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I am assuming your wife was working from Sep 03 - Sep 04 - She was then covered by the NHS.Yr 1 (Sep 03-Sep 04). Full Time job (became pregnant in May 04)
You can find National Health Service (Charges to Overseas Visitors) Regulations 1989 here:“Overseas visitors exempt from charges
(b) who has resided in the United Kingdom for the period of not less than one year immediately preceding the time when the services are provided, whether or not immediately prior to the completion of one year's residence as aforesaid, charges under these Regulations may have been made in respect of services provided as part of the same course of treatment
The Directive does not provide that the national must show evidence of private health insurance for periods of time where the applicant claimed that he or she was self sufficient. Such a requirement could be regarded as contrary to the spirit and purpose of the Directive which seeks to facilitate free movement in the EU
Do not worry about this. I am sure that they just misunderstood and thought that you had not been a resident of the UK for 5 years. If your wife has the right to permanent residency, then you will also have the right to permanent residency.The only confusing bit is that they suggested I should be granted 5 year residence card. Shouldn't it be a 10 year PR?