IMTJ looks at the history of Passport2Health, the first health insurance plan based on medical tourism, and highlights the lessons for the medical tourism industry.
The UK’s Sunday Telegraph reports this week on the demise of Passport2Health, the first health insurance plan based on medical tourism, which offered UK patients private diagnosis in Britain and fast-track private treatment at top-quality hospitals in Europe.
Passport2Health launched in June 2012, claiming it could cut health insurance premiums by between 30% to 50% for people aged between 25 and 55, if they were prepared to accept private treatment overseas in the event of a claim for treatment. The policy provided diagnosis in the UK, surgery in one of Passport2Health’s selected network hospitals in Europe and follow up care and rehabilitation in the UK.
Initially, the product was offered to small and medium sized businesses (SME’s) through the UK’s insurance brokers and then direct to individuals. But uptake in both sectors was poor. In 21 months, it only managed to sell around 100 policies.
After 21 months of operation, the insurer is closing its books to new business.
So what lessons can be learned from the demise of Passport2Health?
Lesson 1: Underwriters are wary if they can’t calculate risk.
The product took several years to bring to market. The biggest challenge it faced was finding an underwriter who was prepared to cover the risk of treatment in non-UK hospitals. Eventually, Sirius Lloyd’s Syndicate 1945 agreed to underwrite the policies. The difficulty for any underwriter of such a product is that of calculating the risks of surgery in multiple hospitals in a variety of countries. With little cross-border comparative data available on outcomes and post operative complications, how is an underwriter able to make an accurate estimation of risk where a medical tourism based insurance product is concerned? The same problem faces any insurer who is considering the development of a product based on treatment in multiple destinations through multiple providers.
Lesson 2: The corporate market doesn’t buy in to medical tourism.
The main selling point for the UK’s SME market place was cost saving. Health insurance is an expensive benefit for SME’s to offer to their employees. So, a saving of 30% to 50% on the premiums should be attractive? It’s the argument that we hear in the USA where medical tourism is being touted as the financial cure for cash strapped businesses, burdened by healthcare costs. But in the UK, the corporate market remains unconvinced. And the broker market isn’t convinced that selling what some would perceive as a low grade product into the corporate market will bring a return.
The reality is that corporate buyers still don’t “get” medical tourism. Offering it to employees is seen as a downgrading of benefits or a cheap option. If an employer is offering an employee benefit, then that benefit has to be seen as credible and safe, not just a way to save the company money.
Lesson 3: The individual buyer of health insurance isn’t convinced about medical tourism
The UK’s private medical insurance market is going through difficult times. With a backdrop of economic recession and rising heath insurance premiums, companies have cut back on expenditure and individuals have found that they can no longer afford the luxury of private medical insurance.
In the past couple of years, the numbers covered by health insurance have been in decline; currently around 10% of the UK population is covered. It has put pressure on the insurers, and on the private hospitals where, in the past, four out of five patients have been funded by insurance. Increasingly, the individual opting for private medical insurance is shopping around for a cheaper deal as they do for other forms of insurance – for their car or for their home. Health insurance is becoming more of a commodity/price comparison purchase.
But even with savings of 30% to 50%, Passport2Health wasn’t able to meet the consumer’s need and plug the gap for a credible low cost option. The consumer is looking for a better deal. But they want a better deal that offers them treatment in an environment with which they are familiar… a local private hospital or the private patient unit within a local NHS hospital. The idea of travelling overseas for surgery in a foreign hospital where doctors and nurses may not understand you, where the culture and practices may be unfamiliar, is a long way from being accepted by British patients who want healthcare at home, and are prepared to pay a premium to offset what they perceive as the risk of medical tourism.
Will we see greater adoption of medical tourism based health insurance in the future?
It’s unlikely, certainly so in the UK.
Medical tourism in the UK and in many countries is far from reaching a tipping point. In the UK, self pay medical tourism is dominated by cosmetic surgery and dentistry, for treatments which are not funded under the UK’s free to use NHS. Very few individuals opt to travel overseas for elective surgery (such as orthopaedic or eye surgery) when they can wait for free treatment under the NHS or negotiate a “Fixed Price Surgery” deal from their local private hospital. Even fewer consider the option to use their rights under the EU Directive for NHS funded treatment in another EU state.
When companies and individuals invest in health insurance, they are seeking to provide cover for elective surgery which is quicker to access than within the NHS and can be provided in a more comfortable, and friendly environment. Health insurance based around medical tourism has so far failed to meet that need.
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