Keeping Your Expats Healthy

November 1, 1998
Health care is the number one concern of international assignees. Does this surprise you? In a time when so many forward-thinking programs have been developed to help expats deal with cultural adaptation, language acquisition, spousal career concerns and repatriation, it’s easy to lose sight of something so basic.

This must be what’s happening, because not only does the “1996-1997 International Assignee Research Project” (conducted by Princeton, New Jersey-based Berlitz International Inc. and HFS Mobility Services, now Danbury, Connecticut-based Cendant Mobility) show expats place highest importance on health care among all assignment services, but it also shows only 65 percent are satisfied with the health care service they receive. One-third of the time, expats’ most pressing concern is being handled poorly. This is not a situation you want to be in. It’s bad for morale. It’s bad for assignments. It’s bad for business.

So why are expats unhappy? Sometimes it’s availability of care, but more often it’s access to care. Many assignees struggle through unreal bureaucracy to process claims for simple medical procedures. As many U.S.-based multinationals are learning, creating a special expat benefits plan may be the solution.

Traditional approaches.
This will sound similar to the popular methods of expatriate compensation outlined in “Is the Balance Sheet Right for Your Expats?” (Global Workforce, September 1998) -- but it bears repeating. Traditionally, there have been three choices for handling expat benefits. Consider this scenario: An individual from the United Kingdom works for a U.S. multinational and is being sent to Australia.

  • Home-country approach: The employee is maintained, as much as possible, in the U.K. benefits program. Everything from health care to life insurance is kept in the United Kingdom.

  • Host-country approach: This system is similar to the home-country approach except that everything shifts to Australia. The person essentially is given the same medical benefits as an Australian national working locally in Australia.

  • Headquarters-country approach: In this case, the U.K. employee being transferred is given the U.S. benefits plan. Medical, dental and even 401(k) is covered by U.S. programs. If it’s impossible to put the employee in a particular plan, a mirror plan is offered.

These methods have served U.S. multinationals fairly well as fill-gap measures over the years. But today’s marketplace calls for a heightened level of effectiveness from assignees. Yesterday’s benefits solutions may be out of date in supporting these key players in your global strategy.

Stumbling blocks.
So what makes the traditional solutions out of date? These approaches carry some serious -- and in many cases, avoidable -- stumbling blocks. These are some of the biggest ones.

  • Language and currency. This problem applies whether you’re working with a home-country plan or a headquarters-country plan. Let’s say an expat in Hong Kong receives medical treatment. The claims, written in Chinese and itemized in Hong Kong currency, are sent to a French insurer unused to dealing with this kind of paperwork. It can be a nightmare to get the documents translated and the currency converted, drawing out the reimbursement process months, if not years.

  • Pre-existing conditions. What happens if an expat from the United States is localized into the Australian medical system for three years (host-country approach), and during that time develops a health condition? When he or she returns home, this person may have trouble going back into the benefits program in the States without being classified as an individual with a pre-existing condition. The employee hasn’t switched firms, but he or she may be stuck with the label simply because the insurers in the U.S. and overseas are different.

  • A family member stays behind. If you have an expat transferring without his or her spouse or leaving behind a child in college, you may have a hard time keeping everyone insured. For example, there are some U.S. policies that don’t like to cover people not on the local payroll. So if a U.S. employee transfers to Australia and adopts an Australian insurer, the family members in the States may not be able to stay on the U.S. insurer’s plan.

  • Cost. Another key concern, especially for expats in a U.S. headquarters-based plan, is cost. Some U.S. companies have noticed, for example, that when sending a U.K. employee to Australia, it doesn’t matter what insurer they go with in either of those two countries, there’s no way the cost could be more than a fraction of what it would be with a U.S. plan.

  • Consistency. As discussed in September’s compensation article, you also need to consider where you want to have equity. If you have expats in Australia from the United Kingdom, do you want the expats to have the same benefits as their Australian peers? Or do you want them to have the same benefits as their U.K. colleagues? You can unwittingly create friction when employees working side by side have significantly different benefits packages.

  • HR’s time and attention. When you transfer people from the United Kingdom to Australia for the first time, you have to figure out what to do with them. Later, if you send another U.K. family to Australia, you know what to expect. But suppose your next transfer is from France to Australia. Then it’s back to square one, researching your options.

Carving out expats.
This brings us to what some are calling the special expatriate plan. This approach to global benefits attempts to solve many of the problems with the other methods by creating a single program for all international assignees. Eugene Dimitriou, international consultant with New York City-based William Mercer, says, “It doesn’t have the administrative difficulties of dealing with different languages and different currencies.” He continues, “If you have a Hong Kong-based employee that has medical treatment in Australia, the person can probably expect to get their money back -- and even an explanation of benefits in Chinese -- within 10 to 15 days.” This is a drastic improvement compared to the months or even years it may take with traditional methods.

Insurers offering special expat plans, such as Cigna and Aetna, have processes in place to handle the language translation. It may be done internally or through outsourcing. They also understand that employees shouldn’t have to take the risk for currency fluctuation, so they process claims using rates applicable for the date the employee paid the bill.

These insurers also offer flexibility, building in waivers for pre-existing exclusion clauses. You’ll find this same flexibility when it comes to deductibles and co-insurance premiums. And special expat plan providers will work with you to develop a program that meets the expectations of your expats, regardless of their nationality. This includes understanding local medical practices and covering procedures that usually would be excluded under other programs. For example, in the Netherlands it’s common to have a midwife during child birth. A special expat plan would be more likely to cover this procedure for families who are more comfortable with this while they live on assignment somewhere else.

These plans are also fairly flexible regarding who can participate in them. Dimitriou explains that in some cases they’re used for local nationals in management positions. This allows the company to improve their benefits packages without having to make arrangements for more expensive individual policies.

Carving out expats is definitely a growing trend. But so far, chances are your company isn’t there yet. Ginny Hollis, vice president of sales for Wilmington, Delaware-based Cigna International Employee Benefits, says, “I would say probably 25 percent of the U.S. multinationals now have separate global programs. The other 75 percent probably still have people covered under the domestic program. And they’re getting the domestic carrier to try to do a bunch of work-arounds … or they have their own staff playing intermediary still.”

So why haven’t more companies already made the move? It’s a time consuming transition. HR needs to pin down exactly where its expats are in the system currently, move them into one information system and work on setting up new eligibilities. But after this initial effort, you should see an ongoing time savings. Hollis explains, “Once HR goes through the initial work of setting up the plan, it takes a lot of day-to-day headaches away. The plan is totally portable.” She adds, “Expats generally will say, ‘My gosh, you listened to me! You set up a plan that really meets my needs. You understand what it’s like to be overseas.’”

So it seems the special expatriate plans beat the others hands down. Well, not exactly. There are some cases in which the traditional methods are still the better options. This is especially true if a company is sending expats from the headquarters country and it rarely does the reverse -- bringing people in. In this case, things may already be as simple as possible. The same holds true for a company with only one or two global locations. If processes are already standardized, this new approach may not be helpful to you.

As with all components of the expat package, it’s important to reevaluate the status quo. Your current way of handling benefits may seem to be working well on the surface, but it’s doing your organization a great disservice if it frustrates assignees and burdens HR. You may learn that an updated benefits program is all you need to recruit and retain top expat candidates. And happy, healthy expats are productive assignees.

Global Workforce, November 1998, Vol. 3, No. 6, pp. 18-23.