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As mid-market companies contemplate expansion opportunities outside the United States, a key issue they will need to address is how best to offer employee health benefits for expatriates working temporarily in foreign countries, experts say.
Expatriate benefit plans, alternately referred to as “global benefit plans” or “international benefit plans,” are designed to provide comprehensive health care coverage for employees working abroad, typically for periods of one to five years. Primarily, the plans provide coverage for medical care in most foreign jurisdictions and in the employee's home country, as well as ancillary benefits such as dental, vision, health and wellness management, chronic illness, emergency evacuation and repatriation services. Most U.S.-based expatriate health plans also can be expanded with coverage for third-country nationals and foreign-based employees working in the U.S.
“The whole reason a company puts in a plan like this is to solve for gaps in medical coverage,” said Robyn Cameron, global leader of Mercer L.L.C.'s international consulting group in New York.
Expatriate health benefit plans purchased in the U.S. are best described as “hybrid policies” resembling a preferred provider organization for coverage within the U.S. and an indemnity-style plan for coverage abroad, experts say.
In addition to transferability of coverage across international borders, expatriate benefit plans typically include access to an insurer's global network of health care providers, along with detailed information and guidance on provider selection based on individual employees' needs and preferences. But unlike employees covered under a U.S.-based PPO with a direct-access provider network, expatriate plan participants are not necessarily required to utilize their insurer's global network to acquire covered medical care, experts say.
“A global network is developed to help an expatriate locate a suitable facility or provider, and in many situations to have the claim payment handled behind the scenes,” said Pam Enright, senior vice president and director of Lockton Cos. L.L.C.'s global benefits practice in Kansas City, Mo. “Employers should consider an expatriate insurer's direct-pay capabilities within the cities/countries where their expatriates will be working. The total number of network providers is not always the best gauge, but rather the strength of the network in the pertinent locations.”
Expatriate plans also generally include a range of administrative and support services, experts say, including management of benefits communications to expatriates, direct payment to international providers, 24-hour customer service and international claims management.
“You can't just throw employees into the local country medical plans,” Ms. Cameron said. “For the expatriate assignment to be successful, you need to take the worry out of the equation for the employee, and that's what these types of plans do.”
While expatriate health benefit plans have been available in the U.S. for decades, experts say many small and midsize employers still view the plans as cost-prohibitive. According to data compiled by Mercer, 53% of employers providing expatriate benefits saw premium rates for those benefits increase by 6% or more at their last renewal, with 20% of employers reporting premium increases of 11% to 15%.
Expatriate plans “are one of the most expensive products in the marketplace because they're global in nature,” said Medha Rishi, vice president of global benefits at San Francisco-based Woodruff-Sawyer & Co. “That can deter a lot of employers from classifying an employee as an expatriate, and can encourage them to localize those employees as opposed to keeping them on a U.S. payroll.”
Ms. Rishi said smaller employers often choose to cover expatriate employees through less expensive alternatives, such as relying on an employee's existing domestic health plan or purchasing local health coverage in the country in which the employee has been assigned.
However, experts say using local or domestic plans — or a combination thereof — to provide health benefits for long-term assignees can generate substantial gaps in their coverage.
“It doesn't really work that well when you take someone from the U.S. and put them on a policy in the host country, because if that employee gets really sick, they're probably going to come back to the U.S.,” said Jennifer Walsh, senior vice president and employee benefits practice leader at Woodruff-Sawyer. “Coverage in the (U.S.) is typically not going to be part of a locally based health plan.”
Similarly, many domestic health care plans exclude coverage for claims made in foreign countries, or place significant limitations on international coverage based on the nature of the claim, the country in which the claim was made and the length of time an employee has been overseas, experts say.
“Our recommendation to our clients is to consider a global option, and weigh the pros and cons,” Ms. Enright said.
It remains to be seen how U.S.-based expatriate health care plans will be affected by the Patient Protection and Affordable Care Act.