What is medical inflation and how does it affect health insurance premiums?

The drivers of medical inflation are complex, but a handful of factors do most of the heavy lifting. Here are the main ones.

1. New technology and treatments

Private healthcare providers invest heavily in new treatments, drugs and technology to improve patient outcomes. Private services often offer drugs and procedures that aren't routinely available on the NHS. That's one of the main benefits of going private, but it also pushes costs up.

Take nanoknife treatment for prostate cancer. It's a less invasive alternative to prostate removal, with fewer side effects and good outcomes. It's currently only available privately because the technology behind it is expensive.

2. Increased demand

The NHS is still most people's first port of call in the UK. But the balance is shifting, with more people turning to private treatment to skip long NHS waits.

The Private Healthcare Information Network (PHIN) recorded 240,730 private hospital and clinic admissions across the UK in Q1 2025, the second-highest quarterly total ever, behind only Q1 2024 (PHIN, 2025). Insurance-funded admissions hit a record annual level in 2024, up 6% on 2023, and now make up around 70% of all private admissions (PHIN, 2025).

These figures cover inpatient and day-case treatment only. They don't include outpatient claims for things like physiotherapy or counselling, which are also rising. As insurer payouts grow, that feeds straight into medical inflation.

3. People are living longer

We're all living longer, which is great news for us as individuals but also raises our risk of ill health later on. Around 19% of people in the UK are now aged 65 or over, up from 13% fifty years ago, and the Office for National Statistics projects this will reach 27% by 2072 (Commons Library, 2024). The number of people aged 85 and over is projected to nearly double, from 1.7 million in 2022 to 3.3 million by 2047 (GOV.UK, 2025).

Conditions like hearing loss, cataracts, diabetes, dementia and musculoskeletal problems all become more common as we age. Most cancer diagnoses in the UK are in people aged over 50, with 37% in those aged 75 and over (Cancer Research UK, 2025).

Many age-related conditions are chronic illnesses, which health insurance doesn't cover. Even so, an ageing population still means more claims for acute treatment, and that pushes medical inflation up.

4. Increased lifestyle-related health issues

Lifestyle-related illness is rising too, much of it preventable with the right support. Two factors stand out.

Obesity

In 2024, 30% of adults aged 16 and over in England were living with obesity, and 66% were either overweight or living with obesity (NHS England Digital, 2025). Obesity prevalence peaks among adults aged 55 to 74, at 35% to 36%. It's often the result of a poor diet and a sedentary lifestyle, where people don't get enough physical activity and eat too much sugar and fat and not enough fruit and vegetables.

Carrying excess weight can cause or worsen chronic conditions like high blood pressure, type 2 diabetes and asthma, none of which health insurance covers. It also drives medical inflation through claims for hip and knee replacements and treatment for mental health issues. Excess weight can become a vicious circle, where weight gain reduces activity because of joint pain or breathing problems.

Smoking

Smoking rates in the UK have dropped sharply, with 10.6% of adults aged 18 and over smoking in 2024, the lowest proportion since records began in 2011 (ONS, 2025). Even so, smoking is still the leading cause of preventable ill health and early death in the UK. It causes some cancers, heart disease and lung conditions like asthma and COPD.

Many patients with smoking-related illness rely on the NHS because their conditions need long-term monitoring. But most insurers cover cancer treatment as standard, so smokers typically pay higher premiums because they're more likely to claim. That feeds into medical inflation too.

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Is medical inflation linked to economic inflation?

Strictly speaking, medical inflation isn't linked to general inflation, although inflationary pressures can affect medical care prices. The Consumer Price Index measures how much we pay for everyday goods and services, including medical care costs and reports on how much those costs have changed.

While inflation affects the amount healthcare services pay in wages, rents, and utility bills, medical inflation is a separate calculation based on medical care costs. It's typically different from the general rate of inflation.

Medical inflation increases health insurance premiums because it makes healthcare services more expensive to run. We've discussed some of the causes of medical inflation already, but here are two main ways medical inflation directly impacts premiums.

Treatment costs per head have increased

Investing in new treatments and medical treatment technologies is expensive. Still, private healthcare companies prioritise this type of investment to attract new customers and give them the best possible outcome from their treatment.

