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PruHealth: breaking even? - John C. Kirk

Nov. 22nd, 2008

12:55 am - PruHealth: breaking even?

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I used to be a member of the local Holmes Place gym, which was later taken over by Virgin Active. In January, I cancelled my membership, and in March I rejoined via PruHealth. The basic theory here was that it would be more expensive in the short term (paying for health insurance as well as gym membership) but that it would get cheaper in the long run (since they'd reduce my monthly fee if I went regularly). I calculated that November was the "break even" point; it hasn't gone quite according to plan, but I think it's still been worthwhile.

The key word here is "quantify", so it's Excel time! (Ah yes, the fun never ends on a Friday night.) Here are the basic figures involved:

When I was with Virgin Active, I paid £60/month, and that was going up to £61/month in February. (I think they may have reduced their prices recently, based on posters, but I don't know the details.) I also paid £6/month for towel hire, so that would be £67/month.

When I joined PruHealth, I had to pay a £25 joining fee, and my insurance costs £35.42/month (for the first year). There are three price bands for gym membership, depending on how often I go:
Infrequent (less than once a week) = £53/month.
Occasional (between once and twice a week) = £40/month.
Regular (twice a week or more) = £15/month.

For the first three months (March/April/May), they put me in the "occasional" band, then they added up my visits to work out how much I'd pay for the next three months, and repeated this every quarter. My plan was to go twice a week, so that I'd be paying about £50/month. However, so far I've only averaged once a week, which means I've been paying £75/month (i.e. more than before).

As a related issue, I earn "Vitality points" for various activities (including gym visits), and the number of points I earn will affect my health insurance costs next year. Basically, it's a no claims bonus. This year the full price of my insurance is £48.52, so I get a discount next year relative to that. The maximum discount is 100%, but that doesn't mean the insurance will be free, because the basic cost will also go up.

According to the PruHealth website: "Your renewal premium will not include your first year discount and may rise due to your age and the effects of medical inflation. In the example above this was assumed to be 12% (including age) but this is not guaranteed and may be more or less than this figure."

Taking that as a rough guide, the full price for my insurance would go up by £5.82/month, i.e. it will be £54.34/month altogether. So, how much will I actually pay at each "status level"?

LevelPoints requiredDiscountMonthly cost
Bronze025%£42.21
Silver100050%£30.08
Gold150075%£17.95
Platinum2000100%£5.82


I'm currently at Silver level (1208 points), and I'm on course to hit Platinum status by the end of the year. I did a free fitness assessment on 22nd June, so I can do my next one on 22nd December (i.e. at six monthly intervals), and I get 300 points just for turning up to that. Assuming that I've maintained my BMI, blood pressure, and fitness levels, I'll get another 300 points. (If I've improved those levels I get extra points, but I'm trying to be conservative here.) So, that would take me up to 1808.

More specifically, points are divided into categories, and there are limits on each category. If I get 600 points from the fitness assessment, that's 500 for exercise, 50 for screening, and 50 for nutrition. I currently have 845 exercise points, so that will give me 1345 altogether. The maximum for the year is 1500, and if I go to the gym once a week between now and the end of February (at 10 points per visit) then that's an extra 150 points; I can get another 5 points from doing 10,000 steps in a day on the Fitbug. So, trying to be realistic about what I'll achieve, I don't see that being a problem. At that point I only need another 37 points to hit Platinum status, and I can get 50 nutrition points for preparing a "healthy eating plan" on their website, so that's easy enough. All in all, then, this seems like an attainable goal.

So far, so good, but then they changed the rules. From November onwards, gym membership will be based on your status level rather than specifically on the number of gym visits.
Bronze: £57/month.
Silver: £45/month.
Gold: £29/month.
Platinum: £15/month.

