Posted on Dec 04, 2015 by Rob McBroom
For many companies, December is one of the busiest times of year. This includes insurance companies. While many companies are busy due to the end of year and impending holiday season, insurance companies are busy because of impending rate reviews, which usually happen in early January. The question is, what exactly are their reviews and what does it mean for people considering renewing or purchasing health insurance in China?
Defining rate reviews
A rate review is a yearly process conducted by all insurers, including health insurance providers, that consists largely of an insurer determining how much, or if, they will increase their premiums for the coming year.
Historically, Pacific Prime China has seen health insurance providers increase their premiums each year. In fact, we have covered this in a recent report called the 2015 International Private Medical Inflation Report. This report found that in 2015 international private medical inflation was 9.2% globally, with insurers applying an average increase of 9.5% in China.
The report also found that in almost every country included in the report's premiums have increased each year. It then goes on to explain the main drivers behind premium inflation, as well as which factors heavily impact insurer rate reviews. This has inevitably resulted in questions from our clients each year regarding their increased premiums. To help answer these questions we talked with the health insurance experts at Pacific Prime China.
Question 1: What is the impact of premium increases on existing health insurance plans?
When an insurer conducts their yearly rate review and subsequently increases premiums, this increase is applied to all plans, including existing plans. This increase will be reflected when you renew your plan. For example, if you secured a plan in May of this year and the insurer increases their rate the following January, you will pay the increased rate when you renew your plan.
Of course, premium increases are applied to the gross premium and do not include any discounts that may be offered, or plan adjustments like higher deductibles or co-pays, which can be an effective way of reducing premiums.
Question 2: When is the best time to renew my plan?
As the report shows, and from our experience, it is nearly impossible to avoid increased premiums. You can theoretically renew a plan at any date, but you will have to pay any increased premiums that were implemented after you started your plan. To continue from the example above, if your provider increases their premiums in the January following the date you purchased your plan, but you decided to renew your plan in December, you will have to pay the increased premium when you renew again.
Because paying increased premiums is inevitable, the question of when you should renew your plan still stands. Our best advice is that you should renew your plan before the renewal date - which is usually one year from the date you started your plan.
While many providers offer a grace period for plan renewals - usually of one month - it is not advisable to renew your plan during this time. The reason being that should you need medical attention, the provider will not process claims until you have renewed your plan and paid. Should a major medical issue come up, you will be required to pay the full cost and then submit for reimbursement later.
In order to ensure that you avoid any grace periods and that you have continual coverage, we recommend starting the process at least one month before the renewal deadline. Bear in mind that during busy times of the year, such as December and during Chinese New Year, there may be delays in the renewal process, so it is best to start the process even earlier if your renewal deadline falls in this time period.
Question 3: What if I am considering switching providers?
Should you be staying with your health insurance plan next year, the renewal process should be easy as long as you start it with enough time to ensure the renewal is completed before the deadline. If you are considering switching providers however, we strongly recommend doing so before the end of the year.
The reason for this is that you can secure the current rate, before increase for the first year of your plan. That being said, switching providers may not be the best idea for all parties. If you have a pre-existing or ongoing medical condition that you have developed over the course of your current plan's coverage, new plans will likely not cover this, which means that any savings in premiums may actually be erased due to lack of coverage for your medical care.
Our expert's best advice for renewing health insurance
Regardless of whether you are considering a new plan, or will be renewing an existing plan, it could be beneficial to talk with the experts at Pacific Prime China. Our team can help you analyze your existing plan and suggest changes to coverage that can make it even more viable while minimizing the impact of increased premiums. They can also suggest new plans that may be better, should they be available. Contact us today to learn more.