Containing costs when recommending international PMI cover can involve pulling back cover. But how far can benefits be safely scaled back? Sam Barrett reports
Striking a balance between comprehensive cover and price isn’t easy with international medical insurance. While the NHS can step in to fill any gaps in cover on a domestic plan, few employers would wish to have an employee, sick and unable to access healthcare, thousands of miles from home.
It’s a challenge that Chris Beardshall, senior consultant at the PMI Health Group, comes across on a regular basis. “We do get asked to justify premiums, especially when we see double digit increases every year, but ultimately employers want to be sure the product will cover any healthcare requirements the employee might have while overseas,” he explains.
But, while comprehensive cover is a must, insurers are responding to employer demands to control costs without cutting out important areas of cover.A common way of doing this is through a modular product. These are available from most of the insurers, with Expacare joining the ranks earlier this year with its Choices product. This offers four modules – core, which includes inpatient cover and emergency evacuation; cancer and chronic conditions; outpatient cover with a maternity add-on; and a wellness option, which includes dental and optical cover. With each option there is further flexibility, allowing policyholders to pick the level of cover they want.
For Beverly Cook, managing director of Expacare, it was important to offer this flexibility. “Employers sending people overseas do need to balance budget and cover. As an example a group of young people setting up an office overseas might feel comfortable removing the outpatient option. They’re young and less likely to have any major medical problems so might want to fund their own outpatient treatment.”
But, while modular plans have made it possible to tailor cover, Cook says there’s been little appetite for major cuts. In particular, every company taking out Choices has elected to retain the full cancer and chronic conditions benefit.
Beardshall isn’t surprised by this. He says that employers rarely remove cover for chronic conditions. “It’s too emotive,” he says. “If you employ someone with a partner or child with a chronic condition, do you want to force them to make choices about whether they take on an assignment based on the availability and cost of healthcare?”
While this benefit tends to stay, he does find that employers are much more ruthless with cover for other areas. He explains: “It’s a judgement call for the employer whether they want to include maternity or dental. Someone might prefer to come back to the UK to have a baby and some employers prefer to exclude dental cover and let employees claim it through expenses.”
As well as shaping cover to suit budget or employee needs, insurers are also reporting an increase in the number of companies that are taking local provision into account. “Rather than provide blanket cover, employers are looking more closely at the requirements of employees on overseas assignments and trying to match cover to that of domestic employees,” says Tim Slee, sales director for Bupa International.
For example, an employer may wish to include maternity benefits on an international plan to replicate the NHS provision in the UK, but they might remove optical and dental benefits if the employee would normally pay for these themselves while in the UK.
While cutting cover is one option, it remains unpopular. Instead, Slee says that the biggest shift he’s seen over the last couple of years is an increase in shared responsibility. “We’re seeing more employers looking to pass an element of responsibility for the cost of healthcare on to their employees. This can drive down the frequency of claims.”
Popular shared responsibility mechanisms include excesses, deductibles and co-payment options. These can secure varying levels of savings on premiums. For example, Axa PPP International offers a range of excesses,from £100 to £2,000, on its corporate plan. These can give savings of up to 25% on an age-related group but Kevin Melton, sales and marketing director at Axa PPP International, says he’s also seen demand for higher excess levels. “We don’t offer a standard excess above £2,000 but some clients have asked about excesses of up to £10,000. This turns the product into catastrophe cover,” he explains.
But, while offering significant savings, chunky excesses tend not to be an option on international corporate cover. “Excesses are popular on individual cover but very few employers take them out when they send employees overseas,” says Cook. “They want them to be able to access treatment easily if it’s required.”
Rather than apply a large flat excess to an annual policy, it’s also possible to impose a smaller excess on each claim. For example, Bupa offers a co-payment option where the employee is required to pay the first $10 of any claim up to a set amount. This can help to remove some of the smaller claims.
Another option for controlling claims costs without cutting back on cover is to restrict the healthcare facilities available. By directing employees to hospitals where the insurer has negotiated rates and set up direct settlement arrangements, it can help to reduce claims costs.
But, given the size of the planet, it can be difficult to apply a restricted network in the same way as a domestic insurer. Instead insurers tend to incentivise employees by offering a full refund for treatment in these facilities rather than paying a percentage of the claim in a facility outside their network.
Rather than limit cover to certain facilities, some of Beardshall’s clients prefer to reduce cost by restricting where the cover applies. By refining cover to the countries the employee will be visiting, premiums can be lower. But he warns that this can backfire. “If the employer truly understands where the employee will be based then it’s worth considering,but we do see cases where the cover is so restricted they can’t come home to be treated in the UK,” he explains.
Likewise, local policies are another option. These can be significantly cheaper than an international scheme but, as cover won’t always match employee expectation, can prove too restrictive.
But, while all of these measures are useful to keep premiums manageable, they’re largely cosmetic in the corporate arena. “Employers want comprehensive cover,” says Melton. “It’s still regarded as an essential part of their package.”
In support of this, Axa PPP International launched a top of the range product, Prestige Plus, in April. This includes cover for chronic conditions, palliative care, maternity, optical and dental and up to £2,000 of out of area cover for emergency outpatient treatment in the US. “Feedback from advisers and customers showed that, even though budgets are under pressure, there was a need for a plan that sits at the top of our product range,” adds Melton.
Although Axa’s recent launch demonstrates that cover remains the number one priority when sending employees overseas, how much it costs is growing in importance. “In the past employers would ask about the service levels and what we do to make things sweet for the expat but now it’s much more about cost containment,” says Ron Buchan, chief executive of Allianz Worldwide Care. “They want to know we’re doing everything we can to keep the cost of cover down.”
Other insurers are also reporting a similar shift in client requirement. For instance at Axa, Melton says that there’s now more emphasis on getting value for money from the insurer.
One of the ways in which insurers are containing costs is through tighter controls on suppliers. For example at Allianz Worldwide Care as well as putting access agreements in place with facilities wherever possible, it will agree charging structures and ensure that, where possible,every claim is preauthorised before treatment commences.
This helps to control costs but also removes the opportunity for claims to be inflated by adding additional nights’ hospital stays. “If we can, we’ll look to establish diagnostic pricing,” adds Buchan. “It’s not always possible but if a rate is established for the procedure, including all the ancillary costs such as the hospital and anaesthetist charges, then there’s no incentive to keep the employee in an extra night or run further diagnostic tests.”
This hands-on approach can be particularly important where potentially large claims are involved. Melton says that while his team are negotiating deals with hospitals and TPAs, there’s additional focus on certain claims. “Claims for heart, cancer and psychiatric treatment can be very costly so our medical services team will step in and negotiate with the hospital to ensure our client gets value for money,” he explains.
Taking steps to manage claims costs in these ways can be particularly effective. Buchan estimates that as much as 30% of claims costs can be made up of extras such as an additional night in hospital, unnecessary drugs or diagnostic tests. “All of these extras can be prevented through careful management of the suppliers,” he adds. “It’s very positive that employers are focusing on cost containment processes: it’s one of the key differentiators between insurers.”