With medical costs soaring, and governments getting out of the health-care business, companies need to rethink the design of their health-care plans for expats and local nationals. This is a bottom-line issue -- poor medical services can result in a failed expat assignment, and slow lines at clinics can cause productivity losses for your local nationals. Managed care is one solution -- and there are others. It’s time to examine current practices with an eye for cost containment. Global Workforce assembled the following round table of experts to discuss the key issues.
- Dave Koonce is the manager of international compensation and benefits for General Electric Co., based in Fairfield, Connecticut. Koonce led a team of GE managers who designed the company’s new global health plan. Employees benefiting from this plan include approximately 85,000 local nationals, 1,300U.S. expats and another 300 non-U.S. expats supporting operations in 50 countries.
- Julie McCashin is the director of international health network development for AEA International, with U.S. headquarters in Seattle. AEA is a global medical services company providing assistance for both emergency and primary care.
- Joe LaSorte is an international total compensation consultant for Hewitt Associates LLC based in Lincolnshire, Illinois. Hewitt Associates is a global management consulting firm specializing in human resources solutions.
- Geri Pangaro is the second vice president of the John Hancock International Group Program. Boston-based John Hancock coordinates a network of 42 independent insurance companies that operate around the world to provide group insurance to multinational companies.
Expats: Access to quality care.Providing quality medical care is the most critical cost-containment issue for expats. Without it, recruitment and retention will suffer. Members of the round table suggested your company’s medical director should evaluate facilities near your expats -- or contract with a medical-services company to do this for you. If you’ve assessed the clinics in the local area and determined that the medical services aren’t adequate, then it’s time to make some better arrangements.
For example, what happens when your expat employees are located in remote areas? Worst case scenario: You have to evacuate an employee to the nearest center of high-quality medical care. This can cost as much as $10,000 to $100,000. Dave Koonce of GE pointed out the importance of having a relationship with a medical-services company that can provide a doctor to travel with your employees in the event of an evacuation. “That basically ends up being two first-class seats and a medical bag, as opposed to sending in a Leer jet with all the bells and whistles and flying them out. . . . Now, that’s not to say we won’t do that, but if the medical emergency doesn’t demand it, why would you want to do it?”
For health problems requiring less urgent attention, Julie McCashin explained that English-speaking AEA physicians are available to members on a 24-hour basis for medical advice. “So if you’re a mom and your kid has a fever, and you’re in the middle of China, and you’re really not comfortable going to the local physician, then you can have a full medical kit in your house and you can talk to our physicians, describe the problem and we’ll see if we can walk you through self-care over the phone,” McCashin said. Or your medical-services company may send your employee to a local clinic and provide an interpreter.
One way you can address the need for better clinics is for your company to build them. Or you can work with a medical-services company and let it build them for you. McCashin said: “We have clinics that are open to AEA members that are staffed with Western physicians. If you’re a member of AEA you can walk in and go to our clinic in Ho Chi Minh, Vietnam, for example, and there’s a French, a British and a Canadian physician practicing.” These clinics have been established in areas with a high concentration of employees working for multinational companies. And sometimes a clinic is started at the request of a consortium of companies.
Expats: Coverage at home and away.Ensuring services are available is the first step. The next step is to provide appropriate coverage. Usually U.S. employers keep their expats in their home country health-care plan, even if the country in which they’re working has national health care available to them. Joe LaSorte of Hewitt Associates explained: “As an example, the U.K. has the National Health Service (NHS). Anyone who’s in the U.K. legally with a work permit can use the NHS. So, if you’re an expat in the U.K. and you sprain your ankle, you’ll get very good service -- and you’ll pay next to nothing for it,” he said.
But what if the problem is something more serious? LaSorte continued: “If you find you need open-heart surgery, however, you’re probably going to want to come home to have it done in the hospital near your home town where your family’s cardiologist can do the work. If you take your expats out of the U.S. health-care plan, then there’s really no coverage for them if they come back for that kind of thing.” Another compelling reason to carry your expats’ home coverage is that many will leave high school and college kids back in the States.
In many countries the local health-care provision isn’t adequate, or there isn’t one at all. The best answer to this is to carry a local insurance contract where your employees are stationed in addition to the U.S. plan. Koonce explained that GE carries dual coverage for expats and business travelers.
Also like expats, business travelers will have to handle the problem of not having a recognized health insurer. A medical-services company can assist by giving care providers a guarantee of payment. McCashin explained: “Can you imagine going to your local [U.S.] hospital with an insurance card that’s in Korean?” McCashin continued: “If the patient is the employee of a multinational on the health plan of the home country, then we get company approval to guarantee the medical expenses. … We’ve worked out these arrangements with thousands of hospitals around the world.”
