Pro-Rate - Another $Million Reasons to Buy Medipac

Spring 2006 CSANews Issue 58  |  Posted date : May 27, 2007.Back to list

We recently received one angry letter. The words were unfit to print but the message was clear, we had a very unhappy client.

In a nutshell, this woman had had an expensive medical claim and Medipac would only agree to pay 62% of her total claim bills. Our client was outraged that we would not pay 100% of her bills and told us so in very explicit terms. Of course, it was a big claim; $460,000 U.S. dollars big, and we all know how aggressive U.S. hospitals can be when big money is on the line. When Medipac agreed to pay 62% of the bills, this amount was determined under the “pro-rate” clause in our policy.

And that takes us back to the beginning. In filling out a medical application for insurance, it can be very tempting to “overlook” that medical condition you have. When you compare prices between one premium class and another, the premium difference can be in the hundreds of dollars. If you simply check this box “No”, saying that you did not have your medical condition, you could purchase the “Preferred Plus” Plan at a premium of, say, $400. If you check the box “Yes”, you must now buy the “Preferred” Plan and your premium increases to $645. That is a lot of money and, very occasionally, someone will fall prey to the lure of saving some money on the premise that “It will not happen to me”. Of course, it always does.

Other insurance companies are merciless with this kind of situation. An incomplete or inaccurate application is a “material misstatement” and the insurance company has the right to, not only decline your claim, but to rescind your policy. This means that they treat your insurance policy as though it never existed. All insurance companies do this, all the time, which is why you must be very careful when completing any application.

Many years ago, Medipac noticed that not all of our cases of “misstatement” were as clearly defined as the situation above. It became obvious that not all of these rescinded policies were from people who were liars and cheats. Some of our clients are quite elderly (our oldest client this year is 103 years old) and there can always be different interpretations of medical conditions. We needed to find a method of dealing with a misstatement that was not as onerous, or as punitive, as a “rescind”.

The Pro-Rate Clause was the best available answer; not a perfect answer, but a much fairer result for the occasional client caught up in a misstatement situation. The Pro-Rate Clause states that if the premium you should have paid was more than the premium you did pay, Medipac will pay the portion of your claim that is equal to the percentage of what you DID pay divided by what you SHOULD have paid. In other words, you get the amount of insurance you paid for. Too many words, so the numbers for this case are shown in the chart above.

This is an unbelievable result to a little white lie. The premium saved was $145, but the client became responsible for paying $175,000. We do not need to discuss that the premium was in Canadian dollars and the claim in U.S. dollars. We can see, now, why the lady in question was so angry. She thought that it was unfair to pay such a huge penalty for such a little “misstatement”.

The reality is that Medipac just agreed to pay $285,000 U.S. dollars that NO other insurance company in Canada would have paid. To our knowledge, we are the only company in the travel medical business that has a Pro-Rate Clause. This is an extreme example, of course, but Medipac pays over $1,000,000 of claim bills, every year, under our Pro-Rate Clause provision.

That is never the end of the story, not when you purchased a Medipac policy. We maintained continuous contact with the doctors and hospitals, on our client’s behalf. We negotiated bill discounts, easy payment plans, and protected our client’s credit ratings. When Medipac pays a portion of the bill, it is amazing how receptive the health care providers can become. In the end, our client paid far, far less than the $175,000 and although not totally happy, she finally understood that Medipac IS different than other companies.

My guess is that our upset client will purchase a Medipac policy again, this year, and so should you. Watch for our Early Bird Plan and make sure it has the Canadian Snowbird Association logo on the envelope. We look forward to assisting you with all of your travel insurance needs, forever.