US nationals living and working in the UK represent a niche healthcare market for advisers working in the private medical insurance market, says Martin Garcia
Britain not only tops the list of popular international holiday destinations for American tourists, it is also the number one centre for US citizens working abroad. At any given time it is estimated that there are some 250,000 expatriate (ex-pat) Americans living in the UK at any one time. And on average, they stay here for three to five years.
The mysteries of the British healthcare system may have become crystal clear to many US ex-pats by the time they return home, but very few Americans arrive in the UK with a proper understanding of the treatment they are entitled to and, more importantly, are likely to receive when they fall ill.
Notoriety
The same rule applies, of course, to other ex-pats, especially those from countries outside the EU with no reciprocal healthcare agreements with the UK.
The NHS, a source of frequent 'shock-horror' stories in the national media, will quickly achieve a certain notoriety in the eyes of the newcomer to these shores. They may recognise the many strengths of a system providing free healthcare to UK citizens. But, even with improvements in waiting times and extra funding, it is hard to see the overseas business community flocking to use the day-to-day services of the NHS where, in England, more than a million people are queuing up for operations and treatment, and waiting times in accident and emergency departments can run to several hours.
Many overseas ex-pats will, however, register, or try to register, with a GP. The catch here is that most GPs will require them to establish their residency status, typically with proof of having spent between three and six months in the country. This is further complicated by the fact that not only is the NHS off bounds without a GP referral for non-emergency treatment, but so is private treatment under a UK medical insurance policy. And with or without a GP, a US ex-pat will not be able to get free inpatient hospital treatment under the NHS until they have been resident in the UK for a year.
It is not surprising, therefore, that the American business community in the UK usually turns to international healthcare, or an extension of their existing US cover, as a solution to their medical needs. The private healthcare picture in the UK is very different from the US. For a start, only around 10% of the population here has a private medical insurance (PMI) policy, compared to 85% in the US where welfare is far more basic. Although, the UK take-up of private schemes is growing, there is still a huge difference in the underlying cultures.
Consequently, although many US citizens opt for private insurance for medical care when they arrive in the UK, a good number of them will make costly mistakes because they do not understand the options available. These choices are summarised in the chart below.
In reality, cover extensions of US policies are rarely an option in Europe because, although US companies are highly efficient at handling domestic claims they draw the line at providing long-term overseas cover largely because of what they consider to be currency, language or billing difficulties.
An international healthcare contract is, therefore, often the most viable option. In the case of overseas business people who are resident in the UK, but travel to other parts of the world on business or pleasure, it makes particular sense to opt for an international policy with worldwide cover. But the choice, of course, does not stop there.
Budget, age, family circumstances, previous medical history and all the other variable factors now come into play. Many advisers find that a good place to start when advising American ex-pats is to make sure they get three basic levels of cover in place:
• Inpatient cover - including standard options such as room and board, pregnancy, CT scans and oncology.
• A minimum annual cover limit of US$1.6m (£840,000).
• Full access to healthcare in the US if they wish to have major medical treatment back home.
The next step is the bolt-on options, which may be essential or desirable, depending on the budget. These can include:
• Outpatient care
• Unusual covers - such as hormone replacement therapy, chronic conditions, and outpatient psychiatric treatment.
• Dental care - particularly in the case of young families.
Budget is, naturally, an important factor in putting together a flexible package. But selling on price alone is not always the route to the most cost-effective policy. Providing value is, of course, an essential part of an adviser's role and there are many ways that this can be achieved and demonstrated.
Take 'self-insuring' for instance. An adviser will find that time is well spent explaining excesses and deductibles to clients and demonstrating how a level of self insurance can make financial sense in terms of premium reduction. This is because smaller claims are expensive for insurers because they take up a disproportionate amount of administrative time and effort compared with the value of the claim.
Selling point
It is not normally a hardship for a young US business executive to fund initial treatment costs up to a defined limit as long as they are covered for the big medical hits. And the savings on premium can be attractive enough to make a difference. For instance, if a 40-year-old male takes out a policy with a US$2,500 deductible, the saving will be in the region of 30% compared to a policy with a US$500 deductible.
In certain cases, it is also worth discussing policies for major medical incidents - though care is needed in explaining the small print with some of these types of cover.
The option of treatment in the US for major medical care is an attractive selling point for many ex-pats. Again it is worth going through the details of the policy. Repatriation for medical care in the US is only of true value if the treatment is carried out in one of the top national hospitals and all costs, including accommodation and fares, are covered.
When it comes down to the nitty gritty of picking an individual policy, the calibre of the insurer should not go unchecked. A series of basic questions should sort out the wheat from the chaff:
• How long has the company been in the PMI market?
• Who owns it?
• Is it a fully focused international healthcare operation or merely a bolt-on service for a larger corporation?
• How good is the evacuation and repatriation service?
• Is it based in the UK with good knowledge of the UK market?
• How extensive is its worldwide network of approved hospitals and clinics?
Finally, of course, take a good look at the annual report and accounts to check financial stability and show it to the client.
With all clients, it is important to sort out most of the administrative problems of making a claim at inception. Direct settlement of bills with hospitals and clinics is not only a boon to policyholders, it makes life a lot easier for IFAs too.
Similarly, if the client is going to be doing a lot of worldwide travel, it is worth looking at insurance providers with local branch representation all over the world who can deal with problems, claims and repatriation on the adviser's behalf. Payment in the currency of choice and flexibility to add on benefits as circumstances change can also be attractive features for some clients.
Undoubtedly, US and other overseas residents represent an important and profitable market for IFAs who are prepared to tailor their advice to specific demands and needs. The rapid turnover of new visitors means that once an adviser is established in the market, referrals will continue to fuel new business. In other words, there is a real opportunity to compliment sales of UK PMI with a vibrant market of overseas residents. And in a few years it could be the springboard to a fully fledged international healthcare operation.
Martin Garcia is managing director of Goodhealth Worldwide
COVER notes
• At any given time it is estimated that there are some 250,000 expatriate Americans living in the UK at any one time.
• Only around 10% of the population here has a private medical insurance (PMI) policy, compared to 85% in the US where welfare is far more basic.
• An adviser will find that time is well spent explaining excesses and deductibles to clients and demonstrating how a level of self insurance can make real financial sense in terms of premium reduction.
