What impact has medical inflation had on international private medical insurance policies?

International PMI

Need to know:

  • An average increase of 9.1% is on the cards for international private medical insurance schemes according to Aon Hewitt’s 2016 Global Medical Trend Rates report.
  • Insurers have developed strategies including hospital networks and claims management to control treatment costs.
  • Employers should consider tiered cover, varying the level of cover and using local plans where appropriate.

International private medical insurance (IPMI) is a must for employees on overseas assignments, ensuring they can access treatment if they are ill or involved in an accident. But, with medical inflation rates outstripping those for general inflation, employers are increasingly looking for cost-effective ways to provide cover.

Just how much of an issue medical inflation is can be seen in Aon Hewitt’s 2016 Global Medical Trend Rates report. Published in January 2016, it estimates that the average cost increase for employer-sponsored medical plans will be 9.1% this year, with Latin America and the Caribbean experiencing the highest rate at 20%.

These figures come as no surprise to Lee Thurston, global benefits director at JLT Employee Benefits. “Medical inflation in Brazil is around 30% but even where a client has employees in 60 different countries, the rate can be around 15%. Employers are asking for ways to keep these increases under control,” he explains.

Insurer strategies

IPMI providers deploy a number of strategies to manage medical costs. Many have developed hospital networks or relationships with local providers that enable them to put pressure on treatment costs.

Even where there is not a network in place, many will also encourage employees to pre-authorise claims so they can actively manage them. Teresa Wighton, head of international healthcare consulting at Punter Southall Health and Protection, says: “An insurer might challenge the treatment or the length of the hospital stay. This can save thousands.”

As well as the behind the scenes activity, insurers have designed policies to enable employers to tailor cover and price. Most now offer modular products allowing employers to pick the level of benefit they require. Claudine Audin, international sales and account manager at Aviva Health, says: “We [offer] four levels of cover and then, subject to the rules in place where the employee will be based, allow employers to add benefits such as maternity, repatriation and compassionate travel and wellbeing.”

Excess behaviour

Excesses are another common add-on to help keep costs down. A £100 excess will shave around 10% off the premium. However, Wighton says: “Employees don’t really want the hassle of having to pay the healthcare provider an excess. It can make the process quite clunky. It’s also just a one off reduction to the premium rather than something sustainable.”

Yet, Audin says she has seen growth in employers using them in a more selective way. She adds: “They tend to go for a relatively small excess, say £50, and only on out-patient costs. This acts as a deterrent and reduces the premium by around 2% to 5%. We’ve also seen more interest in co-payment, especially where it’s linked to a network. For example, an employee will be fully covered if they have treatment within a network but will pay 20% of the claim if they go outside.”

Go local

Rather than tweak a policy, another option could be local cover. Thurston says: “There’s an assumption that employees need an IPMI plan because they’re going overseas. But, as well as providing much richer benefits than the employee may be used to in their home country, these plans are priced for a region so will be more expensive. For some employees a local plan will provide a much more appropriate level of cover and be around 20% to 25% cheaper.”

Although going local will not be suitable for every employee, cover can often be topped up, with IPMI insurers offering plans to supplement local policies with benefits such as repatriation. Thurston adds: “There are options for employers concerned about medical inflation and the rising costs of cover. Tailoring cover so it’s more appropriate to the individual and the territory they’re visiting can certainly help.”