What is the most cost-effective health insurance type?
When choosing insurance, we all want to make sure that we get great benefits for the price we pay. We also know that health insurance can be tricky – in terms of understanding the terminology, exclusions, and the conditions of plans. How do we know what the most cost-effective health insurance is, based on our specific needs? What aspects of the insurance policy are the most important, and why do some plans only seem cost-effective at first, but in the long run, they can ruin our finances and chances of getting a quality plan at a fair price?
In today’s article, Pacific Prime Singapore will explain in detail how a particular insurance plan type can serve you throughout your entire life.
Cost-effective health insurance is long term insurance
First of all, no plan will be accompanied with a sign or description saying: “short term plan,” or “long term plan.” That’s something an experienced broker, like Pacific Prime, or the content featured in our latest Guide to Obtaining Long Term Health Insurance, can help you determine.
Short term vs. long term health insurance plans
Let us explain how short and long term health insurance plans differ. While at the beginning some plans might look like they offer great benefits with considerably lower premiums than other policies, be wary, as you may fall into a trap. Some newer insurers on the market initially offer cheap premiums to lure new customers. But such a strategy can’t be sustainable, and after some time, maybe a year or two later, these insurers will most likely drastically increase their plan premiums (to even higher rates than other plans), so they can start making a profit, and compensate for the time they lost money on medical claims. That’s what we call a short term plan because quite often clients will drop out of the policy and not be able to pay the increased premium.
Changing an insurance plan comes with many disadvantages, as you will almost certainly lose coverage for any chronic conditions you have developed during the last policy, leaving you with no option but to pay higher premiums with your new insurer.
To find out more about how health insurance premiums have increased, download our complimentary International Private Medical Insurance Inflation Report here.
Long term plans on the other hand, initially come with what might seem like a higher premium, but in reality, such plans follow the internationally agreed premium rates based on the above mentioned IPMI Report. With steady premium increases, which you can afford and be prepared for, such plans gain the title of the most cost-effective health insurance plans, as they have the potential to serve you for a lifetime.
How can long term health insurance protect you now, and in the future?
Finding that perfect balance between premiums and benefits is tough, but indeed an essential step if you are looking for the most cost-effective health insurance plan on the market. You want to be protected from high medical costs now, but also in the future. Now you know that if you choose your plan poorly and have to change insurers often, insurance companies most likely will impose higher premiums or reject the coverage if you develop any chronic diseases, or are above the certain age limit.
Pacific Prime has recently released a whole guide dedicated to the topic of long term health insurance, which is available to download for FREE. In it we have covered in great detail how a long term plan can serve you continuously; for a short overview, you can read the below:
Continuous protection
Pre-existing conditions cover
A pre-existing condition is a term that worries many of Pacific Prime’s clients. Almost everything can be considered a pre-existing condition and may be subject to a plan exclusion when you join a new plan. Some international policies may offer a waiting period or a higher premium to cover your pre-existing conditions, but it’s not a guarantee and is unavoidably linked to higher policy costs. We advise our clients to choose the right policy once and stick to it for a long period of time or throughout their lives to ensure they can affordably receive continuous medical care.
No age limits
Another important feature of the most cost-effective health insurance plans is that they can offer to cover your medical expenses for the entire course of your life. While you may be thinking that paying for an insurance plan from the age of 30 is not very cost-effective, it’s important to consider the future. When you are, say, 60 years old with one or more chronic diseases – it’ll certainly be a great challenge to obtain new health coverage for these conditions.
A good quality policy will allow you to cancel anytime, but the insurer won’t have that right – giving you the decision power.
Stability of premium increases
Premiums and their steady increases are the most important factor when determining a quality long term health insurance policy. With the aid of our yearly reports such as the previously mentioned IPMI, and Cost of Health Insurance reports, you can predict your plan’s premiums, and your overall medical spending very carefully.
Another essential thing to consider here is whether the insurer increases premiums based on claims. If that’s the case, your current plan is not a good fit for the long term! Quality plans will not increase premiums based on their existing client’s claims history, but in accordance with medical cost inflation. The most cost-effective health insurance will be a stable and predictable one.
Portability of plans
The great thing about international health insurance plans is that they can cover you everywhere in the world – unless you choose a plan that excludes USA coverage. Moving countries for work, holidays, or adventures and keeping your coverage for all conditions, and having access to the best private clinics worldwide is what makes international plans superior.
Are those plans more expensive? Yes. But despite the fact that local or regional plans are usually cheaper, they only cover you in one place, or in one region. If you have to move or even go overseas for a holiday, you need to spend that extra money anyway for new health insurance or travel policies. And what if you have to move countries whilst you’re in the middle of your local plan? Well, no one is going to reimburse you for having to pay for two policies at the same time, so you will have to do so until the old one expires. Local plans, in this example, are not the most cost-effective health insurance option.
Auxiliary coverage benefits
Many of the international private medical plans come with a set of auxiliary coverage benefits. These benefits often go beyond standard medical-related only benefits and might include supplemental cover for:
- Assistance for major political/terror issues;
- Medical evacuation;
- Right to a second opinion;
- Convenience services – e.g., 24-hour nurse advice hotlines, pharmacy delivery;
- And more.
While the chances of a major accident in which you need to be transported to a highly specialized clinic or require terrorist-related assistance are slim, it’s nice to have that extra layer of protection. Such additional benefits are an indication of excellent private medical insurance.
How to identify the most cost-effective health insurance?
Let’s summarize what we’ve learned from this article:
- The most cost-effective health insurance plans are long term plans;
- A long term plan can sometimes be kept for an entire lifetime;
- Long term plans protect you from long term financial loses;
- Long term plans come with stable premiums and continuous protection;
- The cost-effectiveness of long term policies can be seen even sooner, as it provides international coverage and a set of extra benefits.
Besides knowing what to expect from a quality health insurance plan, you should also know how to recognize one! However, getting a quality policy that has the potential to stick with you for the long term can be complicated.
Pacific Prime has identified ten ways of determining a quality long term health insurance plan in our Guide to Obtaining Long Term Health Insurance, which is available for free to download.
If you have any further questions, feel free to contact us and ask one of our insurance advisors to discuss your options!
Jantra curates and reports on the results of Pacific Prime’s monthly newsletters, as well as manages Pacific Prime’s Deputy Global CEO’s LinkedIn posts. Complemented by her background in business writing, Jantra’s passion for health, insurance, and employee benefits helps her create engaging content - no matter how complex the subject is.
Growing up as a third-culture kid has given her a multicultural perspective that helps her relate to expats and their families while 8 years of working remotely have given her unique insight into hybrid work arrangements and enthusiasm for employee benefits.
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