RISKVUE ARCHIVE | RISK BITES

Overseas Workers Require Special Treatment

If your organization is confronted with workers who become ill or injured while working or traveling abroad, you may find that (1) your workers’ compensation and group medical programs may pay less for claims than you expect, and (2) they may not cover some critical expenses at all.

Additionally, employers cannot rely solely on the governmental health and workers’ compensation systems of other countries. These are usually inadequate in providing even the minimum in health care benefits for overseas workers, and are far less comprehensive than domestic programs.

Workers’ Compensation Policies

The standard U.S. workers’ compensation policy provides only the coverage required by state regulations. State laws typically extend benefits to employees temporarily away from the workplace, including short trips abroad. But they may not provide coverage for diseases or death resulting from certain foreign exposures. These include:

• Endemic disease. Viruses, bacteria and microorganisms in the water, air and food of other countries can cause diseases not normally found in the U.S., such as malaria and yellow fever.
• Personal travel. Many international workers travel or take small vacations when overseas on work assignments. It may be difficult to determine whether an illness or accident in such circumstances is work-related.
• Repatriation expense. The cost of bringing an ill or injured worker back to the U.S. for treatment, plus funeral expenses and transport to the U.S. if a worker dies on foreign soil from injury or disease.

Coverage gaps and ambiguous definitions in the standard workers’ compensation policy may result in costly and lengthy coverage disputes. Employers are often unaware that the employers liability coverage section of a workers’ compensation policy (Coverage B) excludes coverage for bodily injury occurring outside the U.S., its territories and Canada. While an exception is made for citizens who are briefly outside the coverage area (most underwriters consider “briefly” to be less than 30 days), the suit must be brought within the coverage territory for the coverage to apply.

Group Medical Plans

Employers’ group medical plans typically restrict coverage outside the U.S. because insurers cannot effectively control costs abroad. Many employer-sponsored plans in the U.S. use a managed care approach, under which insurers negotiate fees and discounts for contracted medical services. Costs for medical services “out of network,” including those obtained abroad, may be excluded or reimbursed at a lower rate than “in network” services. Foreign travel, especially of long duration, may be excluded entirely. Many U.S. medical plans provide coverage abroad only for emergencies (i.e. life-threatening situations).

Specifically, a group medical plan may restrict coverage in some or all of the following ways:

(1) Coverage for travel outside the U.S. may be limited to as short as 30 consecutive days. This might suffice for a personal vacation, but may be inadequate for a long-term business assignment.

(2) The scope of coverage outside the U.S. is often limited to “life threatening” conditions (as defined in the policy, not by medical personnel). The insurer may further limit coverage to hospitalization only, often with a time limit.

(3) Benefit amounts often are limited to a percentage of a negotiated amount for treatment protocols. For example, if an insurer negotiates a fee schedule for $0.50 on the dollar, and the insurer says it will reimburse based upon 80% of the negotiated rates, this equals a reimbursement of just $0.40 on the dollar.

(4) Many health plans pay only on a reimbursement basis for out-of-network treatment, excess of a deductible. This means you are required to submit detailed receipts and bills for reimbursement of medical treatment abroad. Converting the costs incurred for foreign medical treatment into U.S. dollars could cause you a foreign-exchange loss.

Even when a group medical plan provides adequate overseas coverage, there can still be problems in two areas:

(a) Doctors and hospitals in many foreign countries (particularly undeveloped countries) require cash deposits for admission (or a credit card with suitable limits). Merely presenting evidence of medical coverage from a U.S. insurer (e.g., a Blue Cross card) will not guarantee treatment.

(b) The employee’s illness or injury is serious enough to require medical evacuation. Many personal medical emergencies can and should be taken care of locally, but if a person needs to be medically evacuated, the expenses can be astounding. For example, an evacuation/repatriation by commercial airline usually requires a row of first-class seats with a nurse escort. This can cost anywhere from $10,000 to $100,000, particularly if an air ambulance service is used.

What To Do?

If your company has employees traveling or working abroad, workers’ compensation and health/medical benefits should be tailored to reflect this fact. Because workers’ compensation has no employee deductibles, co-payments or monetary limits, it can provide superior medical coverage for employees abroad.

There are two approaches to providing workers’ compensation for overseas workers. First, domestic workers’ compensation insurance can usually be modified to provide coverage for overseas workers on temporary assignments by attachment of a Foreign Voluntary Workers’ Compensation (FVWC) endorsement. Alternatively, for organizations that have a complex or significant foreign exposure, separate voluntary foreign workers’ compensation coverage is widely available.

In addition to paying benefits in accordance with the workers’ compensation law in the designated U.S. state of hire, these two approaches (endorsement or separate policy) may provide valuable extra benefits not usually available under a domestic policy. These include:

• Endemic disease. Most FVWC coverage treats endemic diseases as occupational, regardless of how the disease was contracted by the employee.
• 24-hour coverage. Many international insurers recognize that individuals travel or take small vacations when overseas on work assignments.
• Repatriation expense. Most FVWC policies will pay for the cost of bringing an ill or injured worker back to the U.S. for treatment, plus funeral expenses and transport to the U.S.
• Third-country repatriation. In some instances, third-party nationals employed away from their homeland also can be provided repatriation expense coverage for expenses to return ill, injured or deceased workers back to their country of origin.

FVWC endorsements and policies are non-standard, so employers can usually request a variety of coverages. For example, coverage extensions can include illnesses and injuries occurring in “other countries” similar to “other states” coverage under a domestic workers’ compensation policy. This way, side trips to other countries do not require prior notification to the insurer. FVWC coverage may also allow employees the option of choosing the workers’ compensation benefits of another country, if benefits are more generous than those under the issuing state workers’ compensation policy.

There are many ways to provide group medical coverage for foreign employees, depending on whether the FVWC policy provides 24-hour coverage. While it is beyond the scope of this article to examine all possible arrangements, two frequent approaches include (1) purchasing full annual coverage for expatriates and very frequent travelers, and (2) amending the group medical policy to include repatriation and transportation expenses for employees abroad, or purchasing a separate policy for this exposure. An example of the latter approach is a group medical evacuation policy available from MEDEX Assistance Corporation and other providers.

Conclusion

When sending employees abroad, employers should make sure their domestic workers’ compensation policies and FVWC endorsements contain the following:

Domestic Workers’ Compensation Policy

• A sufficiently broad definition of “temporary assignment” that will cover employees abroad
• Includes Puerto Rico and all U.S. possessions in the territorial definition
• Includes a worldwide FVWC endorsement for incidental travel

FVWC Endorsement

• Coverage for endemic disease
• Coverage for repatriation
• 24-hour coverage for medical benefits
• Coordinates with group medical plan so that there is no overlap of coverage or premiums

It is essential that employers make certain the workers’ compensation exposure is adequately covered. If the exposure consists only of U.S. hires traveling overseas (incidental travel), the foreign voluntary workers’ compensation endorsement may be sufficient. If U.S. hires are working overseas longer than six months, consider obtaining a separate foreign voluntary workers’ compensation policy. Also be sure that any limitations to group health insurance coverage are identified and appropriate steps taken to avoid gaps in coverage.

riskVue | The webzine for risk management professionals
January 2003