the UK agrees with the EU.

98.There will be consequences not just for the insurance industry, but for tourism and individual travellers. While the industry might derive some benefit should it be required to play an expanded role in providing cover, we recommend that any move to greater reliance on private medical insurance by UK citizens travelling within the EU post-Brexit be subjected to careful scrutiny, particularly in terms of the further regulatory oversight that might be needed to ensure that patients and consumers are protected fairly.

111 Written evidence from Brexit Health Alliance (BRH0018)

112 Written evidence from Brexit Health Alliance (BRH0018) and Nigel Tucker (BRH0002)

115 Written evidence from Brexit Health Alliance (BRH0018)

116 Written evidence from Royal College of Paediatrics and Child Health (BRH0015); cf. written evidence from British Medical Association (BRH0012).

117 Written evidence from Law Society of Scotland (BRH0019)

119 Written evidence from Department of Health and Social Care (BHR0021)

122 Ibid.

123 Ibid.

126 Ibid.

132 Ibid.

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