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Economics & Investments

Positive Prospects for Profit ~US Insurance Companies and Medical Tourism

Economics & Investments
The US has been in the midst of a healthcare cost crisis for several decades. While the federal government, state governments, insurance companies, and others implemented solutions to address this crisis, they have only temporarily slowed the escalation of costs. However, help is on the way. Stakeholders in this industry now have options for economical, quality healthcare from sources that are welcome surprise ~ foreign countries.

With the advent and fusion of consumer directed health plans, price and quality transparency, and medical tourism, the US healthcare industry is on the cusp of an historic milestone, the creation of a consumer driven healthcare marketplace with global solutions. Insurance companies, with millions of members behind them, are uniquely positioned to drive cost and access rewards for the industry, both at home and abroad.

Insurance companies and self-funded plans have promoted the growth of consumer directed and high deductible health plans that have shifted much of the cost of healthcare from employers to employees, making them responsible for how they spend their healthcare dollars. Gone are the “good ‘ol days” when a consumer had to pay a minimal co-pay to access care and the insurance company would then fill in the blank check for the discounted cost of the services that the member received. Under these programs, today’s consumers are more likely than those under traditional programs to take an interest in budgeting “their pool of money" and to be more thoughtful about when and where they obtain care.

It is critical to observe, however, that not only are the consumers responsible for their healthcare dollars, but also they have access to information to make reasonable decisions based on cost and quality. In the US, healthcare cost and quality transparency efforts are moving forward, albeit slowly, with healthcare provider resistance of varying degrees. Over time, with the increasing prevalence of plans that put consumer “skin in the game” and initiatives promoting healthcare transparency, healthcare consumers will be able to actively participate in healthcare decision-making and create a true marketplace.

The combination of consumer directed healthcare with transparency is an extremely positive force in the healthcare industry. However, these factors in conjunction with willing and qualified international healthcare providers create the opportunity for radical shifts in the healthcare system. International providers, contrary to the resistance of most US providers, are enthusiastic about sharing data and prepared to disclose fully both cost and quality information for transparency efforts. In addition, many of the providers focus on world-class service for the medical tourists. Not surprisingly, many of these providers offer low cost, high quality services, and focus on world-class customer service.

For some time, individuals with financial resources, a sense of adventure, and who may or may not have insurance, have known about and utilized international healthcare providers. These individuals have sought elective procedures that are not covered under their policies or necessary care that they could not afford in the US. In either situation, insurance companies, typically, were not and are not involved in these transactions.

Recently, self-funded groups have begun to embrace and demand medical tourism options. More nimble than conventional health insurance carriers, these groups have an advantage in their ability to make swift decisions and redesign benefit plants that can incorporate these types of options. Some self-funded groups have already implemented this benefit or are working with third parties to implement a medical tourism benefit. These organizations are part trailblazer and part guinea pig and will be watched closely by others in the market who will replicate the features that do work and avoid those elements that do not.

In general, large insurance companies are spectators to medical tourism. They are exploring and/or pilot testing medical tourism initiatives at the request of their self-funded clients and conceptualizing products for the fully funded market. Moving forward, the insurers currently administering medical tourism benefits for self-funded groups will be most likely to promptly pursue medical tourism benefits for their fully funded customers. They will have developed and tested an infrastructure to manage the self-funded benefit, witnessed savings, and identified further opportunities to improve infrastructure and increase savings.

Each insurance company’s next step, then, is to develop marketable, value-added, fully-funded products that provide access to international providers. Revenue sources include: savings from a reduction in cost of care and increased membership due to competitive premiums and/or additional access options. Over the next several years, as insurers gain confidence in the international healthcare market and develop the infrastructure and portfolios of ideas and products to participate in it, they will be able to offer US healthcare consumers high-quality, low-cost, international healthcare options.

Insurers, however, must strategically structure incentives for medical tourism. For insurance company members, less than one-third of this population is willing to travel overseas without incentives. As more incentives are added, the percentage of members willing to opt for medical tourism increases significantly. Some of the standard incentives include, paying for travel for the member, paying for travel for the member and a companion, and paying for travel for a member and a companion and a cash incentive.

As the market matures and insurers implement successful, medical tourism programs, domestic costs for certain procedures will experience some downward pressure. For example, after Hannaford Bros. Company announced its medical tourism program, a provider in the US offered to match the international price. Medical tourism, eventually, will prompt a reaction from US providers who, in some cases, will lower their prices for particular procedures. However, insurers must ensure that a price reduction for one procedure that is likely to be performed overseas does not result in a price increase for another procedure that is likely to be performed domestically. If insurers execute this strategy, they will be able to profitably participate in domestic and global tourism.

In conclusion, the United States healthcare insurance market has the ability to promote medical tourism as an option to traditional care and a solution for the high costs of US healthcare. A significant number of healthcare consumers will seek care overseas and will foster the creation of a global healthcare marketplace. Organizations that maintain provider networks domestically and internationally will benefit from downward pressure on the domestic network and, with the right pricing strategy, will be able to obtain additional bottom line income and organic membership growth.

Dr. Chad Holloway is founder and president of Global Health Solutions LLC, an international healthcare consulting company providing marketing, contracting, and strategic planning services related to medical tourism for healthcare providers and consumers. Formerly, he was with WellPoint Inc., the largest US health insurance company in terms of membership, and BJC HealthCare, a large, integrated hospital system in St. Louis, Missouri. He has multiple academic credentials including a master’s degree in healthcare administration from Washington University in St Louis and a Ph.D. from the University of Miami. He can be reached at 001-618-444-1552 or at

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