Expat Health Insurance: Community Rating vs Experience Rating

Whether you want to buy a flight ticket, get a 2nd hand bike, or shop around for a new apartment, there will always be lots of things to consider. You’ll have a key list of pros and cons that will be your top priority when weighing your options. Get a late flight for cheap, or get the expensive early flight and enjoy more time at the beach? Get a nice Honda with low mileage, or a cute Cub that looks nice but was made in the 60s? Live close to your work, or closer to restaurants?

This decision process is no different when choosing expat health insurance in Vietnam. Some people like the peace-of-mind that comes with comprehensive coverage and extra features while others may just want to pay as little as possible and hope nothing bad happens. But in this case you’ll have to be doubly good at weighing the costs and benefits of your policy – especially as a foreigner. In particular, one thing stands out most when choosing policies, something that very few people have even heard about: Community Rated vs Experience Rated premiums.

Hopefully, by the time you’ve finished reading this, you’ll have a better understanding of how to include this into your personal list of pros and cons. And please do get some type of policy before you go on any adventures.

Let’s get started

Insurance Providers are private companies, and as such they have to make a profit, and one way to do that is using price as a risk management tool. At its most basic, Community Rated premiums are calculated based on everyone’s medical claims within a community (or risk pool), while Experience Rated premiums are calculated based on each individual’s own claims history.

Community Rated

Each year, upon renewal, rates will increase based on these two different risk management strategies. Community Rated premiums generally start off more expensive than premiums for Experience Rated policies, but on the flip side the yearly increase of the overall community will generally reflect the medical inflation rate. In other words, it’s very predictable and you can plan a budget around it.

At the time of writing, medical inflation in South East Asia was about 9% for Q3 of 2021.

Experience Rated

Meanwhile, Experience Rated policies will tend to be cheaper, however more of it’s rate will go into profit for the insurer. As mentioned before, this is a risk management strategy. If the insurer paid out a lot in your current year, they will find a way to recoup that money – and Experience Rated insurers will basically do a “claw back” of whatever benefits they’ve already paid.

Even worse, if you get diagnosed with a long term illness, or some injury that requires long term care, Experience Rated providers will create a “loading fee” every time you renew with them. This is something most people aren’t aware of when taking out a policy and it can be an unpleasant surprise when you get hit by a big bill at renewal time. Paying 3X more the following year is not completely unheard of.

Imagine staring a policy at 1000USD per year, thinking “oh, that’s such a good deal!”, only to find out you’ve been hit with a loading fee, and you’re now expected to pay 3,000USD just to renew, because you claimed too much the previous year. Now imagine it’s for something very common (like skin cancer) – something that will require regular follow ups.

Takeaway

Health insurance is a good risk management tool – but only if you plan ahead and understand all the pros and cons of your policy. This means one of two things:

1. Get Experience Rated Policies – You need to be in good health and hope you don’t make any claims (which would result in a penalty). Like NEVER USE YOUR POLICY.
2. Get Community Rated Policies – You need to pay more at the start, but could potentially save more money in the long term.

The moral here: know what your risk profile and future personal requirements are, and where they fall on a scale between these two types of premiums.

The good news is that if you’re a foreigner looking to move to South East Asia, you’ll have a good range of policies which will be Community Rated from Day 1. That doesn’t mean you won’t have any problems, but that’s a conversation for another blog post.

Conclusion

While I can’t give any recommendations on specific providers right now (as we haven’t had a conversation yet!), there is one thing you should definitely pay attention to when making this decision: Read the fine print! Ask about Risk Rating before signing up for anything, because what’s written in that contract could end up costing you dearly. Not all health insurance providers are created equal, and not all policies are understanding when it comes to claims.

Got more questions? Drop me a note on the comments section below. Happy to share more tips.