Keeping expatriates on local health plans could keep short-term costs down. But you should consider the less obvious costs when choosing between local or international health insurance. Marc Posthuma of Cigna International explains.

Tough economic conditions mean that most HR directors are having a challenging time at the moment. The economic downturn, which is driving companies to down-size and make staff redundant, has put cost at the top of every international HR professional’s agenda.

Of course cost has always been important, but viewing health care cover as just another commodity can be a vicious circle when the most cost-effective way for many companies to save on recruitment costs is to retain employees. One factor in retaining employees’ is their satisfaction with the benefits programme, which often depends on the quality of delivery.

Healthcare is a particularly important issue for expatriate employees, because staff working away from their home country can worry about their own and their family’s health.

Expatriates can sometimes fear that an escalating medical case will put the assignment at risk and leave them exposed during a round of downsizing.

Cost and value of expatriates

The National Foreign Trade Council recently estimated that an average three-year assignment costs an employer USD 1 million once the obvious and hidden costs of an assignment are calculated.

It is also important to remember that many expatriates often work in isolated, difficult conditions, where the question is not how good a hospital’s facilities are, but whether they can reach a hospital and whether they’ll have access to treatment when they arrive

Expatriates' flexibility, independence and ability to function quickly in a new environment mean levels of expatriation will continue to rise globally.

For instance, the March 2001 "Maximizing your Expatriate Investment" survey (sponsored by WorldatWork, National Foreign Trade Council and CIGNA International Expatriate Benefits) revealed that 73 percent of HR executives expected their expatriate populations to rise.

And according to the 2002 Global Relocation Trends Survey released in spring 2003, 35 percent of respondents said their expatriate population rose in 2002; 37 percent expect a higher growth rate in 2003.

Local cover misses global needs

In an increasingly globalised business world, it is also important for employers to provide consistent levels of health care for their employees.

International health cover: case study Patient: 35-year-old male Based in: Brazil Diagnosis: Cancer A member contacted CIGNA because he had received two very different diagnoses in Brazil for his condition and he wanted the reassurance of a third opinion. The first diagnosis was leukaemia and the second diagnosis was a back disorder. This member, who had 'Worldwide' cover, was flown to the US for further tests. In the US, he was diagnosed with cancer. In-patient care was required, followed by chemotherapy and three, monthly bone aspirations. A problem developed when the hospital potentially refused to treat the member without an advance payment and demanded settlement of a package price. CIGNA paid the advance package price to ensure that the member received the necessary care without any delay and then negotiated a revised price following the treatment. This price was based on the true cost of the incurred treatment, which amounted to GBP 100,000 Costs related to the follow-up care and treatment in the US were covered by CIGNA, including the travel costs and accommodation from Brazil to the US.

It is also worth noting that while international healthcare plans can cost approximately 10 percent more than domestic health insurance, they deliver very different benefits.

For example, employees in the Netherlands who earn more than EUR 30,700 pay for enhanced private medical insurance, which is easy for employers to administer. But few domestic healthcare insurers possess the in-house resources to find an appropriate hospital for an employee when they need emergency treatment in Beijing or Kuala Lumpur.

Sourcing medical care and emergency evacuation, 24 hours a day, every day of the year, which may be a standard part of international health care cover, is complex and time-consuming to manage from an office overseas.

Domestic healthcare insurers are simply not equipped for this global process. Evidence also shows that a delay in receiving medical treatment escalates both the severity for the patient and the cost (See case study sidebar).

It is also possible for a health care plan that appears to provide a cost-effective solution to ultimately cost more than international cover.

Despite a lower premium, a local or domestic health care plan often provides lower levels of health care, making expatriates feel under-valued.

International vs local plan

For instance, if a Dutch employer has an expatriate population of 50 families in the US, it could be tempting to enrol them in the local US healthcare plan or keep them on the Dutch domestic plan with an "international" extension. But the truth is that it could actually prove more expensive than international health insurance purchased in the Netherlands.

In a country like the US, which has well-developed and cost-effective networks of providers, the Dutch expatriate could also face restrictions on cover outside the US, perhaps on a business trip.

Then there could be the added problem of co-insurances/excesses and deductibles that are a traditional part of US domestic insurance cover, which would have to be paid by the individual and re-claimed from their employer. Add to these issues, an unfamiliar healthcare system and the Dutch expatriate is unlikely to feel their healthcare cover is a valuable benefit.

No matter how difficult the economic climate, the ultimate objective of any HR director responsible for the health care of expatriates is to ensure the firm’s employees receive the care they need, when they need it, at a realistic cost.

Any solution that consumes the HR director’s time in administration, leaves expatriates exposed with costs escalating can potentially lose the company a valuable employee is no solution at all.

May 2003

Marc Posthuma is the sales director in Benelux for CIGNA International Expatriate Benefits.