This usually means that if a new, cutting-edge drug or treatment offers you the best chance of making a full recovery, you can access it via your health insurance. While you can still receive high-quality care with the NHS, newer and more expensive treatments may not be available.

The trade-off is that when your insurers spend more on the latest treatments, they'll pass it on to their customers via premium increases.

Insurers adjust premiums to reflect your claims history

As mentioned, more people are using medical insurance to fund their treatment and avoid time on an NHS waiting list. More claims mean health insurers pay more each year. Insurers calculate premiums based on the risk someone will claim. They'll do this individually, meaning your premium increases if you claim on your policy and could reduce if you don't. However, the overall level of claims can also affect premiums.

If medical insurance is a backup that customers only use for treatment they can't get from the NHS, total payouts will be relatively low. However, if more people regularly claim for treatment via their health insurance, this can affect insurers' risk assessments and cause premiums to rise.

You can't control medical inflation, but you can take steps to reduce its impact on your premium. Getting advice from a regulated broker helps you choose the right policy for your circumstances and get the best possible coverage for your budget.

Here are a few things to consider if you want to reduce your premium and how medical inflation affects the price you pay.

Stay healthy

Looking after your health reduces the risk of becoming ill and needing to use your insurance for treatment. Insurers provide various resources to help you improve your health, including online resources and information on common health issues and ways to live a healthier lifestyle. You can also access discounted gym memberships, fitness trackers, and discounts on other support services. The NHS also provides tools and services to help you stay healthy; this article explains how your lifestyle affects your health and the help available.

When you invest in health insurance but don't claim, your premium is less likely to rise and may even drop. Medical inflation will still affect prices, but you can minimise its impact on your premium.

Use preventative health services

Medical insurance typically includes various health assessments and tools to help you stay healthy. Some insurers even reward customers who achieve their healthy living goals with reduced premiums, perks, and discounts on various products and services. For example, Vitality's rewards program offers discounts on hotel stays and spa days.

Participating in health assessments helps you identify areas of concern and take preventative measures before they cause ill health. A recent survey of health insurers asked them to identify how customers and healthcare services increased medical inflation. Unnecessary treatment or over-prescribing was the number one issue. However, poor lifestyle choices and underuse of preventive health services came in second and third, respectively. By looking after yourself, you can reduce your premium and help combat medical inflation.

Review your coverage

Reviewing your coverage periodically is a good idea, especially if your circumstances have changed. Insurers sometimes alter their coverage, for example, by packaging services differently or removing or adding discounts. An independent broker will carry out a whole of market review to ensure your policy still meets your needs. If your circumstances have changed, for example, if you've changed jobs or become a parent, your policy may need to change to reflect this.

Reviewing your coverage means you'll only spend money on things you'll likely use. You can do this yourself, but getting professional advice reduces the risk of removing something essential.

Increase your policy excess

Your policy excess is the amount you pay towards your treatment before insurance covers the rest. Increasing your excess can reduce your premium by cutting the amount your insurers must spend if you claim.

One note of caution: consider how much you can afford to pay out of pocket if you need treatment. Some providers offer an annual excess, so you'll only pay once, while others charge an excess per treatment. Setting your excess too high might put you off using your insurance, so you don't get the benefits you've paid for.

Consider guided consultant choice

Guided consultant choice cuts the cost of your health coverage because it reduces the amount your insurers pay for your treatment. While it won't prevent rising costs due to medical inflation, it minimises the impact. Guided consultant choice works by limiting the amount of choice you have over who treats you. Instead of offering unlimited choice, your insurers will send you a list of 3-5 consultants when you claim. These consultants are still qualified but charge lower rates based on their treatment costs or experience level. Some highly experienced doctors also agree to treat a fixed number of patients at a reduced rate.

Taking this approach reduces your premium as it helps lower your insurer's overall costs.

MyTribe guides aim to help you learn more about private healthcare and health insurance and the factors that can affect the cost of your premiums. We hope this guide has helped you understand how medical inflation impacts healthcare costs.

The best way to find the right health insurance coverage for your needs and budget is to speak to a broker. Contact us for a comparison quote, and we'll connect you with a high-quality, regulated broker for tailored advice, whether you're buying health insurance for the first time or want to review your current policy.