Over the years, we have talked to many expats all over the world about their medical insurance. Those who were young told us, that they were happy, because they enjoyed good coverage at an affordable price. The middle-aged often complained about rising costs. And a growing number of retirees informed us, that they might move back to their home country, as they can’t afford their insurance premiums anymore.
Many people who plan to live abroad, underestimate the challenge of obtaining affordable long-term expat medical protection. Dealing with insurance companies at home is already challenging, getting health coverage in a foreign country comes with additional risks. No insurance company or broker voluntarily mentions these risks. When we asked them specifically during our research, they either did not respond or it took us several email exchanges, to get at least some answers to our questions.
Soaring premiums for seniors
For the average person, health costs increase with age. Many insurance companies in Western countries therefore make provisions when a client is young, and release those provisions when the client gets old. Consequently, annual insurance premiums for young clients are higher than their actual health costs, and for old clients they are lower.
Expat health insurance companies don’t make any old-age provisions. For each age group, annual premiums are calculated to cover expected medical and administrative cost for the year and generate a nice profit for shareholders. This allows younger clients to enjoy low premiums, while older people have to pay a lot more.
The following chart shows annual premiums for four different tariffs of a local expat medical insurance in Thailand. At age 25 you can get basic coverage for as little as USD 447, and even the top tariff only costs USD 1,485 per year. Premiums rise with age, first slowly then rapidly for people in their mid-sixties and older. For those 95 years of age and above, the annual premium ranges between USD 8,500 and USD 28,000. Clients aged 80 pay 308% more than those aged 50, and at age 95 the surcharge rises to 716%.
If you think that such annual premiums for the elderly are very high, you are probably not familiar with international private health insurance companies. Their policies, which provides higher flexibility when moving to another country (pls. refer to the topic portability below), come with much higher premiums. In the example below, insurance costs for Malaysia can reach USD 94,000 at age 95, which is 1,162 % higher than at age 50. You must have an annual retirement income of several hundred thousand dollars to afford such a policy.
You can reduce premiums by lowering the annual limit for total coverage, taking out dental and outpatient care and increasing deductibles. But then you end up paying most of your medical bills yourself, when you get old. Your health insurance, which probably still charges a few thousand dollars annually, will only cover major surgery, but only after deducting USD 10,000 or more from your hospital bill.
If you have decided to spend your retirement in a foreign country, there is a real risk, that you will run out of money in the next 10-20 years, as your pension and other income will increase considerably slower than your expat health insurance premiums.
It needs to be added, that many insurance companies don’t necessarily provide cover for older people or only under very restrictive conditions. One company informed us, that they provide lifetime renewal only for customers, who join before the age of 60, which is well below the retirement age in most Western countries. And customers joining at the age of 60 to 65 would only get renewal until their 70th birthday.
High exposure to rising health costs
Soaring medical costs are a global challenge affecting all individuals. However, expats are a lot more exposed to them than locals. The latter are usually in the public healthcare system and therefore enjoy government subsidies or benefit from mandatory price ceilings. Expats, who are not in the local system, are unlikely to get the same benefits.
In some countries, foreigners have to pay higher prices for medical services. For instance, Thailand has implemented a three-tier pricing system for public hospitals. Thais and migrant workers from neighboring countries pay the least. Foreigners working or studying in Thailand can expect to pay up to 50% more. The highest surcharges of up to 100% have to be borne by tourists and retirees.
According to Pacific Prime’s International Private Medical Insurance Inflation Report 2018, between 2009 and 2017 private medical insurance premiums have on average increased by 7.8% per year. This rate is substantially higher than the rate of inflation and the rate of salary and pension increases.
Medical premiums will likely continue to soar. The AON 2020 Global Medical Trend Rates Report lists increases in medical cost of 7.8% for 2019. For 2020 a hike of 8% is forecast, which is almost 5% above the expected rate of inflation.
For most developed nations, an annual increase of 3.5% to 7% is expected, while costs in developing countries will soar by 10% to 15%. The latter will most likely also experience much higher price rises in the following years. Many Western retirees, who moved to a developing country to enjoy a higher standard of living, are in for a bad surprise.
Limited or no portability
When you move to another country, you can’t be sure to stay there for the rest of your life. You might get a new job in a third country or decide to move there for personal reasons. Even if you don’t want to leave, political and economic changes or new visa regulations might force you to get out.
In the context of expat medical insurance, portability means the right, to remain insured by the same insurance company or group, if you move to another country. The annual premium might be adjusted in line with different cost levels in your previous country of residence compared to the new one. But there is not a new medical underwriting, which could result in additional exclusions and/or surcharges related to new medical conditions, that have arisen since you originally signed up for insurance.
Local policies don’t offer portability. If you move to another country, you will have to apply for a new domestic or international insurance. This is usually not an issue for those in their twenties. But expats in their forties usually have some kind of “pre-existing condition”, that allows the new insurance company to exclude this condition from coverage or ask for a nice surcharge. The older you get, the more exclusions and surcharges you are likely to face, and eventually you might end up with an insurance, that is very expensive but provides only limited cover.
There is another risk that comes with age. Many insurance companies don’t offer contracts to applicants above the age of 60 or 65. At age 70 and above you will most likely find it impossible, to purchase an affordable new health insurance. In this case you only have two alternatives. Either you stay in your current country of residence, if you still like it and can afford the premiums there. Or you move back to your home country, provided that you are still insured there or can get back into the public healthcare system.
International health insurance policies usually come with portability, but risks still exist. Not all insurance providers, even the big ones, offer coverage in every country on earth. And even if they do, their coverage might not be compliant with visa or other regulations of the new host country. For instance, if you plan to move from Costa Rica to Thailand and apply for an O-A retirement visa, you will be requested to buy coverage from a local insurance company.
