GROUP HEALTH INSURANCE ……. THE GOOD AND THE BAD
Beware of certain group health insurance policies. Heavily discounted group health policies have many hidden risks. This report has been written by a professional licensed insurance broker, specializing in the field of health insurance and goes into details the main risks and why you should avoid this type of health insurance.
- Be aware that a group health policy has many risks. These risks are not openly visible to an average customer, only an experienced insurance broker knowledgeable about health insurance will be aware of these risks. Not all insurance brokers have the same background or experience and not all brokers will inform you of the risks……….for two reasons, (they either don’t know, or they don’t want to tell you).
- Choosing a reliable health insurance is easy to do; choosing a very bad health insurance is also easy to do. Take your time before choosing, talk to several friends, insurance companies, agents and brokers before making your final choice. There are over 90 insurance companies registered in Thailand and many more overseas that offer some form of health insurance. Not all insurance companies are trustworthy and not all insurance companies will offer good claims service. Some insurance policies are not worth the paper they are printed on. How can you find out which companies will do a good job? Easy, talk to a trustworthy insurance broker.
- Group health policies are cheaper, but at the risk of many other factors. The negative factors of group policies should scare most people away from these type of polices (see below paragraph on advantages and disadvantages). The multiple negative factors far outweigh the small benefit of saving on health insurance premiums.
- Group health policy premiums are determined by the previous years medical costs; if medical claims were high during the previous year, then the premiums for the following year will go up……..sometimes dramatically.(see below paragraph on advantages and disadvantages items 2 – 3).
- Group health policies are not automatically renewed. If the insurance company decides the group is losing too much money, they have the right to refuse renewal (see paragraph below, item 4). At some time in the future, you may find yourself without insurance cover when you need it most.
- If your group policy is not renewed, you will be forced to apply for a new policy and declare all medical conditions. Your declared (and undeclared) medical conditions are called pre-existing conditions and will not be covered by a new policy. You will be paying the same premium as others in the same age group but your policy will be restricted and not cover various pre-existing conditions that you developed while insured under the group policy.
What are the advantages and disadvantages of group policies?
Advantages to customers:
1. Lower premium cost to each member because everyone renews policy at the same time (less work for the insurance company).
Disadvantages to customers (usually never revealed to the customers):
1. You are at the mercy of the collective health of the group members.
2. The annual premium is dictated by the previous year’s loss expenses. Premiums can go up a substantial amount if losses are high the previous year.
3. The insurance company can reduce policy benefits if losses are too high the previous year.
4. The insurance company can refuse to renew the group policy if losses are too high.
5. Many insurance companies will not insure affinity groups with significant premium discounts.
For people that place a greater significance on money than health, a group policy offers the most important advantage.
For all others, a group policy is your worst nightmare.
1. You are at the mercy of the collective health of the members. As more and more members join the group, you have no control over the quality of these new members. If the average health condition of the group drops, claims expenses will naturally go up. You are directly affected by the poor health of other members…………and paying higher premiums for it.
2. The premiums charged by the insurance company is based on the previous year’s loss-ratio for that group. Loss-ratio is a percentage of the premium income that is paid out for medical claims. Insurance companies are not a charitable organization, they are in the business to make a profit. If your group has excessive losses, the loss-ratio goes up and you can expect a significant premium increase the following year. Don’t expect this premium to drop in the future. The group members are going to be one year older the next year and that also increases the incidence of claims-expense for the group……………all this adds up to ever increasing premiums, in some cases the increases can be higher than if you had originally applied for an individual policy. An insurance company losing money on a group will only do so for a limited period, usually to the end of the year…..on renewal, the premium will be increased substantially.
3. The insurance company only issues annual health policies. Each year a new policy is issued it can be revised, remember it is a custom-made policy for the group. If the insurance company sees a benefit that needs adjusting, they will adjust it…………the adjustment is usually down, a reduction in benefits. From my experience with group health business, groups are generally the worst kind of business for an insurance company. Some health insurance companies see a loss-ratio in excess of 100% for their group business. This means they are paying out more in claims expense than the total premium paid in. (A manager of a leading health insurance company in Thailand revealed to me that his company individual customers subsidized their loss-burdened group health business.)
4. Several insurance companies I have worked with and some I have observed, have to take drastic action on their group business. If the group is costing the insurance company too much in losses, the insurance company has every right to refuse to renew the policy the following year. There is no guarantee of renewal with group business. Individual members of the group join thinking that they are now insured with a reputable insurance company (and they may well be with a good company, but that doesn’t change the rules) but soon find themselves having to apply with another insurance company when the group policy is no longer renewed. Starting with a new insurance policy may not be a problem for many healthy persons, but it is a problem for people that have developed a medical condition. These unfortunate persons are forced to apply for a new health insurance and declare their medical condition which will not be covered by the new health insurance policy. Because they were misled, they are now at a disadvantage.
5. Many insurance companies will only offer affinity groups (groups that are made up of people that are not employed by the same company or a member of a registered association) a minimal premium discount, 10-20%. Large discounts work against the insurance company; they encourage too many customers to join the group instead of applying for individual policies at full price. The lower premium actually backfires in the face of the insurance company.