Download your copy of the 2018 Cost of International Health Insurance report to unlock in-depth analysis on our report's primary findings:
- Three of the top 20 most expensive countries have seen increased rankings
- The gap between premiums in the US and everywhere else has increased
- The Americas has emerged as a dominant region in the top 20 most expensive locations
- Onshore premiums are not drastically different from their global counterparts
- Some countries have seen premiums decrease
Here, we provide insight on the main global drivers behind the cost of international health insurance.
Key global drivers behind the cost of international health insurance
As this report focuses on international private medical insurance, the drivers discussed below impact primarily this type of insurance. In some situations these drivers can and do impact other types of insurance (such as local health insurance).
While there are countless influencers of IPMI premiums, especially when you start to look at country-specific trends and drivers, we have identified four that can be applied globally:
- Increased demand for international quality private care
- Increased cost of healthcare
- Increased regulation
- Continued challenges with fraud regulation
We have reported on these in each of our previous Cost of Health Insurance reports, and for 2018 we believe that these drivers have continued to be the main drivers behind IPMI premiums.
As with other reports, we fully believe that the single largest driver of health insurance premiums is the cost of healthcare. If you see an increase in the cost of healthcare, you will see an increase in health insurance premiums.
For this report, we have provided an update on these factors:
Increased demand for international quality private care
In the 2017 version of this report we mentioned that this trend is becoming increasingly common in developing nations, as well as already being present in almost all developed nations. Deloitte’s 2018 Global health care outlook backs this up, stating that increased demand for healthcare in both the public and private sector is a key driver of cost.
For example, Indonesia, ranked as the sixth most expensive country in 2018, has seen a large increase in demand for quality healthcare. This export.gov article from the US cites that Indonesia's growing middle to upper class and generally ageing population are putting extreme pressure on the medical system. Paralleling this demand for medical treatment is increasing demand for "sophisticated and modern medical equipment and supplies."
There is also the fact that many wealthy Indonesians prefer to travel overseas for medical treatment, with Singapore being the most common destination for many of our clients based in the country. This demand inevitably drives up the cost of healthcare and in turn premiums to cover it.
Increased cost of healthcare
On a global scale, the cost of healthcare is increasing and has been doing so on a consistent basis for many years. From the research, reports, and general data that we have seen, it looks like this trend is not going to abate anytime soon.
When looking into the cost of healthcare in 2018 it appears that, according to AON's 2018 Global Medical Trend Rates report, the global average medical trend rate was 8.4%, up from 8.2% in 2017.
These increased costs certainly have an effect on the cost of health insurance, and as they continue to increase you can expect to see the overall cost of health insurance also increase at relatively similar rate. In fact, our 2018 International Private Medical Inflation report found that when Cigna Global (which saw generally negative inflation in 2017) is discounted, the average global inflation of IPMI premiums in 2017 was 8.5%.
Increased regulation
We are seeing increased regulation of both the healthcare and health insurance industries in many countries where IPMI plans are popular. Of the top 10 most expensive locations for IPMI plans we have seen new or increased regulation of either healthcare or health insurance in at least six of the countries. This includes China, Dubai, Singapore, the US, and even Hong Kong, among others.
The regulation that we have seen being implemented has often been widespread and targets different parts of the respective industries. Of all the regulations introduced, we have observed two common types that are having a major impact on the cost of health insurance:
Implementation of stricter insurance licensing
Two countries, namely China and Singapore, stand out here. Over the past half decade or more both of these locations have been implementing stricter regulations around licensing of insurers. For example in China, all insurance plans sold must be offered by insurers licensed in China.
With the insurance industry seeing continued growth - the Asia Insurance Review reported that in 2017 the market grew by 19% - we are seeing an increased number of insurers looking to enter the market. The concern here is that the barrier to entry is becoming increasingly expensive.
For example, increased regulation in China and Singapore not only requires immense capital but has also led to increased compliance requirements and the need for extensive due diligence. This is costly and can have a strong impact on premiums in both countries.
Implementation of mandatory cover
The leader with the implementation of mandatory cover is Dubai, which requires all residents - foreign and local - to have compliant health insurance plans. Not having these plans means work visas will not be issued and heavy fines for companies who do not secure cover for their employees.
In many cases, when mandatory cover is introduced most costly types of care like maternity, diabetes, cancer, and more are required to be covered. If the population covered is seeing increased prevalence of these medical issues the cost of care will be high. This in turn puts pressure on insurers who will, barring any set regulation, increase prices. Case in point: Of the countries included in our IPMI inflation report, Dubai recorded the highest average premium inflation in 2017.
What's interesting is that the government in Dubai is acting to try to keep medical prices in check, having implemented a law that allows them to do so in May 2018. It will be interesting to see how this impacts the cost of health insurance in the Emirate.
The other country with mandatory health insurance requirements is the US. While the government there has essentially abolished the fines for not securing compliant health cover starting in 2019, the problem here is that the government has just scrapped fines. This means that the law around the Affordable Care Act is still in place, and will remain so even after 2019 (as of the writing of this report - May 2018).
While we can not be certain what this means, if this year's premium figures are of any indication, you can expect to see costs for coverage in the US continue to increase.
The interesting thing to point out here is that these regulations are usually a good thing. In fact, in countries like China and Singapore where many insurers have gone onshore, we are seeing better quality plans being launched, not to mention the fact that such plans are much more suitable for those living in and around these countries.
Continued challenges with fraud regulation
Health insurance and healthcare fraud have both been named as influencers of cost in nearly every version of the Cost of Health Insurance report that we have published. In 2018, this trend continues.
Just how big of a problem fraud is can and does vary depending on where you look. For example, the National Health Care Anti-Fraud Association estimates that health care fraud results in financial losses of tens of billions each year in the US alone.
On a global scale, this article from Microsoft estimated that health fraud results in financial losses of USD 455 billion each year. Looking closer at insurance, the Reinsurance Group of America (RGA) reported that globally, around 3.58% of all claims are identified as fraudulent. Of the regions included in the RGA report, Asia is reported as having the highest percentage of deceitful claims at around 4.16%.
Of the fraudulent insurance claims submitted, the RGA reports that 24% can be attributed to health benefits. While companies, governments, and other organizations are taking actions to reduce the impact or even percentage of deceitful claims. For example, this release from MarketsandMarkets indicates that investment into healthcare fraud detection is expected to reach USD 2.2 Billion by 2022 - a CAGR of 28.9% from investment levels in 2017.
With increased investment it is hoped that fraud rates will decline. What this likely means for the consumer are fairer prices, and possibly even better benefits, than what exists today.
