Thanks to improvements in healthcare, we can all expect to live longer. This in turn increases demands on healthcare services. Beyond the age of 50, our susceptibility to ill health rises quite significantly. In a survey carried out in Kenya in 2013, one-third of people aged between 55 and 64 (and 39% of those aged 65 and over) reported ill health.
Living a long life could mean a lot of medical bills. The more complex your medical needs, the higher the bill could stack up. In that same Kenyan survey, 21% of people who didn’t seek medical attention when they needed it put this down to the high cost of care. World Health Organization (WHO) statistics from 2014 show that two-thirds of the average Kenyan household’s out-of-pocket expenditure went on health. In Uganda the figure was 55% and in Tanzania, 43%. For some families, unexpected medical expenses can be catastrophic and send them spiralling into poverty. A 2015 study revealed that 23% of Ugandan households faced financial ruin due to healthcare costs.
So in order to protect ourselves and our families from this fate as we get older and begin to face more health challenges, investing in private medical insurance (PMI) is a sensible precaution. But for an ageing population who are not used to insuring themselves in this way, the options can be bewildering. Insurance providers will charge higher premiums to cover the higher risk of illness in old age and there will be all sorts of caveats and conditions that you need to understand clearly before committing to any health insurance policy.
In this article I’ve highlighted the major issues to keep in mind when you’re shopping around for senior health insurance, either for yourself or an elderly relative.
Factors influencing the cost of medical insurance
So let’s look at the key factors at play when it comes to the cost of health insurance.
Age: The younger you are when you apply for PMI, the better your chances are of getting good cover at an affordable price. Many insurance providers set a maximum age for new applicants, though they are happy to continue insuring existing customers once they pass this threshold. Check the conditions carefully, though, because you might find that the level of cover diminishes with age. For example, the maximum limit of medical expenses covered may decrease at a certain age and the premium will increase.
Many insurance providers set a maximum age for new applicants, though they are happy to continue insuring existing customers once they pass this threshold.
Other providers commit to a flat pricing structure for those who join before a specified age but increase the premium every year for those who join later. And some, which are best avoided, reserve the right to cancel your policy or refuse to renew it when you hit a certain age or are diagnosed with a serious illness.
It’s worth beginning with providers that specialise in PMI for senior citizens, as they will have tailored their products to take these conditions into account and make them easy to understand.
Pre-existing conditions: If you have a chronic illness or have had an accident that may impact on your health in the future, this will be counted as a pre-existing condition and some insurers will simply refuse to provide cover. Others will be more flexible, accepting a new member with a pre-existing condition on the proviso that they won’t pay out for any treatment related to their condition until they have been trouble-free for a certain period of time (a moratorium), typically two years. Others will calculate the risk a pre-existing condition poses, in terms of future health expenditure, and then set the premium accordingly.
Joining a group scheme, such as an employer’s or retirement club’s scheme, may prove beneficial where there is a pre-existing condition. The other members of the group will help to even out the risk, so the pre-existing condition may not be taken into account.
Cover sub-limits and exclusions: Regardless of the age at which you apply, many PMI policies include restrictions on the cover provided for certain conditions (sub-limits). Most have a list of conditions and forms of care for which they won’t pay out (exclusions). Others exclude or set a limit on the amount paid out for a chronic condition, even if the insured develops it after applying for cover.
Beware that some PMI plans designed specifically for senior citizens exclude certain types of care that ageing customers are likely to need, such as providing glasses or dental treatment. Others will refuse to pay out for treatment for any condition contracted within 30 days of joining. And some procedures that are common among older people, such as joint replacements, may only be covered after a certain period of membership.
Some local health insurance policies may only cover the costs of hospital treatment up to a certain limit if you don’t give adequate prior notice.
International vs local insurance cover: In pure cost terms, international private medical insurance (IPMI) is more expensive than local health insurance but the benefits can make it your best option. If you opt for local health insurance you can usually expect the range of available facilities to be fairly limited. This can be a problem for someone who develops an ailment that requires specialist treatment at a centre of excellence abroad. IPMI would finance you to travel and pay for the treatment you need, wherever that may be in the world.
IPMI policies will also cover you for using the best medical facilities close to home – something you can’t guarantee with local health insurance. Excluding certain countries from your plan, such as the USA, will help you keep the premium down while providing the flexibility you need.
Excluding certain countries from your plan, such as the USA, will help you keep the premium down while providing the flexibility you need.
Budget: The range of PMI plans open to you will, of course, depend on your budget. Many insurers allow you to tailor the cover you want, which enables you to keep the cost down by choosing only the options you think you’ll need. For example, you might prefer to buy cover for in-patient care only and to pay any other medical expenses out of your own pocket. Look for providers who offer a list of optional add-ons, ranging from dental and optical cover to complementary therapies and psychiatric care, which you can include if your budget allows.
For serious illnesses, some policies may only cover treatment up to a certain value or only cover essential tests and treatment. Where this is the case, you could look at taking out a separate critical illness policy that would pay out a lump sum on diagnosis to help cover the extra costs. Alternatively, if your budget is limited, you might consider paying a higher excess or deductible to bring the premium down.
Five steps to securing the best senior health cover
A good medical insurance adviser can help you through the process of securing PMI in later life, getting to know you and your specific needs and seeking out the best cover at the best price. This can save you a lot of time and help to avoid the pitfalls of what can be a complex marketplace.
Despite all the limits and conditions, the process essentially boils down to five basic steps that your adviser can guide you through.
1. Consider at least two providers. Don’t just go with the first one you find. Shop around and weigh up the relative benefits against your specific needs.
2. Select the provider you want. Read reviews and ask other people for references before settling on an insurance provider.
3. Having chosen your provider, they will ask you to fill in an application form. Make sure you do this honestly, declaring all pre-existing conditions. Failing to mention a condition could be a costly mistake, as it could even invalidate the entire policy.
Failing to mention a condition could be a costly mistake, as it could even invalidate the entire policy.
4. You may be required to attend a medical examination as part of the application process.
5. The insurer will then notify you as to whether they are prepared to offer you PMI. Cover may be offered in one of three ways:
- Cover in full, including pre-existing conditions, either at standard premiums or on a premium loading.
- Cover with exclusions on some conditions.
- Cover with a moratorium for existing conditions.
They also have the right to reject an application if they feel it doesn’t meet their criteria.
Before signing on the dotted line, remember that it’s your responsibility to verify that the policy you sign up for is suitable for your needs. Read the small print. Your adviser will be able to help you address any concerns.
And remember, the younger you start with this process, the better value you are likely to achieve.