Hayward’s Insurance Brief

Health screening and insurers

The world of health insurance is a complex one with many different parties involved. Each of those parties generally operates as a business and since one maybe helping to fund the profits of another at the expense of the first, objectives of each are clearly not aligned. For example, hospitals want their beds full and their equipment in use, as this is how they make income and profits. Insurers want their premiums higher than the claims they have to pay, as this is how they make profits. In the middle of this is the patient who just wants to be made well again in the quickest, least uncomfortable and least inconvenient way possible. In an ideal world all parties would be focused solely on the patient, his needs and desires. But sadly we don’t live in an ideal world.

A good example of something which becomes a victim of the ‘profits now’ approach is healthcare screening. I am frequently asked why insurers don’t generally want to pay for health screening. Surely doing so identifies potential health conditions early with a number of obvious benefits:

- Treatment can be started early, and it is a well known fact that early diagnosis and treatment generally results in lower long term cost for the overall treatment

- Long term prospects for the patient can be improved significantly

- This will result in a lower long term insurance claim, surely something every insurer wants.

Profits and short term-ism

So why don’t insurers generally offer health screening as a standard feature of their plans?

The simple answer is profits and short term-ism by insurers and insurance buyers alike. Health insurance buyers, be they individuals or companies, generally have a budget. Indeed, that may even shop around each year to find the best possible deal. This is understandable: times are hard and health insurance costs are rising rapidly every year in most countries around the region. What this tends to mean is that there is limited loyalty by insurance buyers to insurance companies. They just want the cheapest and best perceived value every year.

From an insurance perspective, health screening makes sense over the medium and long term. It is likely to reduce costs in any given portfolio of customers over a period of time. However, in the short term it will actually increase costs.

If an insurance policy normally only pays when someone is ill, this is how it is priced. If, however, it pays for tests or screening to identify if someone is ill even before they have any symptoms then there is an increased cost in terms of treatment claims. The first extra claim is for the screening test itself. Subsequently, if any condition is identified, then there are additional claims costs associated with treatment which would not have occurred if the screening had not identified the need. (If there was no screening and the patient had no symptoms then no treatment or insurance claim would have occurred.) These increases in claims mean that insurance premiums would rise.

Of course you can argue that the insurance premium does not need to rise in the short term since costs will reduce in the long term. This is true. However, from an insurer perspective this is only true if the insurance buyer remains a loyal customer long term. Otherwise, the buyer benefits from screening then moves to a cheaper policy which doesn’t provide screening afterwards.

How can this be addressed? Well, some insurers already do provide screening benefits. These plans tend to be more expensive and have wider ranging benefits. Those who buy these plans are the same people who prefer to by a Lexus rather than a Toyota. They appreciate quality and that you get what you pay for. Additional benefits come at a cost.

However, for many, the increased cost in insurance associated with additional benefits such as regular health screening tests cannot be overcome. Plans on the market will therefore remain focused on value for money today and not be treated as a means to achieving long-term improvements in health and wellbeing.

The longer-term solution perhaps requires outside intervention. Many governments in this region are considering or have already introduced compulsory health insurance laws. To contain long term costs of both health treatment and health insurance, perhaps these regulations should require general common health screening as a standard requirement and benefit. Only time will tell if the markets will move in this direction.

About the author

Ian Hayward is an independent insurance consultant based in Dubai, specialising in life- and health-related insurance. He offers consulting, training and advisory services to the regional insurance industry and associated organisations. Email: ichayward@hotmail.com

ate of upload: 15th Nov 2011


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