Why have US employers failed to adopt medical tourism?

In the second of two articles on the US medical travel market, Irving Stackpole from Stackpole & Associates looks at how US employers view medical travel and the reasons for the slow uptake of “medical tourism” benefits.

While no large employer has, as far as I know, included international medical travel in its benefits plans, small employers have. The MTA have aggressively promoted these early adopters including Hannaford Supermarkets based in Maine (2008), HSM Solutions, a Hickory, North Carolina furniture manufacturer (2008) , Casino and Hotel of the Blue Lake Rancheria tribe in Northern California (2013) and IDMI Systems Inc., a software company in Warner Robbins, Georgia (2014). Six percent of firms offering fully-insured plans report that they intend to self-insure because of the ACA. It is now estimated that the average self-funded plan covers 300-400 employees and that 59% of companies within the U.S. self-fund part of their healthcare plan.

While these are small companies, the theory is that their willingness to adopt a medical travel benefit plan may prompt others, and serve as an example for similar plans. So far, this hasn’t been borne out.

More small companies are looking to self-funding as a way to reduce their share of the health care cost burden. Because small companies are not able to assume the same levels of risk as larger ones (the self-insured market is dominated by large employers), stop loss insurance rates are increasing. This pressure will serve as a limitation on the expansion of self-funded health insurance into the small employer market.

The larger they come, the harder they fall

The likelihood that large self-insured companies would add an international medical travel benefit to their health insurance plans is extremely small at this time. This conclusion is based on the following:

• The current implementation of ACA in the United States has distracted or absorbed the attention of insurance markets, including self-insured companies. Many self-insured companies are wrestling with far more immediate issues of how many employees will be included/excluded, potential penalties and avoiding fines under ACA;
• Self-insured plans are exempt from many of the more costly and burdensome requirements of ACA as long as they make no significant changes in their plan benefits. Therefore self-insured companies and their third party administrators are being extremely careful about keeping their plans’ coverage unchanged;
• Reinsurance, or stop loss coverage may be limited for plans offering an international medical travel benefit, and;
• There is no history of outcomes, evidence or actuarial models to support the case among employers for a disruptive change such as international medical travel. Reports appearing in the popular press and the news from associations and companies promoting the sector about cost savings and quality outcomes are not yet supported by recognized, reliable evidence.

The challenge of penetrating the self-funded health insurance market in the US is evidenced by the very low acceptance. To date, only a few companies (small companies mentioned above) have been identified as having adopted international medical travel as part of their plan benefits. There is currently no reliable published data available regarding self-funded health insurance plans offering medical travel benefits. Despite what others may say, there’s no evidence supporting their claim that the self-funded employer market is a good marketing & sales channel for medical travel benefits.

Third party administrators (TPAs)

While a few large employers administer their self-funded group health plan, most find it necessary to contract with a third party for assistance in collecting premiums, managing membership enrollment, claims adjudication and payment. Third party administrators (TPAs) provide these and other services, such as access to preferred provider networks, prescription drug card programs, utilization review and advice regarding the stop loss insurance market. Very often TPAs are health insurance companies offering what are frequently referred to as “Administrative Services Only” or “ASO” contracts. In these arrangements the insurance company provides the typical third party administration services but assumes no risk for claims payment.

These details are especially relevant to medical travel providers which wish to contract for care with self-funded employers. Because employers are exempted from state regulations, they are at liberty to modify their benefits plans to include such services as medical travel, payments to foreign providers and international medical travel. Because of the growth in premiums and medical costs, economic logic suggests that self-funded employers should be interested in high quality, lower cost destinations for those employees willing and able to travel for medical care. However, wherever a self-funded company has a TPA or ASO contract in place, it is necessary to persuade both the benefits manager at the employer and the TPA/ASO of the value proposition being offered as a destination provider, and the low risk associated with accessing international medical travel.

Does it add up?

Hundreds maybe thousands of insurance agents, medical travel facilitators, hospitals, government representatives and others have taken the advice to market and sell medical travel benefits to self-funded insurance companies, third party administrators, and private health insurance companies. All this effort, all that time and money spent, all the personal anguish created by failure after failure, and there are only a handful of small businesses that have adopted foreign medical benefits plans, and even fewer employees who have accessed them.

The health insurance market in the United States has just been through wrenching change, and the difficulties associated with that change are not yet over. The incentives for health insurance providers, self-funded employers are not simply economic (to save money), but are squarely focused on risk management and mitigation. Because of this, international medical travel benefits are not likely to be adopted until there is a manageable risk model which health insurance providers and self-funded employers can understand and accept.