The average annual increase in international health insurance (IHI) premiums over the past few years has been between 5% and 15%. Although accurate global figures are difficult to work out, most industry insiders believe that last year's policy hikes averaged nearly 10%. This year the figure is likely to be closer to 12%, according to one broker.
This is expensive stuff. IHI policies can be hundreds of dollars a year for an individual and thousands for a family that has relocated abroad. The insurance providers cite what they say are three unavoidable reasons for the rising cost of healthcare: medical inflation, customers' higher expectations, and the fact that regions that were previously off the expatriate map are becoming popular destinations.
The cost of medical treatment tends to rise faster than the official inflation rate because new medical interventions and expensive innovative technology push the cost of medical care up. And all the costs are passed to the policy holder. Researchers at Missouri State University calculated that annual medical inflation in the US has been running between 12% and 20% for the past five years, with prescription drugs likely to increase in cost from 20% to 30% a year over the next decade.
The US is the main driver of rises in IHI costs, and American healthcare spending is set to double in real terms in the next decade – it already consumes close to one-fifth of the nation's economic output.
People also have increased expectations of medical advances and therefore a cure for every ailment. This, in turn, means higher claim rates year on year. Peter Rousseau, of the health insurer Interglobal, notes the example of a cancer treatment known as proton therapy ('absolutely cutting edge, but very expensive'). It is increasingly available in the US, but seldom in the rest of the world.
It isn't difficult to see why. The University of Texas Anderson Cancer Centre opened a proton therapy clinic last year, which was great news for cancer sufferers, as the use of proton beams instead of normal x-rays is far less damaging and intrusive. But the computers, machines and specialists cost $125m. And that's only at one clinic. Be prepared to pay dearly for an IHI policy if you are moving to the US.
Insurance companies also point out that many expatriates live and work in developing countries. Although the local healthcare system may not be expensive, there may be the possibility of a full evacuation, which is expensive.
On the other side of the coin, Alastair McGuire, professor of health economics at the London School of Economics, says health insurance companies, like general insurers, make some of their profits from investing the premiums they receive, particularly in the stock market. But returns from equities, unless invested solely in the UK or emerging markets, have been fairly low for years, so premiums have risen.
Rises in annual premiums are unlikely to decline, but there are ways to reduce the pain. One is to arrange an excess or deductible on a policy. Bupa estimates that this can reduce overall premiums by as much as 38% for a 35-year-old willing to pay a $2,000 excess (or an 11% reduction for an excess of $200). 'Most people are happy to pay for a blood test or just a basic check-up if it reduces their headline policy,' says Paula Covey of Bupa International.
By far the best way of escaping the worst effects of medical inflation is to avoid going to the US, or to try and get US cover excluded from the policy. Andrew Wilson of the health insurance broker Medibroker advises people who travel only occasionally to the US to buy a policy that excludes America in the first instance, and to arrange an occasional premium with their insurer when they go there.