It is important to get written confirmation about the portability of your contract. Verbal or written confirmation from an insurance broker is insufficient. Even an email from the local subsidiary of a global insurance group might not be enough. It is better to get the confirmation directly from the group headquarter. Otherwise the subsidiary located in the new home country might try to charge you additional fees or even decline to insure you.
Expats with international medical coverage need to be aware of two other aspects. First some insurers reserve the right, to terminate the policy, if they decide not to operate in the country of your residence any longer or can’t do so for regulatory reasons. Second, coverage is usually only valid for stays outside of your country of birth. If you need to return there, you will have to find another insurance solution.
Mandatory local health insurance
As mentioned above, some countries require insurance coverage by a local company in exchange for a long-term visa or residence permit. If this trend spreads, it will make global living a lot more difficult.
Expats who officially work in such countries are usually not affected, as they pay into the public healthcare system and the additional cost is often born by their employer. If this is not the case and the international health insurance does not accept a suspension for a few years at a nice fee, there are only two options: Either pay for two health insurance products at the same time, or cancel the international insurance.
Retirees and digital nomads, who can’t get into the local welfare system, are forced to buy domestic insurance. In case they already have an existing international contract that can’t be suspended, they should seriously consider moving to another country.
Apart from lacking portability, local health insurance plans pose another risk, as they are subject to changing government regulations. Suppose that this year total annual coverage of no less than USD 50,000 is mandatory and you purchase a policy with a limit of USD 75,000. What happens, if next year the government raises the requirement to USD 100,000?
We have asked several insurance companies and got interesting replies. One company informed us, that we can upgrade, provided we sign a paper confirming no change in our health conditions. Another provider stated, that they might create a new plan or find a plan that covered the new government requirement. In both cases the message is clear. Those who stay healthy and haven’t claimed much, will get a new contract that meets the revised regulations. All others will face exclusions, surcharges or won’t get a new contract. It’s just a matter of time, until you are one of latter.
In summary, think twice before moving to a country, that requires mandatory local health insurance.
Many other blogs will tell you, that they have the perfect solution for you. Unfortunately, we don’t, as a lot depends on your personal situation and nobody can foresee healthcare, visa and other developments for the next 50+ years.
Some expats have decided not to buy any medical insurance, but rather save money for future expenses and hope for the best. If they start saving enough money at an early age, invest successfully, and avoid major diseases or costly operations, such an approach can indeed produce a much higher “return on investment” than the insurance solution.
But the no-insurance strategy has two main risks. First, your country of choice and many other countries might require health insurance in the future, in exchange for a long-stay visa. If you don’t have one, your choices for global living might be severely reduced. Second, if you really get sick, you might not be able to afford an urgent operation or medical treatment. In some countries you might literally die in front of the hospital, if you don’t have an insurance card or pay up front.
For those who decide to buy insurance, there are several strategies to mitigate risk.
- Ensure that you remain in or can always go back to the public healthcare system of your home country. Private insurance companies can (and will) go bust. A public system is likely to survive for political reasons and is therefore a great fallback option
- Before you move abroad, do your homework even if that means spending weeks or months doing research and going through the fine print of various insurance offers
- Don’t rely on statements and confirmations from insurance agents, as they provide no legal protection. For important topics always ask for written confirmation from the insurance company (better from the global headquarter than a local subsidiary)
- Ask for current premiums of different age groups (especially those above 80) and make your own calculations to determine, what specific combination of service level and deductible is best suited for you and affordable now and in the future
- Get a written confirmation from the insurance company, that you can downgrade to a cheaper tariff with lower coverage and/or higher deductible at your discretion
Strategies for working expats
- Even if it is not mandatory, try to get into the local healthcare system, if you plan to stay in the country for many years and perhaps retire there. Local welfare, especially in developing countries, might not provide good coverage today, but this might change in the next 10-30 years. Consider it to be your “personal insurance”. When you get older and can’t afford the soaring premiums of your private health insurance anymore, being in the public scheme might not only provide affordable coverage, but could help you to renew your visa or keep your residence permit
- Avoid local expat health insurance policies, except if i) you can’t get into the public system and plan to stay in the country forever, or ii) you intend to return to your home country in a few years
- Choose an international expat health insurance carefully. Don’t switch, because another company is a few dollars cheaper, as this might already change in the following year. Chose a provider with strong financials and comparatively stable premiums and stay with it
- Don’t be fooled by low insurance premiums when you are young. Save a substantial amount of money every month for health expenses in the future. You will certainly need it
Strategies for retired expats
- Many private health insurance policies in Western countries cover foreign stays of up to 3 or even 6 months. Alternatively, there are travel insurance products with similar duration, though they become more difficult to purchase, once you get older. If you can use one of the above options, consider not moving abroad permanently, but rather traveling once or twice a year for extended periods. This might not be your favorite solution, but it will be a lot cheaper than getting international private medical coverage
- Try to avoid countries that have mandatory local health insurance requirements
- Buy (cheaper) domestic coverage only, if you plan to stay in the country for the rest of your life
- Obtain (more expensive) international medical coverage as early as possible. The older you get, the higher the risk of exclusions and surcharges or that no insurance company will accept you as a client
For many long-term expats, the health insurance issue is constantly hanging like a sword of Damocles over their head. Many have been forced to abandon their dream of living abroad, as they could not get or afford medical coverage or because an expensive operation ruined them financially. Spend sufficient time doing your own research and deciding on the right approach, so that you are not one of them.
Disclaimer: The above is for informational purposes only. It is not an offer or advice to buy or sell any products or services. LBB and its owner do not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
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