April Medibroker’s business development manager, Paul Bolam, explains how growing medical costs affect international health insurance premiums.
We have all heard of inflation; basically, it is the increase in the cost of goods and services this year compared with last year.
Many governments issue a monthly inflation index, which tells us how much the cost of living has increased over the last 12 months. Healthcare also suffers from inflation, commonly known as medical inflation.
What is medical inflation? Why is it different from standard inflation, and what causes it?
We are getting older, and need more medical treatment the older we become. We are also living longer, so the medical treatment we need has to continue longer. Medicine has made huge advances in the last few years; we are not dying from conditions as we used to, so we need medical care to treat them. For example, more people survive a heart attack than ever before, and cancer is now being treated, unlike ten to 15 years ago, when a diagnosis of cancer might have been a death sentence.
The advancement of medical research must be paid for: drug companies and medical supply companies spend a fortune in developing new drugs and medical equipment. They do not pay for this development – funding comes from government grants, insurance company funding, and the charge when selling the drugs and equipment.
Throughout the world, new hospitals are being built. The cost of accommodation and nursing also is reflected in the charges made by hospitals; they are, after all, businesses, and want to make a profit at year end.
Doctors, however, control the cost of treatment; they decide what treatment to recommend, and they want to be thorough. Tests can include blood tests, X rays, CT and MRI scans, ECGs, echo scans – the list is endless. Surgical procedures are also more complex, or, in some cases, less complex (for example, keyhole surgery) but the equipment used costs more to manufacture. Less-invasive techniques, such as colonoscopy or gastroscopy, assist in the diagnosis of conditions which, previously, would have involved surgery but still involve using expensive equipment.
Who pays for all these costs?
Mostly, we do, if we pay for treatment ourselves, or if we have expat medical insurance.
International medical insurance companies usually do not specify the hospital or doctor you may use. There are so many across the world that it is not possible to dictate a specific hospital or doctor in a particular country. In the USA, insurers use networks which have specified hospitals and doctors who have agreed to charge set fees. It is not like this in the rest of the world.
An international health insurance company will contact a hospital when a patient requires inpatient treatment, and arranges for bills to be sent directly to them. When a bill arrives, the international medical insurance provider will assess the costs and may query the charges. International health insurance companies know how much a procedure costs and what a hospital will charge. They will challenge bills that they consider to be too high, but, at the end of the day, the invoice has to be paid.
All these increased costs are assessed by international medical insurance companies when they review their premiums, which usually end up being higher than last year.
How do you know what is best for you?
First of all, speak to a specialist international medical insurance broker, who knows which of the plans they have available will suit you. International health insurance providers have different ways of developing and charging premiums – it is a complex issue. Each insurer publishes premiums rates, and, as I said earlier, the premiums reflect our age.
The older we are, the higher the premiums. The younger we are, usually, the lower the premium. Once 50–55 is reached, things start to change. Some international medical insurance companies start to increase premiums at this age, so, by the time you retire, international health insurance may be the highest monthly or annual cost you pay.
Once you are insured and you have claimed for treatment (after all, that is what international medical insurance is for), you may have little choice but to stay with the same insurance company, otherwise your condition may not be covered by a new international medical insurance company, so you will want to ensure that your future premiums are manageable.
Some international health insurance companies, such as InterGlobal, offer a no-claims discount, so if you have not claimed on your plan in the previous policy year, they will give you a discount of, usually, 10% of your renewal premium. Taking this into account along with any excess you have chosen, you need to assess whether a small claim is financially necessary. You may find that a small claim will cost you more than the value of the treatment.
IMG Europe will give 15% no-claims discount on your renewal premium, but it is not automatic. You have to claim it, and the premiums offered at renewal are not the same as in the first year. They are usually higher, so the no-claims discount can be very important when your renewal offer is made. This will also need to be considered when making a small claim.
IHI Bupa does not increase premiums for your age once you reach 60, but they will still increase premiums for medical inflation. If you apply for a new plan over the age of 60, they will apply a premium loading. We have found that this is still competitive compared with other insurers in the long term.
Nordic Healthcare does not increase premiums as you get older, and they have historically only increased premiums by 5% per year to cover increasing medical costs. The premiums may be higher in the first few years, but, overall, there may be significant savings compared with other plans.
Moving to live in a new country is about enriching your life and fulfilling your potential. However, the single biggest cost you could face abroad is healthcare – whether the incidental doctors’ visits and the medication they prescribe or the unexpected events that can result in a long hospital stay and a huge bill.
At April Medibroker, we have many years’ experience of providing international private insurance solutions to expatriates from our extensive database of the international providers/insurers, enabling customers to make an informed selection of medical insurers to suit their needs.
For a free, no-obligation expatriate health insurance quotation, click here