Expats: Education and prevention.Expats are transplants, living in an unfamiliar environment. This makes them high-risk for health problems relating to things unfamiliar: diseases, prescription drugs and even local driving customs. This small but important group has a lot to learn -- and much of it will decrease the odds of evacuation.
Another interesting twist is that expats and their families often don’t return to their home countries for vacation. Instead, they travel. This means they’re passing up opportunities for checkups and routine exams during visits home.
So, companies need to arm expats with the information they need to maintain their health in the host country. Otherwise, employees will ignore small problems until they become big ones. “Most people can be sent to any location, but you’re going to have a greater chance of success if you’ve identified problems and provided them with solutions -- and if you’ve identified English-speaking primary-care providers, dentists and hospitals they can go to in case of an emergency,” McCashin said.
This is just as important for day-to-day care. As McCashin explained: “If you give employees a primary-care provider, they’re going to deal with a sinus infection in their child before it develops into meningitis. And they’ll go to the physician early in a respiratory infection before they end up with pneumonia.”
Surprisingly, motor vehicle accidents are the No. 1 cause of trauma-related evacuations -- and education is the key to lessening the number of them. “First of all, driving is more dangerous overseas. You see people who aren’t in adequately maintained vehicles and people who aren’t wearing their seat belts,” McCashin said. So address the driving issue, and you’ll dramatically decrease the odds of an accident interrupting an expat assignment.
Local nationals:Setting up shop. Modern medical technology is expensive, causing medical costs worldwide to rise faster than local inflation. And at the same time, the economic situation in many countries is causing governments to reconsider their generous national health-care plans. Some governments are cutting back on the level of service and leaving it up to employers to decide whether to pick up the difference. Others are building in competition or introducing co-payments and deductibles. And in many countries, national health care means long delays. Employers are forced to establish private clinics or private plans to limit downtime.
So although global health-care plans traditionally focused on expats, nowadays it’s the local nationals who are the key concern. Their large numbers mean they have the potential to make a big impact on the overall cost of health care. LaSorte said: “Your typical American multinational might have 300 expats; many have far fewer than that. And they may have 30,000 employees locally outside the States, so that’s where the problem is. This is where the inability to keep medical costs under control will really impact the bottom line.”
So when you’re setting up operations in a new country -- employing local nationals -- naturally you’re going to have a lot of questions. What does social security provide? How long is it likely to continue? What do the labor laws require? Are there unions you need to be aware of? Are adequate medical services nearby? What kind of medical care are your local nationals used to? How receptive will these employees be to cost-sharing measures? Are you thinking of starting up in a big city, near clinics and air transportation? Or in a remote area, away from both? Just like for your expats, your medical director or medical consultant should answer some of these questions for you.
Your first project should be to contact medical directors and local HR staff of other multinationals in the area to collect some firsthand information. “If I were getting off a plane and I were under direction to set up a plan in Nevernever Land, the first thing I’d do is find out if there were other companies that I recognize -- the IBMs, the Coca-Colas, the PepsiCos. I’d talk to them to get a flavor of what they do, and then I’d talk to a consultant or local broker,” Koonce said.
An insurance broker can provide information about local benefit practices and work with your local managers to design a plan that meets your employees’ needs. Geri Pangaro of John Hancock described what a company in her network would offer: “We provide country profiles of the 40-some-odd countries in which we currently operate. The profiles give multinationals a snapshot of what the government program provides and what typical private practice looks like. Each profile has sample benefit plans in it,” Pangaro said. “And then the employer, working with the local broker, can get a quote for a medical program from one of our associate insurers.”
Then here’s where you have to make a big decision. Do you want to establish a minimum level of care that you plan to maintain worldwide? Or do you want to set up your health-care coverage on a case-by-case basis in support of recruitment and retention efforts? Koonce explained that GE’s local national plans are driven by competitive practice. “If it’s common to do something in country A and not do that something in country B, then we won’t do it in country B,” he said. “We don’t come in with a GE mindset saying, ‘Everybody’s going to have medical, everybody’s going to have maternity, everybody’s going to have 80/20.’ We don’t do that in any benefit program anywhere in the world.” Still, some organizations like the idea of a minimum level of coverage. Although, rising costs are forcing many companies to reconsider.
And just like with your expats, you may be faced with finding adequate services for your local workers. McCashin explained: “For the local nationals, if you’re going to develop a factory in a more remote area of the country and you’re bringing people out from the capital city to be your managers, they may expect a certain level of medical care. If it’s not available in the remote area, then you’re in a position to have to provide medical services or medical solutions to your local national population in addition to your expatriate population.”
Local nationals: Managed care and cost containment. After assessing the situation and deciding on some parameters for your plan, it’s time to take a hard look at the costs. With domestic health care in the States, companies have made progress with managed care and cost control, with second surgical opinions, co-payments and deductibles. And HMOs negotiate lower rates with care providers. Lately, these practices are being adopted -- in various forms -- around the world.
