How to Choose the Right Excess for Your Health Insurance?

What is an excess?

Your excess is the amount you pay towards your medical bills before your health insurance plan kicks in. (Expats from North America might be more familiar with the term ‘deductible’. Excesses are slightly different from deductibles, but they exist for similar reasons.)

Let’s say your health plan has a US$500 excess. You pay your insurance premium as usual, and you go about your life safe in the knowledge that you have cover for private healthcare. When you visit a hospital or doctor and you incur a charge for consultation or procedure, you’ll pay the first US$500 of your bills. After that first US$500, your health plan will pick up the tab for your eligible medical treatment.

What’s the point of health insurance if I have to pay the bills?

Excesses might seem a little strange at first. Isn’t medical insurance supposed to pay for your hospital bills?

Yes, of course, but that’s not quite the full picture. Excesses can help insurance companies and customers:

• Excesses help insurance companies reduce the amount of risk they’re exposed to by an insurance policy.
• In return, insurance companies translate that risk reduction into premiums savings for the customer buying the policy.

Health insurance companies receive millions of claims for medical treatment each year. Most of these claims are for relatively low-cost treatments such as doctor visits, specialist consultations and pharmacy prescriptions. These small claims certainly add up. Of course, a complex claim for cancer treatment at a private hospital can cost millions of dollars. But most of the claims that health insurance companies pay out to customers are for minor treatments.

An excess means health insurance companies pay out less for high-frequency but low-cost claims. Fewer claims save money for the insurance company. But it also saves time so claims advisers can focus attention on claims for serious, long-term medical treatment.

Most importantly, insurance providers ought to pass on the savings to customers. At William Russell, that’s the approach we take. We know that insurance doesn’t have the best reputation, but we’re doing our best to change perceptions. We’re completely transparent on how excesses work and how they can save you money.

Below, you’ll find information on our excess options and a couple of strategies for picking the right excess for your needs.

What is a nil excesses?

When you first start thinking about health insurance, you probably just want a policy to pay for your private healthcare. So, what’s all this about excesses? Why have an excess if your excess is the amount you contribute to your private healthcare costs?

Counter-intuitively, not having an excess (known as ‘nil excess’) is unpopular with our members. Why? Having a nil excess means more expensive premiums.

The logic behind calculating premiums for health insurance is somewhat complicated, but most models start with a baseline (or ‘base premium’, as it’s known). When calculating base premiums, insurance companies’ price using the most basic version of their plans (i.e., a standard-issue plan with no optional benefits or other add-ons).

Insurance companies also tend to calculate base premiums using the nil excess. They calculate discounts for higher excesses against the standard, nil excess. On our plans, the difference in premium between the nil excess and the next highest available excess (US$50 per claim) can be as significant as 20%!

So excesses are nothing to be afraid of, and most of our members have one on their plan quite happily.

What is a ‘per annum’ excess?

The ‘per annum’ excess is the most popular type of excess.

Your per annum excess is the total amount you’ll be out-of-pocket in a single period of cover. No matter how many claims you make: your medical plan will only kick in once the amount you’ve personally spent on medical expenses exceeds the excess.

For example, you choose a US$5,000 per annum excess. We won’t pay the first US$5,000 of medical expenses you incur during your period of cover. After that first US$5,000, your plan covers you in full for all remaining treatment in that period of cover.

How per annum excesses work in practice

Say Mr Brown purchases a health plan with the US$5,000 per annum excess. Later that year, he stubs a toe and visits a clinic for tests and treatment for a minor cancerous growth.

Mr Brown’s excess is ‘per annum’, so his health plan does cover the first US$5,000 of medical expenses he incurs during each period of cover. It is unlikely that the treatment Mr Brown receives for his stubbed toe will exceed US$5,000. Still, the costs of his cancer tests and treatment will soon take him past US$5,000 for the year—at which point his health plan will start covering his medical expenses.

If Mr Brown’s cancer treatment programme spans the renewal date of his health plan, we would not cover the first US$5,000 of medical expenses he incurs during his new period of cover—even though Mr Brown would not be claiming for a new medical condition

A glance at the lower ‘per annum’ excesses

Choosing a lower excess gives you a smaller discount on your premium.

A glance at the higher ‘per annum’ excesses

Choosing a higher excess gives you a greater discount on your premium.

‘Per claim’ excesses

A ‘per claim’ excess is the amount you pay each time you make a new claim for a new medical condition.

How per claim excesses work in practice

Mrs Smith purchases a health plan with a US$50 per claim excess. Later that year, she breaks her arm and visits her doctor for a severe cold. Since these two medical conditions are unrelated, Mrs Smith pays the excess for each condition.

Mrs Smith’s excess is ‘per claim,’ so she won’t pay the excess a second time when she has follow-up consultations for her fractured arm. But if the programme of follow-up treatment were to span the renewal date of her health plan, she would need to pay the US$50 excess again upon renewal.

A glance at the lower ‘per claim’ excesses

Choosing a lower excess gives you a smaller discount on your premium.

A glance at the higher ‘per claim’ excesses

Choosing a higher excess gives you a greater discount on your premium.

Choosing a logical excess

While we cannot recommend a particular excess to you, some excess selections are logical and some just aren’t. Below, we’ve set out a few approaches popular amongst our members.

Bronze plan with a high excess

If you’re only concerned with cover for serious medical conditions such as cancer care and hospitalisations following an accident or illness, then chances are that you’re considering the Bronze plan.

With a Bronze plan, choosing a higher excess such as US$1,600 per claim or US$5,000 per annum might be a good option to save money on your premium. True, you won’t have cover for medical expenses that fall under those amounts. But if you’re mainly concerned with serious medical conditions like cancer, your total medical expenses will dwarf US$1,600.

If you have a Bronze plan with a US$1,600 per claim excess, and you need extensive treatment for cancer, you’ll be liable for the first US$1,600 of medical expenses but your Bronze plan will cover you up to US$1,500,000.

Silver plan with a low excess

If you’re considering a Silver plan, chances are that you’re interested in cover for everyday medical care such as doctor visits and pharmacy prescriptions.

The cost of a doctor visit or physiotherapy session depends on where you live, but they’re unlikely to cost more than a couple of hundred dollars.

Now, if you chose a high excess such as US$800 per claim or US$500 per annum with your Silver plan, you wouldn’t have much cover for your doctor visits.

That’s why members with a Silver plan typically choose a low or nil excess.

Nil excess when you’re on a tight budget

Excesses are a great way to reduce your premium. But don’t forget, your health plan won’t cover you for the amount you choose as your excess.

This might not be a problem if you choose a low excess. If you can afford an annual insurance premium of US$2,000, then you can probably afford to pay the first US$50 of each claim.

But if you choose a high excess, such as US$10,000 per claim, you should make sure that you can afford to pay the first US$10,000 of each claim. Your plan will not cover you for that amount.

How do excesses work with direct billing for everyday medical care?

If you choose a Silver or Gold plan and you live in Vietnam, you may be eligible for direct billing for everyday medical care. This means you can receive out-patient medical treatment at doctors’ surgeries and clinics without having to pay anything out-of-pocket.

Direct billing for everyday medical care is only available if you select a nil excess or a US$50 per claim excess.

Notes on the health plans

You won’t find complete information for our plans on this webpage, nor the full T&Cs, limitations, and exclusions that would apply if you purchase one. You can find complete information in the plan agreement, which we suggest you read together with this webpage. All the benefits on this webpage are per member per period of cover, unless we state otherwise. We show the benefit limits in US dollars, but we can also denominate your plan in pounds sterling or Euros.