News that Bupa International is considering cover for chronic conditions has caused a stir in the industry. It could still shelve the idea – but the possibility has focused attention on two matters: what do policyholders suffering a chronic condition do and how can an insurer allow for these potential costly claims?
Despite all the attention, Bupa would not be the first to introduce such cover. A handful of insurers, including GoodHealth, ExpaCare, Cigna and Allianz Worldwide Care, already offer cover for chronic conditions.
But the way in which international private medical insurance (PMI) evolved explains why such cover is offered by so few insurers. David Pryor, the managing director of ExpaCare, which has been including chronic conditions cover on its policies since launch in 1982, says: “When we designed the product we had the advantage of approaching it fresh. Many insurers’ international PMI plans were really only clones of their UK product with extras, such as evacuation, added on. Because UK residents could always fall back on the National Health Service it was never necessary to include cover for chronic conditions on UK plans. So when international plans were developed, they followed the same design.”
Cigna, with its roots in the US, has always included this type of cover on its international group schemes, basing its decision on its American experience.
However, other non-UK benefits have already found their way onto the benefits lists of international PMI: maternity and dental cover are now relatively common benefits. But even with these there was initial resistance from insurers keen to control claims. And now many are displaying a similar attitude to chronic condition cover.
Morgan Price International managing director Jon Carpenter says: “Not many people ask for cover for chronic conditions. Perhaps it’s because they’re more insurance aware and understand that it’s not the sort of thing that would be covered. Policies aren’t designed to cover on-going medical needs and I’m not sure that there is sufficient demand to warrant the necessary price increases.” Carpenter adds that although chronic conditions are not covered, his company tends to be more flexible if a claim is made.
But others are less convinced by the cost argument. Judith Latham, national sales co-ordinator at Private Medicine Intermediaries, says: “If you go for one of the policies that include chronic conditions they do tend to be more expensive – but most companies are happy to pay extra.”
The alternative can turn out to be even more costly. Cigna director of international sales and client management Sheldon Kenton explains: “Just because your company joins Cigna it doesn’t mean your employees are going to get ill more often. It just means that more of the costs are going to go through the employee benefits package rather than other options.”
These “other options” camouflage a whole host of possibilities for paying for treatment for chronic conditions. These range from an employer footing the bill voluntarily to an employee fiddling their expenses to pay for treatments that would ordinarily be met in the UK. Supporting this, Cigna says that, anecdotally, employers have found other costs diminish after taking out its international PMI cover.
The other alternative for individuals is to rely on the healthcare system of the country in which they are working, as and when it can be accessed. But this is far from satisfactory.
Although you can stock up on medication for conditions such as asthma and diabetes, many medications lose their efficacy over time and few doctors allow these conditions to go unmonitored for long periods of time.
At the other end of the chronic scale are the more serious conditions, such as cancer. “If you get one of the major cancers then you are likely to come off an assignment overseas, but a lot of them aren’t life threatening so this might not be necessary,” says Kenton.
As well as the financial implications, there are also ethical considerations that need to be made. If an employer cannot send one of their employees to do a job because they have a chronic condition, then this could be regarded as discrimination. Kenton says: “By putting restrictions on the cover available you are putting pressure on a company to make non-business-related decisions. I don’t believe an employer should have to make these types of decisions. It could also compromise the employer legally.”
Most employers believe that by increasing the cover, and, therefore, the cost to the insurer, premiums are going to increase. However, this may not always be the case. Pryor explains: “There is a great fear that you’ll pick up a major long term claim. Certainly this has happened to us but we were fairly fortunate in as much as the claims have been manageable.”
Kenton agrees: “The incidence of claims is high but most are not for a high value. And, because a company is using an insurer rather than footing the bill themselves, the costs can be managed.”
As well as this ability to negotiate costs with hospitals, insurers can also incorporate safety mechanisms to ensure that the costs do not spiral. This can be seen on GoodHealth’s policy. Its chronic conditions cover is available as an optional module and the price ranges from £50 a person each year for the under 18s to £1,000 a year for the over 75s. The most common age band, 18-64, is charged an extra £150 for each person.
Because policyholders can select the option, the cost of claims is higher than if the option was priced into all policies. But, to offset this, the benefits are capped at £25,000 each year for five years. Additionally, GoodHealth insists that if it is included on a group scheme it must be group-wide.
Balancing these two conditions with a company’s medical insurance needs can present opportunities when selling the product. GoodHealth’s sales director Paul O’Sullivan explains: “You can’t say how much a claim for a chronic condition can cost. If a company has 100 employees and only a handful with chronic conditions, you have to consider whether it’s better to cover them all or pay for the costs of any treatment directly.
“This is where a broker would need to sit down with the client and work through the costs.”
This blanket cover for chronic conditions is something that all insurers insist on for group schemes. Some insurers, such as Cigna, include it in all group policies and others make it an option but one that has to be taken up by all members of a group or not at all. Kenton believes that making it compulsory is important when it comes to costs: “If you’re offering it on a voluntary basis you’re really inviting people to think about the likelihood of becoming chronically ill. By spreading the cost over all groups you are effectively diluting the risk across a larger number of people which helps to keep the cost down.”
How, and if, Bupa International addresses these issues is yet to be seen. All the company’s business communications executive Jon-Paul Clarke will say is that it may launch a new product, including chronic conditions, in the first half of this year.
Despite this lack of detail, one thing is certain. If Bupa does add cover for chronic conditions, it won’t be long before this becomes standard on all international PMI plans.