But managed care and other co-insurance practices aren’t always well received. “In many of these countries, health care is culturally something that’s much closer to employees’ hearts -- something in many cases they take as a God-given right -- and when you start imposing some of these managed-care concepts, employees may react negatively,” LaSorte said.
Of course it varies from one situation to another. “I don’t think it’s going to be an easy sell in any country. It will be easier in operations [located] where you don’t have an existing health-care system or where the employer doesn’t presently provide health care,” LaSorte said.
On a positive note, there’s an added benefit to employing managed-care solutions -- a benefit that’s not as critical here in the States. “I’m hearing from some managers that there’s also an issue of quality for local nationals. And so managed care isn’t just cost containment in the international environment -- it’s really directing people to better services,” McCashin explained.
Pangaro outlined four categories of cost-containment initiatives: plan design, administrative procedures, alternative delivery systems and education. She also suggested working with a network of insurance companies to maximize savings on all insured benefit plans. A network can spread the risk over a larger group of employees based in many countries. “We help a multinational place business with [an associate insurer] and then include it in an international account for the parent, which is a cost-containment procedure because then the plan is viewed as a piece of a much larger pie,” Pangaro explained. “It recognizes that these multinationals are really mass purchasers in the global insurance market and that as such they should be entitled to size discounts or economies of scale.”
Private Patient Plan (PPP) in the United Kingdom is one of John Hancock’s network partners. PPP implemented banding, a creative plan design to cut costs. The insurance company categorizes hospitals throughout Britain into various groups, or bands, by the amount of the hospitals’ charges. PPP makes sure that the premiums are much more reflective of the level of liability. So, if the hospital finds itself grouped into the higher expense band, then the premium for an employer purchasing this option is higher. Hospitals have been taking steps to control their costs because they don’t necessarily want to be in the highest band.
Other areas to focus on with local nationals include lifestyle awareness issues that HR is addressing here in the States. Consider establishing awareness plans to educate employees about the health problems associated with tobacco and alcohol, the need for weight control and blood-pressure control, and the importance of having a healthy diet and getting plenty of rest and exercise.
Seguros Monterey, a John Hancock affiliate in Mexico, worked with one client to address the fact that the majority of its maternity benefits were covering cesareans. Pangaro explained: “They set up education programs for pregnant employees or spouses to discuss the options they had for childbirth so there was more participation on the part of the insured in making the decision as to how the birth was going to occur.” She continued: “So I do think there are lots of things happening around the world and they parallel what we see in the States.”
On the flip side, another strategy for trying to achieve cost efficiency is self-insuring. Koonce explained: “We can go down and talk to the [company] underwriting the medical plan and say, ‘Look, we’re going to take the risk away from you.’ So all of a sudden the underwriters aren’t really doing anything more than administering the medical plan for us. So, from that million-dollar premium we give them 10 percent. We bring all the rest back and just pay the claims through them. We self-insure a lot of our plans all over the world.”
Future trends in global health care.So what does the future hold? McCashin expects there will be a higher incidence of travel-related stress. “Instead of going for five days to a single country, executives are now doing the country-hopping routine -- and the jet lag, the stress, the fatigue and the illness can just overwhelm them,” McCashin said.
She also sees mental-health issues as a growing concern. McCashin estimates that 5 percent to 10 percent of AEA’s evacuations or major medical cases are related in some way to mental-health issues.
LaSorte cited current trends that are still running strong: the cost escalation, cost responsibility shifting from governments to the private sector, growing dissatisfaction with government health-care provision, increasing provision of private medical insurance, more managed care, more flexibility.
Pangaro responded: “There’s going to have to be greater cost-containment efforts overseas than there have been. What’s happening is that in more countries real partnerships are being formed between the employers and the insurance companies or the health-care providers to contain costs and to try and work out systems that provide the employee with good care, but not an excessive amount of care.” She also noted preferred provider organizations are attracting a great deal of attention lately.
And the result of all these cost-cutting strategies? Companies will be prepared for the one trend that seems inevitable: the rising cost of medical care. And quite simply it all boils down to this: If a company can find a cost-effective means of providing good services and thorough coverage, its expats, business travelers and local nationals can concentrate better on the job they’ve been assigned to do, and retention and recruitment will become easier.
How important is that? Koonce explained: “We anticipate that half of our profits are going to come from outside the United States by the year 2000 -- and the people who are going to do that for us are the very people we’re talking about -- those who have an opportunity to benefit from the program.” Granted, devising the perfect health-care plan is a challenge, but the outcome is a satisfied global workforce and a healthy return on investment.
Global Workforce, January 1997, Vol. 2, No. 1, pp. 24-28