Pay Peanuts, Get Monkeys: Why Cheap Health Insurance is Cheap
Insurance like anything, is an industry where you tend to get what you pay for. For instance, the providers offering plans to people for a few hundred dollars a year to a 50-year old are quite a bit different to international private health insurers, which might be 3-8X that.
Of course, there’s a different flavor for everyone, including chaep plans, but one should be aware of the risk of such plans & not shop on price alone. When it comes to something as important as healthcare, be aware of said risks, including:
No Guaranteed Renewability
In many cases, local insurance companies in Asia do not offer guaranteed renewability, that means they can refuse to renew your new policy. Instead, they are experience-rated providers who manage people’s risk by each policy’s individual claims experience.
As a result, if you claim high, get a serious chronic condition and become a liability to them, they can simply not offer you a renewal policy. And even if they do offer you a renewal, then undoubtedly, it would:
- Have mass premium increases
- Forced deductibles or co-pays for the condition in question
- Reduce your annual limit for that specific condition
Bad Claims Experience
At first glance, if a provider is offering the world in terms of benefits & coverage area, you’re probably wondering “what’s the catch?” Well in addition, to the above, the answer could simply be:
- They find every way not to pay a claim
- They have a laundry list of exclusions
- They have a 1-year waiting period for ‘special diseases’
- No coverage for pre-existing conditions
- and most likely a combination of all of the above
Keep in mind, these are for profit companies. Therefore, they cannot offer a policy for a few hundred dollars a year and make it super easy to use = lose money.
Low Benefit Limits – Annual Limits & Submit Limits
Similarly, cheap plans = low annual limits and low sub-limits to specific benefits. These insurers reduce their financial risks, which allows them to offer lower premiums.
That leaves you vulnerable to out-of-pocket expenses with no cap.
Restricted Coverage Areas & Direct Billing
Again, insurance is all about risk management. For example, if a company offers insurance that only covers a specific country, let’s say Vietnam only or Cambodia only, then what happens if the treatment you require:
- Isn’t available there
- Isn’t adequate there
- Don’t have the right specialist or equipment
- Or you’d simply prefer to have it somewhere else
Their risk is reduced, which brings the price down and keeps more risk with you.
The same goes for their list of direct billing. A cheap policy won’t give you access to premier hospitals, clinics & medical facilities. Such places are not cheap for a reason. So if you take out a policy with a local provider, you cannot expect to top-tier direct billing services.
You could still go to them, but because of the high costs of treatments & low premium paid, you’ll find yourself in a pickle at renewal time because you have now made yourself a liability to them due to your high claims.
Summary
The primary purpose of any insurance policy is to make sure big ticket items are covered, ones that could seriously financial harm you, your family & your life’s savings. You want to be with a provider that treats you fairly at the renewal date should something major occur.
This is even more important if you’re a long-term resident of Asia, whether that is as a local citizen living in your own country or as an indefinite expat. Learn more about what I recommend in this short video.
If you do take a cheap local plan, just be aware of the risks involved.
