Comparing quotes from international health insurers

Not all international health insurers include tax charges in their initial quotes, so comparing quotes across the board can be highly misleading, says Kirstie Redford.

If you read nothing else, read this …

Different countries charge varying tax rates on insurance premiums.

Not all international health insurers include tax costs or other additional charges in initial quotes, so ask.

To compare premium quotes fairly, ask for a breakdown of cost items.

Article in full

When choosing which benefits scheme to opt for, employers naturally want to get the best deal. So it’s important to be able to compare like for like. With international healthcare schemes, however, this is no easy task.

Different countries charge varying rates of tax on health insurance premiums. As the rate of tax chargeable on a scheme varies depending on which countries employees travel to, pricing healthcare schemes accurately can become one big headache.

For this reason, not all international healthcare insurers include tax charges in their initial quotes to employers. But because some do, comparing quotes across the market can be misleading.

Andrew Apps, global sales director at Goodhealth Worldwide, explains: “Although it is the responsibility of insurers to collect taxes for the relevant authorities, there is still no definitive ruling from the Financial Services Authority about how this should be done, in terms of the way insurers charge. So insurers are all using different methods.”

Goodhealth Worldwide excludes all tax charges from its quotes. “We make it clear that these exclude any local taxes. We then invoice organisations for the tax based on what they tell us. The net cost is the most common denominator to compare quotes by and the best way to compare quotes fairly,” Apps explains.

John McMahon, principal of health and benefits at Mercer Human Resource Consulting, agrees that the net price is the most accurate way to compare quotes. “Even though clients may think otherwise, it helps if variable non-insurance items are excluded,” he says.

If insurers provide a breakdown of costs, comparing the net price is relatively simple. A La Carte Heathcare’s sales and marketing manager, Graham Thompson, explains: “We provide transparent quotations by giving a breakdown of net price, the amount of tax due and the total cost to the customer.” However, other insurers provide just one gross price, which includes any of the organisation’s tax liabilities. Stephen Ryan, international marketing manager at Axa PPP Healthcare, explains that this is how its pricing system works. “To give maximum flexibility to policyholders, we pay the tax bill for them. If staff had to say in advance how many days they were planning to stay in each country, it would also cost money to administer the information. We charge a gross premium only, so customers only have one price to pay, regardless of where they travel and this is what is included in our quotes,” he says.

However, Apps argues: “Some countries are non-taxable areas. Incorporating tax into quotes makes it unclear how [insurers] work the tax charge out, leaving policyholders open to being charged too much.”

But Ryan responds by saying that calculating different tax charges could end up costing employers more than applying average margins.

Until insurers agree on one way to present tax charges, comparing quotes will continue to be tricky. The key is to ask for a breakdown. “An initial quote should ideally identify all cost items, including commission, whether evacuation costs are included, administration loadings and stop loss charges,” adds Mercer’s McMahon.

To avoid any doubt, employers should question the quotes they are given. This can help to curb any nasty surprises

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