Combining this with insurance premiums, there's quite a dramatic difference between the levels. Here are the scenarios for what I (or someone in my demographic group) could pay next year:

LevelPremiumGymTotal
Bronze£42.21£57.00£99.21
Silver£30.08£45.00£75.08
Gold£17.95£29.00£46.95
Platinum£5.82£15.00£20.82


The theory is that they want to reward people who go for an all round healthier lifestyle, rather than just focussing on the gym, which sounds reasonable. It also means that if I can't get to the gym for some reason (e.g. I'm working late), I can still earn points by doing enough steps that day, so I don't lose out. Prices are now reviewed at the end of each month (rather than the end of each quarter), so you get the benefit more quickly, and your gym membership won't go up during the year. If I get to Platinum status by the end of this year, that gets carried forward to next year, so I automatically get the cheapest gym membership and then I just need to make sure that I earn enough points during the year to retain this status in my third year.

However, I do think it's a bit iffy to change the rules partway through the year, rather than waiting until the policy comes up for renewal. This decision generated quite a bit of controversy, e.g. in the Guardian (PruHealth's 'free gyms' promise runs out of puff). For instance, I planned to get 2000 points by the end of the year, not after 8 months, and even if I'd been going to the gym twice a week (as I originally intended) then this would make my premiums more expensive. Given my actual activity, it means that the price goes up from £40/month to £45/month. In fairness to PruHealth, they recognised that people were upset, and sent out a followup letter: I could choose to stay with the old method until the end of my first year (i.e. 24th February 2009). After due consideration (and forgetting to post the form), I decided to go for the new method.

So, there are five different scenarios here, and this chart shows the monthly costs:

Monthly costs

The two for Virgin Active are pretty straightforward: it's £61 or £67 each month, depending on whether I'd continued to hire towels. (I didn't know that I'd get free ones with PruHealth, but it may be fairer to compare like for like.)

As for PruHealth, the first three months are all the same (i.e. the lines overlap); the first month is more expensive because of the joining fee. The green "regular" scenario assumes that I'd lived up to my good intentions (twice a week), so that drops after the first three months, then again in the second year (March 2009), and goes up a bit in the third year (March 2010). I'm assuming another 12% rise, i.e. at Platinum level I'll be paying £6.52/month for the insurance and still £15/month for the gym.

The purple "occasional" line is what I've actually been paying so far, i.e. a slight drop after the first month, then a fixed amount until the end of year 1, a smaller fixed amount in year 2, and a slightly larger fixed amount in year 3.

The light blue "new" line is the most interesting one. This is based on my activity so far, and the points I'm expecting to get. So, it's a bit more expensive in November and December (paying £45 for the gym rather than £40), then a bit cheaper in January and February (paying £29 when I hit Gold level), and equals the "regular" scenario from March onwards.

There's obviously a balancing act between short term and long term, so that's where the cumulative chart comes in; this looks at the total amount I've paid in each scenario, starting in March 2008:

Cumulative costs

Again, the two Virgin Active lines are pretty simple, i.e. they show a steady increase each month (mirroring the previous chart).

The green "PruHealth (regular)" line is what I originally planned around. This starts out above the VA lines, but then dips below them (and stays below them); that's the break even point. Specifically, looking at the total I'd pay in March-December, it would be £604.20 for PruHealth vs £610 for VA. If I include the cost of towels, I'd have been ahead by September. However, since I was lazy, none of that applies.

The purple and light blue lines overlap up until the present, but they diverge after that, and clearly I'll be a lot better off with the new scheme. If PruHealth hadn't changed the rules, I'd break even in August 2009 (including towels) or April 2010 (excluding towels). So, technically I'd be better off, but two years is a long time to wait to see the benefits! By contrast, with the new scheme I'll break even in May 2009 (including towels) or July 2009 (excluding towels).

All in all, I'm glad I switched over to the new plan. It won't be such a good deal if you're just starting out, but you can play with the numbers to look at the long term effects. Also, PruHealth randomly paid £30 into my bank account last Friday; I don't know why, but I'm not complaining!

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Comments:

[User Picture]
From:sarahinthepark
Date:November 23rd, 2008 02:59 pm (UTC)
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There's always a run in the park...
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[User Picture]
From:johnckirk
Date:November 23rd, 2008 03:17 pm (UTC)
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True - I used to do a lot more running when I was in Durham, and it's not too far to the nearest park. That said, I mainly use the gym for swimming (rather than machines); I bought the Wild Swimming book a few months ago, but I think I'll wait until next summer to try that out :)
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