The cost of international private medical insurance is climbing globally, with an inflation rate of 9.2 percent reported for 2016.
As you might expect, the United States continues to rank as the most expensive market, with an average cost of $17,335 per year for international medical insurance. This is a whopping 32 percent higher than the average cost in the second most expensive country for international private medical insurance, Hong Kong. There, the average cost is the equivalent of $11,780 in U.S. currency.
But prices are rising all over. My company, Pacific Prime, a global insurance advisor, recently analyzed 95 countries to come up with a list of the main factors pushing up the premiums for international coverage for a new report.
Here are four: an increase in the demand for international quality private care, increases in the cost of health care, new regulations, and fraud.
Increased demand for international quality private care
In almost all of the countries analyzed in the Pacific Primes report, there has been an observable growth in the demand for international quality private care. Many of the 20 most expensive countries for international private medical insurance are popular expat destinations such as Hong Kong, China, Singapore, and Dubai. Expats in those markets may demand care that is comparable to, or better than, the care that the expats received back home.
In many of those markets, both the expats and locals are insisting on high-quality care.
China, for example, ranked as the third most expensive country for international private medical insurance. The country has seen some significant changes in its health care system, especially since 2012, when the Chinese government started letting foreign entities invest in private-sector hospitals. As the quality of health care improves in China, demand continues to grow from expat populations as well as from the growing number of middle-income and upper-income people who were born in China.
As the wealth of local populations rises, private health spending is likely to rise, particularly in the developing markets in Asia and the Middle East. By 2019, the total number of high-income households in the world could increase about 10 percent, to more than 540 million, with Asia projected to generate over half of that growth, according to the Economist Intelligence Unit. The growing demand for high-quality private care is increasing the demand for health insurance that can help pay for that care.
In places like Hong Kong, both expats and locals have higher expectations for medical care. (Photo: Andrew Ma/Pacific Prime)
Increased cost of health care
The increasing cost of medical care is a significant driver of skyrocketing international private medical insurance prices. The four key reasons for the increase in the underlying cost of care are new medical technology, gaps between supply and demand, higher compensation for health care professionals, and over-use of care.
1. New medical technology
Medical technology is in high demand in the health care industry, and the cost of research on new medical equipment are sky high. For example, a key medical innovation to watch out for in 2017 is a test called a liquid biopsy, which will help uncover the DNA shed from a tumor into the bloodstream. Some say sales of liquid biopsy kits and processing services will reach an astounding annual sales figure: $10 billion. The high cost of new medical technology leads to higher medical fees.
2. The gap between supply and demand
In many markets, because of the aging of the medical professional population, more doctors are retiring than entering the system. Meanwhile, the average age of the patients is increasing, and the patients are seeking more care. The strain on the supply of medical care is forcing insurers to hike up premiums.
3. Higher compensation for health care professionals
Doctors are some of the highest paid skilled professionals. A specialist in the United States, for example, earns average of $355,000 annually.
There’s a reason for this: Medical school fees are increasing. Once doctors start practicing, they will also have to pay negligence insurance and ongoing training fees, meaning that salaries will increase to cover these costs, thus leading to the increase in cost of health care, and medical insurance.
4. Health care utilization
Factors such as the introduction of insurance ownership mandates in some regions have led to a trend towards increased health care utilization. In the United Arab Emirates, for example, expats are visiting doctors 4.6 times per year, thus increasing the number of claims being submitted to insurers. Insurers are offsetting these increases in health care utilization by increasing premiums.
In Beijing, only insurers approved by the China Insurance Regulatory Insurance Commission can sell plans. (Photo: Thinkstock)
Increasing regulation is also impacting the cost of international health insurance, especially when issuers of private medical insurance have to meet new minimum capitalization requirements. You are no doubt familiar with the Affordable Care Act and the ACA individual coverage mandate. Other countries are also imposing new requirements on consumers and health insurers. In China, for example, only insurers that are approved by the China Insurance Regulatory Insurance Commission are allowed to legally sell plans in the country.
BDO International, a global accounting network, reported that average global health care fraud losses were 25 percent higher in 2014 than in 2008.
However, as health insurers come to make more sophisticated use of big data, insurers may do a better job of identifying fraudulent claims, and keeping fraudulent claims from contributing to premium cost inflation.
Jessica Lindeman is the executive editor for Hong Kong-based Pacific Prime, an international global insurance broker that helps expats buy health insurance and understand how health care systems work outside their home countries.
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