Why Health Insurers Don’t Offer Plans that Cover Elective Medical Travel

Many healthcare facilities at international destinations have requested my assistance to get contracts with insurers who offer plans that cover elective medical travel. 

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Some have heard through various advertising by consultants and medical tourism trade associations that this was possible so naturally, they want a piece of the action and an opportunity to receive patient referrals from insurers.  After all, it makes logical sense that an insurance company would like to save money, right?

To bust the first myth, there are no such insurance plans.  There have been companies that tried, one in UK, one in Australia and New Zealand, and a few at other dots on the map, but they each ended up quitting and in some cases simply didn't raise enough traction and sell enough policies to non-users to spread the risk.

Insurance is a financial risk protection arrangement by which a company, employer, labor or trade union or government agency provides a guarantee of indemnification ("to make one whole") for a specified covered loss, damage, illness, or death in return for payment of a premium.  The insurance company, employer or plan sponsor creates a document known as an Evidence of Coverage and issues an identification card that is traded in exchange for the premium payment. The insurer or plan sponsor also describes specific eligible conditions or treatments or accumulations of benefits toward an annual maximum allowable amount, if any. These are described in what is called a Summary Plan Description (SPD).

The Summary Plan Description (SPD) is the equivalent of a declaration page. It acts as a high-level overview of the plan and contains information on how to find more detailed plan information.  Together with the SPD, the policy buyer also receives a Summary of Benefits and Coverage (SBC) which is supposed to be easy to understand so that purchasers of a policy can compare plans side-by-side and determine which plan suits their needs the best. 

Before these documents can be prepared and the plan designed and filed with regulators, actuaries and underwriters must first determine the risks of benefits utilization (incidence frequency rate), the costs to cover what has been insured in terms of covered services (claims cost) and if a network of designated healthcare providers will be contracted to contain costs and negotiate rates and other terms and conditions in advance, the network development, site inspections and other due diligence must be completed.  Before network development can be completed, site inspections and other due diligence can be contracted, standards for each, along with policies, procedures and contingencies must be fully-developed and published because they will be referenced in the contracts. Once the network of providers and their known contract rates has been created and indexed, the underwriters confer with the actuaries about the incidence frequency rates based on the population of policy holders and they develop pricing models that take into account financial risks of claims costs, plus plan operation costs, necessary cash reserves, and profit margins to set a premium that should be adequate to cover costs, earn profit, and cover a premium to a re-insurer in the event of excess claims loss.  The reinsurer, if outside the umbrella of the insurer, also has its own actuaries and underwriters that model the risk for their portion of financial responsibility after a claim hits a trigger called an "attachment point".  Once all this is sorted out, the plan documents, financial reports, modeling assumptions must go to the regulators for approval and a Certificate of Authority for brokers and sales agents to sell the plan and collect premiums.  You can only imagine how much startup and pre-sales cost is involved to develop the insurance product.

Feasibility considerations

So before a health insurer or other plan sponsor can commit to create such an insurance product, it must determine in advance the feasibility of the endeavor in the first place. Are there enough customers, both utilizers and non-utilizers in the marketplace who will purchase such a policy in advance of need?  For an elective medical travel insurance product to sustain risk, it must have utilization offset by non-utilizers who pay premium but don't submit claims.  The pooled funds from collected premiums must be adequate to cover claim costs, plan operations and marketing and sales costs, profit, taxes, state licensing and regulatory fees, network development and contracting costs, site inspection travel costs, and reinsurance premiums for excess losses.

If the average medical loss ratio (the percentage of premium used to cover claim costs paid to medical, facility and ancillary providers (including hotel, ground support, incidentals, and business class international airfare for two people) is 83%, then the remaining 17% of the premium is to cover all other expenses, taxes and profit.  If a claim cost is $100,000, for example and 100% of the people buying the policy are anticipated to incur claims on this type of a policy, how many premiums must be collected to zero the books each month from premium income? How much reserve cash must be set aside to cover late reported claims (incurred but not reported or IBNR) in the event a billed charge is not received for as much as 90 days after services are rendered, because the money for that claim must come from the premiums that were collected in the month in which the date of service occurred.  How many policies must be sold to achieve this and at what price?  And what is to guarantee that the policy holder won't lapse the policy for non-payment of premiums once the episode of care occurs?

Designing an insurance product just for elective medical travel has been determined to be non-feasible for these reasons.  That's why many who considered this as an expansion product to other insurance plan products for sale in the market have abandoned the idea or failed trying. 

Alternatively, on a much smaller scale, an elective medical travel benefit can more easily be added to an existing general health insurance product. The business models and programs vary in coverage, scope and many are designed to accommodate the population being insured rather than just adding random procedures, treatments and providers to a panel.  The addition of the elective medical travel benefit is much smaller in scope along with, SPD and SBC documents and designated providers than designing an entire insurance plan and benefit design as a stand alone product for sale to the general public.

So there you have your answer in a nutshell.

What is Possible and How to Prepare

Site inspections for medical tourism

If you are associated with a healthcare facility or clinic or are responsible for the development of a medical travel destination, you should prepare yourself to contract with the general health plans that are ready to contract with providers for their pilot program of elective medical travel as an option for plan participants.  The book I authored will help you step-by-step to know what to show and tell, to whom and why. You can find it on Amazon.com as a soft copy that can be read on all Kindle e-reader devices or your computer or tablet. It is not currently available in hard copy and there are no plans to create a hard copy version in the near future.

Beyond that, if you need assistance to prepare once you've read the book, I am happy to engage under a retainer to consult to your organization both remotely and on-site.  I have been assisting employers and insurers with their network development and due diligence and can provide references from both the payer side and the provider side around the world where I have fast-tracked the providers onto insurer and employer designated health provider panels on 5 continents.

 

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