Insurance

In presenting different health insurance alternatives to people, I am often asked why there can be a wide divergence in the rates charged, given the individual products are ostensibly similar.

Here are some of those reasons:

1. Guaranteed vs Non-guaranteed renewal.  
Insurers offer plans where the right to renew is either our choice or theirs.

In the case of a non-guaranteed renewable product, if we have claimed we will often face a penalty increase in the premium

Because health insurance is regarded as annually renewable, the contract can be revised each year.

Some insurers guarantee renewal, 'if the plan you have is still available...' Such insurers typically assure you verbally that if they drop one plan, they will offer you another.

Unless you have this in writing, don't bank on it.  

A trap for many is that renewal may be guaranteed for as long as you are an expatriate.  This means the insurer can avoid many claims that are likely in our later years.

On a similar basis, many insurers will guarantee renewal until a certain age, or providing we live in certain countries.

When you think about it though, what guarantee is there that the insurer will still be in business when we need them?  And what guarantee is there, that we will be able to afford the premiums they charge later?

2. Rates by age, sex, smoker/non smoker and country of residence
Some companies charge a different premium for each age.  More commonly though, ages will be banded, usually in a 5 year spread and occasionally in a 20 year spread.  With such a system, the younger will subsidize the older, in order to get an average rate.

The real thing to watch is the rates applying in first 5 years after birth and once we have retired. 

Rates for children under 6 should commonly be charged far more than they are, but people are reluctant to accept this pricing philosophy.

In our older ages meantime, it’s not unusual for rates to double or even treble between say age 60 and 70; even ignoring the typical 7-12% annual premium increase.

Some companies offer free cover for a certain number of children under certain ages.  Don't be fooled.  The insurer has done its home work and will be charging for children, within its overall rate.

At almost every age, women's medical claims, on average, will be higher than men's', so when we have a unisex rate, men are paying more and women less than should actually be the case.

Smokers are also being subsidized by non-smokers in the vast majority of plans. 

Most likely the same is true for drinkers, being subsidized by non-drinkers, but I have not yet seen a plan that rates by declared alcohol consumption!

As far as country of residence goes, companies that offer a global rate are inevitably charging those claiming say in the Philippines, more than necessary and those claiming in the US less than necessary.  If everyone is charged a global rate, then it means everyone pays... maybe 10% additional; whereas if you need US cover and are taking a programme that prices for US cover, the cost may be 50%-100% more than for non US cover.

3. Chronic vs Acute conditions
If we develop some condition like Diabetes, which will need ongoing maintenance and monitoring, this is regarded as a 'chronic' condition, which can not be cured.

Kidney Dialysis is another chronic condition which insurers will try to avoid; as private hospital costs can run to US$10,000- US$30,000 per month!

If you see a limit for Chronic Condition cover in the policy, be warned that this gives an indication as to what the insurer well knows, a claim amount that can easily be exceeded.

4. Outpatient, Maternity, Evacuation, Dental
Outpatient cover will generally be an option.  Some people figure the bigger costs are the hospital and they are right, but they forget the fact that more and more treatments are handled in an outpatient setting and if we are hospitalised, chances are high we will need follow up treatments with doctors later.

Some plans even rate whether medicine costs are included in the outpatient cover.  The cost of new, high tech medicines on the market are increasing exponentially in variety and price.  For some drugs on the market it is possible to even pay US$50,000-$100,000 in a year for medication.

Maternity claims are normally factored into the overall rates by most international insurers, but there are a few that allow maternity as an option.  More significant than to allow maternity cost to be claimed are whether the insurer will guarantee a child cover from birth. (See my earlier article: Maternity Insurance)

Some plans distinguish 'Evacuation' , costing say US$50,000-US$250,000, from 'repatriation', costing perhaps US$100,000- US$300,000, the latter being where you get the choice of which country you are sent to for treatment.

From an insurer’s perspective, a medical claim may or may not happen but a dental claim is sure to happen. Expect to pay in premium around half as much as you can potentially claim in a year.  

5. Pre-existing Conditions - Covered?
With few exceptions, international insurers do not cover pre-existing conditions.  Some have a moratorium where, rather than have you answer lots of health questions, they simply say they will cover everything apart from a medical condition that in the previous two years, was diagnosed, needed treatment or investigation, or presented symptoms, whether diagnosed or not

Our advice; better to be fully underwritten at the outset, to reduce the chances of surprises later.

6. Portfolio growth?
If a plan loses its appeal or is no longer sold, but exists simply for the benefit of existing clients, watch out!  Without new entrants, a growing amount of claims will be shared over a shrinking premium pool.

7. Country Location/Government oversight/commission
Insurers based in different locations face different operational costs and differing compliance requirements, all of which involve administration costs that, like commission (typically 10-15%) are factored in to premiums.

Insurers will often admit though that the overhead of government reporting requirements do little to protect the customer. 

Presuming a competent and trustworthy management then, we are not necessarily any less served by a company based in Dublin or Copenhagen, than you are with one based in Samoa.