Individually-rated
health insurance policies
are risky for long-term expats
By Geoffrey Mann – December 6, 2023
If you’re covered by certain health insurance policies and experience a serious accident or injury, you might see your premiums double or even triple. An individually-rated policy like this is usually not a secure long-term solution. The relatively low cost may be tempting, but a serious accident or illness can trigger serious negative consequences. Better to stick with the stability of a community-rated policy.
What are individual and community ratings?
For context, private health insurance companies are in business to make a profit. They calculate the risk of customers making claims for medical care against the reward of collecting their premiums. At the end of the year, if the premiums they collected exceed the claims paid (plus other business expenses), the difference is profit.
This profitability formula can be applied to an individual or a group (community). Some use the term experience rating instead of individual. That’s the simple explanation; the reality is a complicated world of actuaries, networks, reinsurers, probability theories, pre-existing medical conditions, etc.
Premiums are subject to increase each year
If profits are low or even non-existent, the insurer will usually raise the premiums for the following year.
Insurers also raise premiums to correspond with inflation in the costs of medical care, but these increases apply more or less equally to both types of ratings.
In an individually rated plan, individuals who have significant claims due to a serious accident or illness can see massive premium increases, while those who stay healthy have none. In a community rated plan, the big claims of the few will be offset by the healthy majority, and the resulting premium increases will be applied equally to everyone.
Each rating type has its pros and cons, so if you are in the market for health insurance, you need to understand these concepts.
Pros and cons of individually rated policies
The allure is that they are generally cheaper at the start. That’s really about it in the way of positive differences compared to community rated policies. However, the cons are quite meaningful. In addition to significant increases to your premium, you might also see
- Other cost increases, such as one-time or annual loading fees and copays for specific types of medical treatment
- Excluding your recent medical condition from your coverage going forward
- Not renewing your policy
A major cost increase may seem harsh or punitive, but the impact of losing your coverage after a recent medical condition is actually worse. Since almost no insurer in Southeast Asia provides coverage for pre-existing medical conditions, this means you would not be able to find coverage for the condition.
Here’s a real-life example:
Last year, a Tenzing customer had a stroke and submitted a lot of claims. He just received his renewal notice, which included an increase of 133% – his annual premium jumped from $5008 to $11,700. His choices are to pay the premium and be covered for his post-stroke treatments and any future strokes, or seek a new policy, which will certainly exclude anything stroke-related. Worse, since this is a major medical condition, most other insurance companies won’t even offer him a policy. He will likely be forced to return to the United Kingdom.
If your plans are to have a policy for just a few years before moving on, an individually rated health insurance policy might be a good solution, especially if you can return to the safety of your home country’s national health system. Otherwise, we generally recommend spending a bit more for high quality, community rated health insurance. Long-term expats in particular should be taking the long view, thinking about being properly insured for as long as necessary.
