By Farooq Ahmed Farid | 14 Jul 2020

What Influences the Cost of Health Insurance?

What influences the cost of private healthcare, and what should you be aware of when purchasing a plan?

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In the current pandemic environment, it’s only natural that more of us are thinking about protecting our health. This may be particularly true if you live abroad and are unfamiliar with the local health system, or are a frequent traveller (or at least you were before COVID-19!) and want to know you will be protected wherever you are. 

Taking out private health insurance can help reassure you that you can access high standards of healthcare and get access to the treatment you need quickly without having to wait. For frequent flyers or those expats that live overseas, an international health insurance plan that enables you to access private healthcare treatment worldwide is also often a popular choice.

But what influences the cost of private healthcare, and what should you be aware of when purchasing a plan?

Your Age

It’s no secret that as you get older you become more susceptible to illness. As a general rule the older you are the more likely you are to need healthcare, particularly for illnesses and conditions associated with older age such as heart disease.

Therefore you should expect your health insurance premium to increase as you get older. However you won't get a letter on your birthday telling you the price of your health plan is going up! Instead, most insurers price plans by age band, for example from 31 to 35 or 46 to 50, meaning your premium will increase once you move from one age band to the next, but only at your plan renewal.

You may see a more significant increase in your premium depending on the age band you are moving into, for example, once you pass the age of 65.  

Your Location

A key driver of your health insurance premium will be the cost of medical care in the country in which you are resident. The more expensive the local healthcare system, then the higher your premium will be. If you’re an expat this may explain why your premium may be significantly different if you relocate from one country to another, depending on where you are moving to.

If you opt for an international health insurance plan your premium may also be impacted depending on the geographical area of cover you want protection for. For example most international health insurance plans exclude the USA as standard, so if you want to add cover for the USA this will increase your premium.

Conversely you may be able to reduce your premium by opting for a smaller geographical area of cover, such as regional coverage only rather than worldwide. At Now Health International our more affordable SimpleCare plans offer regional coverage options in some parts of the world, such as cover for Europe only, or South East Asia, depending where you live.

The Level of Cover You Want

Another key factor that will impact your premium is the level of cover that you select. It should not be surprising that a more comprehensive plan with higher benefits limits will be more expensive than a plan that only covers you for hospital treatment.

The good news here is that you're in control of the plan you choose, and you should always select the right plan for you and your family's lifestyle. The level of cover you choose will impact two key elements of your plan:

  1. Your plan benefits limits (i.e. the cash value of treatment you can claim for within your plan); and
  2. The specific types of healthcare treatment covered by the plan (such as dental treatment, maternity care and physiotherapy).

More comprehensive plans will have higher benefits limits and cover you for more types of treatment, so you need to consider what is important to you. For example, if you are thinking of starting a family in the near future then you may want to opt for a higher level of cover that includes GP visits and maternity care. However if you’re young and healthy with limited budget, then you may prefer to opt for an In-Patient only plan which will cover you for hospital treatment and emergency care should you need it.

Your Health

It’s also important to remember that your existing health condition will impact your health insurance premium; and how it impacts the premium will depend on your health status and the provider you choose.

Most health insurers will make you complete a medical questionnaire as part of the application process to assess your general health and therefore your level of 'risk'. You will have to disclose any pre-existing medical condition, such as diabetes, or any recent health issues or surgeries.

Some insurers may also ask questions about your alcohol, weight, exercise habits and whether you smoke, to better assess your risk levels. Whatever your circumstances, you must provide honest answers to all questions so you don’t risk invalidating your plan at a later date.

If you do have an underlying health issue or long term condition, this does not necessarily mean that you won’t be able to access private health insurance. However you may be subject to higher premiums or exclusions on certain medical conditions.

How to Reduce the Cost of Your Private Health Plan

It’s also worth bearing in mind that you can help to reduce your health insurance premium by selecting certain options, such as an Annual Deductible or a co-insurance.

An Annual Deductible is the ‘out of pocket’ healthcare costs you pay before your cover kicks in. For example if you have an Annual Deductible of USD 1,000, you will pay the first USD 1,000 of your treatment costs each year, and your health plan will cover the rest, subject to any exclusions and plan limits. The higher the Annual Deductible, the lower your premium.

Remember that if you do select an Annual Deductible, you should only select an amount that you can afford. A cheaper premium won’t be useful if you fall sick and then can’t afford to cover your out of pocket medical expenses, before your plan will pay out!

Choosing a Suitable Private Health Plan

Choosing the most suitable private health plan for you and your family will help give you peace of mind that you can access the treatment when you need it most.

Remember that if you are an expat living abroad or someone who travels frequently, then an international health insurance plan may be a better option for you. Even if you live somewhere with good universal healthcare facilities that expats can access, you may still have to contend with:

  • Healthcare standards lower than what you're accustomed to;
  • Different processes for diagnosing illnesses;
  • Overcrowding and long waiting times; and
  • Communication issues due to the language barrier.

In these circumstances taking out an international health insurance plan can help provide you with the reassurance that you can access the best private medical facilities wherever life takes you.

For more information about our plans and different levels of cover you can click here. You can also get a quote here or contact our team for more details.

By Farooq Ahmed Farid

Farooq is a qualified actuary, a risk & underwriting management professional, strategist and data scientist. During his career, Farooq has been instrumental in helping to develop international best practices across underwriting, technical pricing, actuarial, analytics, product development, risk management, reinsurance, and business intelligence in order to implement successful strategic business plans.

See Farooq Ahmed Farid's profile