Over his past twenty-something years as a wealth adviser, Dubai-headquartered Tim Searle, of Globaleye Wealth Management, has seen first-hand what having health insurance, critical illness cover and similar types of “protection” insurance can mean to the lives of his clients – as well as, and sometimes especially – their businesses and families.
Here, Searle considers the issue of health insurance generally, and the growing trend around the world to mandate expatriates be covered by such schemes – which he acknowledges is a welcome development in theory, in addition to offering expat advisers a potential new area of business to cater for.
And yet, he concludes, it also isn’t always as straightforward a matter as it might seem…
One of the downsides of a life lived overseas is the scarcity of state-sponsored healthcare. There are only a few countries left in the world where you can find a truly state-funded healthcare programme, and those that still exist are located exclusively in highly-taxed jurisdictions, such as Scandinavia and the UK.
There are hybrids of medical care, too, which typically entail a combination of state support, coupled with financial assistance from the patient’s own purse, and/or in the form of insurance reimbursement. This is by far the most common system, but how it should best be done, and which jurisdictions get it right, remain topics of hot debate.
Whatever the system in force in a given country, though, what matters is that the medical insurance plan one chooses – whether for one’s self or for one’s client – is the correctly-chosen plan for them.
The key words here are “correctly chosen”, since, whenever there is a need to choose between a range of different insurance plans, the person or organisation making the choice cannot help but to play a key role in whether the scheme is fit for purpose.
Invariably, the key differentiating factor between the various plans on offer will be their cost, (and I don’t mean the cost of getting it wrong, but the actual financial cost). This will often be influenced heavily by whether the end user – that is, the plan-holder, who may also be one’s client – is paying for it themselves, or whether it is being funded for them, either whole or in part, by a sponsor, such as their employer.
The funding options
When an individual is paying their entire health insurance bill themselves, they normally have no choice but to weigh up the various options in terms of their (apparent) costs vs benefits. Some take the view that a cheap, basic plan is good enough, as long as one has some form of coverage, though I personally don’t agree.
My view is that the last thing you want to have to worry about, if you are in a major accident or become seriously ill, is whether your medical cover is going to provide you with the care you need to fully recover, assuming such a recovery is possible.
Yet I have seen, time and again, when an inadequate insurance plan has fallen well short of the level of care individuals have required, they – and often, their relatives as well – end up dipping deeply into their savings in order to make up the difference, and to ensure that the individual gets the care they need.
This can be true of insurance plans paid for by employers – and indeed, it is likely to be the case when the law in a jurisdiction mandates employers provide full healthcare coverage for their workers, rather than allowing them to offer their staff a corporate discount on a range of policies of varying costs; but it is also too-often true as well of plans paid for by employees themselves, for whom the cost of a top-of-the-range health plan would be prohibitive.
Upfront deductible plans
Another option, of course, is for individuals to choose plans that come with a large upfront deductible, which the individual funds up to a pre-determined level whenever a claim needs to be filed. Above this threshold and beyond is entirely covered by the insurer, at least to the extent specified in the contract.
Naturally, the larger the deductible, the lower the premium, since the individual pays for more of their routine medical expenditures.
The ‘Goldilocks Plan’
In the end, most people and corporate providers lean towards what I’ll call the Goldilocks Plan, which is to say, a plan that offers a level of healthcare coverage that is not too expensive, but which isn’t at the bottom of the range either, with the unspoken assumption being that they probably won’t need to use it, at least for anything major.
Ironically, we have seen self-payers who, having invested in such a Goldilocks Plan, see a year’s paid-up premium without a single claim as a waste of good money, forgetting that they are simply lucky not to have needed to require major medical treatment! (My usual response to such individuals is that they may wish to throw themselves under a bus, if they are concerned about not getting their money’s worth; it’s a pretty reliable way of doing so.)
But this is, in fact, an illustration of our role as advisers, to help people to plan for the worst, even when they don’t always see, themselves, why they should.
As more and more countries are requiring expatriates to have health insurance even before they arrive, the corporate scheme, typically provided by an expatriate’s employer, is potentially likely to begin to change.
Traditionally, expatriates working for large multi-national employers have been given a company-sponsored healthcare scheme as part of their contract, a fait accompli.
Sometimes there have been banded schemes, where the rank and file of the company may have an inferior (less expensive) solution than the management enjoys, but on the whole, insurance of some kind is offered compulsorily. The employee is expected to fit into the plan on offer, rather than having it tailored to their specific needs, but it will be cheap, if not free.
Most companies in major global expat centres now provide some form CEB (corporate employee benefits), of which medical cover is usually a key part.
Such companies, by dint of their collective purchasing power, are typically able to secure favourable bulk terms from insurers, and thereby can give their staff more cover for less money (or, it has been rumoured in some cases, enable them to pocket the difference).
But the choice of plan in in such cases is done at the corporate level, with pre-determined underwriting terms, leaving employees with little say on the matter.
The better employers will want to show their employees that they truly care about their welfare, and will try to opt for a good solid health insurance plan as part of their CEB offering, but other companies can need to be nudged into doing the best for their staff.
Where change is beginning to happen in the corporate healthcare sector, meanwhile, is in countries like the United Arab Emirates, where the government is now forcing companies to provide health insurance cover to their employees. That it, and other countries like it are taking this step isn’t really surprising, since the UAE doesn’t, as yet, have a direct taxation system in place, and with an ever-growing population, it cannot continue to offer subsidised health cover at the level it has been.
On the face of it, compulsory health insurance sounds like a great step forward for all employees, whether they had health insurance previously or not. And don’t get me wrong, it is.
However, there is a minimal cover limit set by the government – and it doesn’t take much guessing to figure out which end of the coverage spectrum those companies that until now have never provided such a benefit will be offering their employees.
The unintended consequence of this is certain to be that many employees who are being insured for the first time in their lives will be under the delusion that they are now comprehensively covered, should they fall sick or become injured – even though, in reality, the level of coverage they enjoy may be very basic indeed.
Tragically, the inadequacy of their plans will only become apparent when it is too late, when the employee and their family are having to scramble to pay for the more advanced treatment they may end up requiring.
The companies they work for will not be held accountable, of course, in such situations, since they will have adhered to the official guidelines for providing the coverage.
As I trust I’ve demonstrated, selecting the right medical coverage, whether at a personal or corporate level, clearly remains fraught with issues, even after governments begin make it mandatory.
And although giving people choice is always preferable to not doing so, healthcare is a difficult product for the average person to choose, without at least some objective advice, and a bit of background knowledge. Otherwise, the risks of making potentially life-threatening mistakes can exist.
Employees, after all, are paid to do whatever it is they do in their day jobs, not to be insurance experts.
This is why I always say that “medical cover” should, in fact, also be considered “wealth cover” – since without it, your wealth could be seriously impacted.
Tim Searle is chairman of Globaleye Wealth Management, which was founded in 1999, and currently has more than 15,000 clients, who have more than US$1.5bn in assets under advice with the firm. In addition to its Dubai headquarters, other offices include Abu Dhabi, Doha, Geneva, Moscow, Singapore, Kuala Lumpur, Hong Kong, Ho Chi Minh City, Manila and Sri Lanka.
Tim Searle’s column originally appeared in the October issue of International Investment. To read more about how compulsory health insurance is coming to a growing number of expat jurisdictions around the world, as countries tire of the burden of looking after sick and injured expatriates, tourists and business travellers, click here.