How will health insurers adapt to medical tourism?

 

In Europe, the recent EU Directive will affect both the public healthcare sector and health insurers and may spark new interest in working together.

Anybody following the medical tourism industry for the last five years will be aware that some hospitals and countries have been told that:

“Very soon millions of Americans/Europeans will be on planes to your country and other destinations, with the costs paid by their insurance companies.”

Some countries and hospitals are standing at the airport and are still waiting, as the planeloads of insured medical travelers have not arrived.

Are health insurers interested in medical tourism?

The simplistic analysis of this would be that insurers are not interested in medical tourism and never will be. After all, they have been fed lots of wrong information and empty promises, so many are skeptical of the medical tourism business. The reality is more complex as some insurers have been, and more will be, involved in medical tourism. Some of this will be long-distance medical travel, but most will be cross-border or local.

The vast majority of the pilots and deals that have been done outside the USA have been done directly with hospitals or hospital networks, with no intermediary involvement. There are many reasons for that, the main one being that most medical tourism intermediaries are small businesses. Intermediaries have been involved in the US, but their track record includes several failures.

Mostly in Europe, but also in Asia and parts of America, insurers have been experimenting with medical tourism. There are difficulties, as in one country it is illegal to offer insured customers treatment out of the country, while one US state has made it illegal to give incentives to customers for overseas treatment. The big winner in America is the increasing number of cross-border plans. Some might paint this as a victory for medical tourism with Americans flocking to Mexico, but in truth it is more about the complex relationship between Hispanic /Mexican areas, people and families where they already cross the borders for work and shopping. These local cross-border schemes are working but have many restrictions and would be difficult to copy elsewhere in the US. Even the US/Canadian border is different due to the complex rules on Canadian healthcare and insurance.

Lessons for the US insurers

In the USA there have been many high profile pilots and schemes launched. Some are sending people to other countries, but in very small numbers. The pilots have been a key driver in developing internal/domestic medical tourism. Some pilots sent nobody overseas, some are too new to assess the results, while others launched in a wave of publicity and have quietly died, as sometimes have the insurers and agencies that launched them. They have provided many valuable lessons for insurers across the globe. The real problem for US insurers is that health reform is a fast moving beast and it will not be until after 2014  - or perhaps even after 2018 – that the survivors will have adapted everything they do; until then, medical tourism may be an irrelevant sideshow to them.

Opportunities for insurers in Europe?

In Europe, for all the EU member states, those expecting to join soon, and those who follow the EU lead on services, the subject of medical tourism has been given a kick-start by the passing of the EU cross-border directive. To those outside Europe, it is often difficult to comprehend that each EU country is very different on the mix of state, private, semi-state insurance – and how costs and cover are or are not controlled.

It may come as a surprise to many that the EU Directive does not just apply to state insured healthcare, but also affects privately insured healthcare and all the various models in between. This makes understanding the potential for insured cross–border health care much more of a complex problem to solve than if it was limited to state provided healthcare.

Several UK and French insurers already pay for treatment outside the country but only certain types of plan can easily do this. Hospitals in Asia are used to EU insurers happily paying for treatment for expatriates and travellers who happen to get ill, but the chances of EU insurers sending planeloads of insured medical tourists to Asia are almost nil.

Those trying to sell medical tourism to insurers have often set their stall out by displaying their wares - shiny new hospitals, the latest equipment, specialist international patient centres, good doctors, and low prices. They have expected, sometimes because that is what people have told them, that insurers will rush to them to save money. They are often puzzled why insurers will talk politely but rarely do more.

There are two key reasons;

  1. Insurers pay only a fraction of the quoted hospital prices –so comparing costs to what the prices seem to be in the US or Europe is a       nonsense.
  2. Insurers are reluctant to do deals with anyone who does not understand about the insurances they offer, how their insurance works, malpractice problems, and that big insurers sell corporate business mostly via intermediaries so they and the employer have to be convinced about everything too. Dealing with an insurer that has enough customers who may travel means you are dealing with major players who spend every day negotiating with equally tough suppliers and brokers. It takes time and effort. If you come across as an amateur they will not touch you, and if they do business with you it will be on their terms and driving a very hard bargain.

Insurers are reluctant buyers of medical tourism, but in the EU it is something they will have to understand and perhaps buy to comply with the directive. As I see it, EU insurers have twelve alternatives -

  1.     Do nothing
  2.     Wait till competitors move
  3.     Agree with regulators
  4.     Allow trade bodies to agree a common position
  5.     Add minimal cover
  6.     Offer options
  7.     Allow customers to arrange own cross-border cover
  8.     Arrange cross-border cover for customers
  9.     Partner with selected hospitals/clinics
  10.     Help customers arrange non-insured treatment
  11.     Join with other insurers
  12.     Work with a partner

Although insurance and medical tourism will always be uneasy bedfellows, neither side can ignore the other. Early March has given a wake-up call to EU insurers after a court ruled that using gender to determine the price or cover of any insurance is illegal, and the principle may also extend to age, disability and health. So now they know that EU directives really do apply to the very basics of insurance too, so health insurers will have to treat the cross-border directive more seriously than they have been.

Read the latest report on health insurance and medical tourism

As an insurance professional who grew up negotiating with some of the toughest underwriters, and as a medical tourism analyst, I understand both sides of the relationship. My new report tries to offer a balanced picture of use to both industries.

Included in the report are details of the relevant areas of the EU cross-border healthcare directive, and what may be expected of the EU insurance industry. Insured medical tourism is not just a European problem; in the US there are several covers offering this, some pilots and a lot of discussion. This report looks at what EU, US, and other insurance organisations offer; their views, pilots, case studies, and more

Read more and order the report.

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