Does your Expat Healthcare Plan Pass the Financial Fitness Test?

Written by Chad Creveling, CFA & Peggy Creveling, CFA   

Monday, 01 November 2010 22:58

An expat American living with her family in Hong Kong is diagnosed with late-stage stomach cancer. Since her husband’s healthcare benefits only covered him, the couple had purchased a private family healthcare plan from a major U.K. insurer with total lifetime benefits of US$1.7 million. While this amount would seem to be more than enough due to a policy loophole it tragically was not. Unfortunately, the policy placed a separate limit of just $85,000 on “chronic conditions,” which included her stomach cancer.

The above predicament was highlighted earlier this year in a New York Times op-ed piece entitled Is Any Illness Covered? by Nicholas Kristof. Apparently, the expat health policy in question contained such a broad definition of “chronic condition” that Kristof translated the policy to mean essentially: “We’ll pay for care unless you get sick with just about anything that might be expensive. Then we’ll cut you off at the knees,” and further noted that, “…cancer, heart disease, strokes, diabetes, tennis elbow and even athlete’s foot seemed to be ‘chronic.'”

To make sure that you’ll be able to cover the cost of your care if you fall seriously ill while living overseas, here are some items to consider when you evaluate your current health insurance plan:

1. Know what your health insurance covers. It sounds obvious, yet all too many of us aren’t clear on the details of our coverage. While it’s definitely not the most enjoyable thing to do on a Saturday morning, it’s in your best interest to get into the details and find out if the policy covers pre-existing and chronic conditions, how these are defined, and what limits may be placed on coverage. It’s great if your policy pays for fairly routine items such as a child’s trip to the doctor for a head cold, but remember that the real reason you need health insurance is in the unlikely event that you or a family member are diagnosed with something that could be financially catastrophic, such as stomach cancer, a brain tumor, Parkinson’s disease, heart disease, or diabetes. So carry a high deductible if this makes sense for you — but if your policy excludes or places low limits on items that could bankrupt you, it may be time to consider a better policy.
2. Plan for future insurance premium rate increases. For expats who purchase private health insurance, continual increases in the annual bill can come as a bit of a shock. It’s important to realize that beyond the simple annual inflation rate for private healthcare policies (which alone may run in the high single to low double digits), the cost of a health insurance policy can also rise as we age. These age-based price increases may be built-in to the policy and can accelerate as the insured approaches or surpasses retirement age. For those expats paying for private policies, ask for a copy of the age band premiums at current price levels. To keep your current level of cover as you age, you’ll need to plan to pay both the age-based price rates as well as overall cost increases due to price inflation.
3. Consider what will happen if your current coverage ends. Even expats with seemingly secure insurance benefits at work need to consider what will happen if for some reason their employment situation changes. A new position may offer lower levels of overall coverage, not cover your entire family, or perhaps won’t cover some pre-existing conditions. Even if you have good benefits at work, it can make sense to purchase a separate private policy as a back-up —remember that if your work situation or benefits change after you’ve already fallen ill, you may no longer be able to purchase a private plan that covers your specific pre-existing condition.
4. Consider whether at some point you may need to return home. Your expat health plan may be like the one in the Hong Kong story: not designed to cover your costs if you fall ill and can’t be cured (have a chronic condition). If for some reason you can’t upgrade your policy, you may need to consider if under certain circumstances you’ll want to return to your home country to be covered under a national insurance plan. If this is a possibility, make sure that your country has a national health plan and that you will qualify for coverage if you find yourself in dire health straits.
5. For Americans: Working-age Americans such as the one in Hong Kong have not previously had a national health insurance plan to fall back on. The new U.S. Patient Protection and Affordable Care Act (PPACA, aka “Obamacare”) changes that. While most experts say that PPACA neither allows nor requires nonresidents to participate, its existence may still offer some comfort to expat Americans — assuming it survives mid-term U.S. elections more or less intact. This is because Americans who fall seriously ill overseas may now at least have the option of returning to the United States and purchasing an affordable policy that covers them — pre-existing conditions and all. So if you find yourself with stomach cancer and your expat health policy abruptly cuts you off, this fallback could make all the difference.

About Creveling & Creveling

Creveling & Creveling is a private wealth advisory firm specializing in helping expatriates living in Thailand and throughout Southeast Asia build and preserve their wealth. Through a unique, integrated consulting approach, Creveling & Creveling is dedicated to helping clients cut through the financial intricacies of expat life, make better decisions with their money, and take the steps necessary to provide a more secure future.

For more information visit www.crevelingandcreveling.com.