Sourcing overseas healthcare cover locally can save on costs, while global plans are more straightforward to deliver. But employers are increasingly opting for regional plans, says Sam Barrett
Opportunities in both established and emerging markets mean overseas assignments remain a key part of many corporates’ business strategies. However, with healthcare costs continuing to rise at rates far outstripping inflation, new approaches to insuring medical expenses are gaining popularity.
The Health Insurance Group head of international Sarah Dennis says growing numbers of employers are questioning whether they ought to include a global medical insurance policy as part of their package for employees on overseas assignments.
“More companies are looking to provide employees with a local product instead,” she says. “These will be cheaper and often offer the most appropriate cover.”
Several factors are driving this trend. The introduction of regulations governing the provision of healthcare in other countries means bosses sometimes find that a local policy is the easiest – and in some cases the only – option. For example, in countries such as Dubai, Germany and the Netherlands it is compulsory for everyone who lives or works there to take out a minimum level of health insurance.
Dennis adds: “The changing rules and regulation means there’s a growing need to have access to local products. We also find that local nationals like the familiarity of a local policy with the wording in their own language.”
Cost is also a factor influencing the move to local cover. Aon principal, global benefits Douglas Gibbons says: “The underlying cost of healthcare is rising fast around the world and it’s especially bad in some of the growth markets and in countries where inflation is high.
“Healthcare systems are dealing with issues such as the ageing population and advances in medicine. This will see the cost of cover increasing significantly over the next 10 years.”
Although going local can still leave a policy open to these inflationary pressures, by limiting cover to one country the effect can often be less extreme. In some instances, especially where cover is compulsory, aligning cover to the one market can deliver significant cost advantages.
For example, in the Netherlands everyone pays the same price for their standard health insurance regardless of age or the state of their health. This means an employee who is above average risk can gain preferential rates by going local.
Time is also a factor in the shift to a local policy.
“Once someone has been based somewhere for around two years, it’s common for them to switch from a global to a local policy,” says Gibbons. “By this point they will have a better understanding of the country and its healthcare system and know whether they want to stay there.”
But there are downsides to going local. If an employee travels to another country either on business or for a holiday, the cover on a local policy will not stretch to their new destination. Similarly, if an overseas assignment does not work out or the employee is posted to another country, the local policy becomes redundant. Further, if the employee has undergone medical treatment or developed a chronic condition, they may struggle to obtain affordable cover.
Having this mish-mash of policies can translate into an administrative nightmare. As a result, some insurers are noticing a different trend among the larger multinationals.
Rather than switch to local policies, providing all staff with international medical insurance is becoming the norm.
“I’m seeing more people move to international plans for simplicity’s sake,” says Aetna executive director – distribution, UK Damien Lenihan.
Running just one plan can indeed make health cover much easier to manage. Consistent management information enables employers to spot anomalies in different regions and take appropriate action to prevent these becoming a drain on the plan.
Global plans can provide considerable reassurance to expat employees, according to Aviva Health international sales and account manager Claudine Audin.
“An employee posted overseas wants the confidence that they would be looked after if they had a problem with their health. They won’t know the local set-up so it’s important to have the reassurance that they have a good level of cover and can return home if necessary,” she says.
This reassurance can extend to the employer, as Axa PPP International sales and marketing director Kevin Melton explains: “No employer wants their highly paid expat employees meeting up and discovering they have different levels of health insurance.
“A global policy fits the demand for a consistent approach to employee benefits.”
Although the decision to opt for a global policy is usually governed by a desire for this consistency, costs must be considered. While the average cost of a global plan is higher than that of a local plan, the much bigger scale of the contract can give the employer considerable clout when it comes to negotiations.
On top of this, there can be savings in administration costs.
“Rather than having to renew 10 or more different local plans, there’s only one to worry about if they go for an international plan,” says Lenihan. “This can save on administration and also work well where a company has streamlined its employee benefits resources.”
However, opting for a single global solution can sometimes work against employers financially. Where an organisation has a broad spread of employees, concentrations of high-cost claims can be damaging, says Dennis.
“If a large number of claims are coming out of the US or Singapore, where treatment costs are higher, this could push up the cost of cover for all employees, including those in areas where claims experience is more benign,” she says.
“You need to be careful you don’t inadvertently push up costs for everyone.”
Regardless of employers’ chosen solution, Gibbons says insurers should make greater efforts to keep their cover affordable.
“Employers want sustainable medical insurance but, with costs rising, this becomes increasingly difficult,” he says. “It’s not in the insurers’ interests to have premiums so high, either.”
As a result, advisers are increasingly calling for a third option: a regional plan. This can apply to a geographical continent or a business region and ensures employees are covered if they travel out of the country in which they are based or need to access a healthcare facility in a neighbouring country.
Audin says: “There’s much more interest in regional plans now, with common requests for Europe, the Gulf and South-east Asia. In terms of cost, this type of cover sits between a global and a local plan.”
With all types of plan, a proactive approach to claims management is essential.
“Claims data can give an employer a really good insight into how their medical insurance is working,” says Gibbons.
“For example, it could highlight supply chain issues, such as where a GP is referring all his patients to the most expensive healthcare facility. It could be a genuine mistake but it is much easier to flush out these cases if you study the data.”
Insurers are also using cost containment measures to ensure their plans remain affordable. These vary but can include networks of healthcare facilities, co-insurance and more tiered benefits and menu products, which enable employers to select a level of cover that suits their budget as well as the employee’s needs.
Audin says such measures are becoming more commonplace.
“There is much more focus on cost than before. Employers are challenging it much more. Insurers need to explore ways to ensure cover remains sustainable,” she says.
Insurers are seeking other ways of supporting people who are interested in sourcing medical treatment overseas but without the price tag associated with a fully comprehensive plan.
For example, Friends Life offers a global treatment option through its Best Doctors scheme, albeit this is available only on its individual protection products. The option enables policyholders to go overseas for specified procedures, including cancer treatment, neurosurgery and coronary artery bypass surgery.
The cost for adding this to an individual protection plan is £4 a month or £8 for joint policies and, although the range of treatments is relatively limited, it gives a maximum annual benefit entitlement of £1m per person.
While this proposition may need work before it can feature in a corporate healthcare programme, it highlights the variety of potential options for employers wishing to cover staff overseas.
Dennis thinks this flexibility is essential.
“For some employers, consistency of benefits will be the most important factor, but others may prefer to limit global plans to expats, with regional or local plans for employees who don’t travel for business,” she says.
“There isn’t a one-size-fits-all approach for international medical insurance. You need to understand the employer and what they want to achieve.”