Mr Paul Weigall from InterGlobal gives pointers on how to select the right level of cover and benefits for expatriates and hence reduce the impact of rising international private medical insurance premiums without compromising the quality of cover.
Every year the cost of delivering International Private Medical Insurance (IPMI) increases. Even in good economic times, rising costs were an issue for buyers of insurance and their providers, but now we are living in more prudent times, the issue is becoming more acute.
Fortunately, the emerging Asia Pacific economies, with their stronger growth and lower cost of labour, continue to be a magnet for expatriates of all nationalities. This means the demand for high quality IPMI remains buoyant as expatriates and internationally mobile people demand access to medical care, when and where it is needed. Premium inflation remains an issue, however, and there are a number of ways that insurance brokers can help their clients to save money on their premium – while retaining high quality cover.
Maximising insurance cover value for expatriates
The most effective way to cut costs depends on the clients’ circumstances and differs depending on whether the cover is for a group scheme or for an individual expatriate. In both cases, however, adjusting the level of benefits, managing the geographic area of cover and accepting a higher level of excess can offer internationally mobile and expatriate clients and their employer’s significant savings on their insurance premiums.
• Increase the policy excess
Most IPMI plans have a standard level of excess, with the client paying the first part of each claim. Some plans have the option to increase this excess and reduce the premium in return. For individuals, premium savings of up to 40% are available from some providers for increasing the excess to a high level.
For groups, the approach is for the employer to co-insure with their IPMI provider, with the employer covering the initial cost of medical treatment, up to say, a few hundred dollars, but using IPMI to protect themselves against the high costs of a serious medical complaint or the long term hospitalisation of one of its staff. Premium savings for groups will depend on the employer’s claims record, size of the scheme and level of self-insurance, but it is not unrealistic to achieve savings of up to 50% with a reasonable level of co-insurance.
• Improve claims record
Premiums for larger groups purchasing IPMI are usually directly linked to an employer’s claims record. A poor claims record can mean high and potentially escalating premiums and brokers can help their clients by working with them to reduce the level of unnecessary claims. The key is not to stop staff making a claim when it is necessary, but to ensure that only necessary treatments and benefits are utilised at reasonable costs. For example, medical facilities are highly commercial operations, they make more money if they can treat an employee as an inpatient rather than a day patient. They can also make more money by performing several extra tests, where one would suffice. It is of course a tricky balance for employers; employers do not want to appear mean – or to give the impression that they are putting money before their employees’ healthcare. However, imbuing a culture of cost containment and keeping an open mind to the potential of overtreatment by some medical providers, will work wonders for managing costs. One approach, which has proved effective for some employers, is to expect their staff to pay the first US$100, or similar, of every claim – this is a highly effective means to eliminate frivolous trips to the doctor.
• Manage claims costs
For group schemes, managing the overall cost of claims can have a significant impact on their claims record and in turn, on their premium level. Prices for medical treatment can vary widely, even within a single jurisdiction, dependant on the approach and business model adopted by the provider. Using only carefully selected medical providers, based on quality of care and their record for good clinical outcomes enables insurance providers to deliver a more cost effective service to employers. Of course, if a client wants cover which gives their staff access to a hospital which provides comfort more akin to a five star hotel than a hospital, they should expect to pay more for their cover. The key is that employers should know what their cover entitles staff to receive, rather than assume the insurer will pay irrespective of cost. It is also worth noting that across the Asia Pacific region, the most expensive is not necessarily the best; some expensive Western-style hospitals have a stranglehold on advertising and marketing budgets – but their prices are high and their clinical outcomes are not always the best.
• Negotiated rates
Employers with large group schemes can also improve their claims costs by using an insurer’s approved list of hospitals where the insurer has negotiated agreed rates with healthcare providers. Clearly in a global business with hundreds and thousands of medical providers, it is not possible for an insurer to reach pricing agreements with every one – but in each region there will be one or two major hospitals which are frequently used by expatriates, so set prices can be agreed with certain key providers. The hospital network approach is particularly effective for large corporate group schemes, where the volume of members using a single hospital can enable the insurer to negotiate highly competitive rates for treatment. Here, brokers should look for insurers with a strong network of offices across the Asia Pacific region, which are well placed to negotiate the best rates with providers.
• Direct billing or not?
Many employers like IPMI schemes which offer direct billing, where the medical provider invoices the IPMI provider directly for outpatient treatment of its employees, as this cuts administration. It is also worth noting, however, that this can add to the premium cost and employers can save money by opting for a reimbursement model, where the employee pays the medical bill and claims it back from the insurer instead.
• Check the levels of benefits
The range of plans on the market are wide, with premium-priced plans offering high levels of cover, including wellness benefits and protection for dental, maternity and optical treatment. Many plans also duplicate cover which may be covered elsewhere, such as repatriation of mortal remains which is frequently included in life policies. While these additional benefits are valued, they do add considerably to cost. Many individual expatriates and employers simply require a plan which offers access to high quality in-patient treatment together with access to emergency medical evacuation and repatriation if necessary. Plans offering this lower level of essential cover are generally priced at a far lower cost than the premium plans.
• Consider the appropriate area of cover
The cost of medical treatment varies widely around the world, with the cost of treatment in the US being particularly high. This cover is clearly unnecessary for expatriates who will never travel to North America and a regional plan providing protection for the areas a member will actually visit, will cost less. By making sure that your client’s plan covers the right geographic area, there can be considerable savings over worldwide plans. To protect members, most plans also offer them some protection when they are travelling temporarily outside their geographic area of cover.
• Pay annual premiums up front
For individual members, many plans are priced on the assumption that members will pay their premiums monthly. In return for paying for cover up-front with a single annual payment, many insurers are willing to discount individual rates by up to 12%.
• Benefit from no claims discounts
No claims discounts (NCDs) are increasingly available for individual members of IPMI plans. These have been controversial in the past, with some arguing that this may discourage members from claiming when it is medically necessary. In reality, experience shows that members will always claim when they face a medical emergency and as a result NCDs are becoming increasingly common, frequently offering savings of up to 20% on individual annual premium after three claim-free years.
The increasing cost of medical treatment is a fact of life. But by carefully selecting the right level of cover and benefits for their clients, insurance brokers can ensure that their individual and corporate clients can be protected from the impact of rising international private medical insurance premiums, without compromising on the quality of cover.
Mr Paul Weigall is Group Head of Sales & Marketing at InterGlobal.