Does Lowering the Annual Maximum Actually Save You Money on Health Insurance?
When international employers begin looking for ways to reduce the cost of their employee health insurance plan, one of the first suggestions that often comes up is to reduce the overall policy maximum. If your plan currently has an annual maximum of, for example, US$5 million per person, lowering that figure — perhaps to US$2 million — may seem like an easy way to reduce your premium.
But here’s the truth: lowering the annual maximum rarely leads to meaningful savings. In fact, it’s one of the least effective ways to reduce your health insurance costs.
What Is the Annual Maximum?
The annual maximum is the cap on how much the insurer will pay per insured person, per policy year. It’s designed to protect against catastrophic medical events such as major accidents, cancer treatment, or complex surgeries — events that can easily exceed hundreds of thousands of dollars.
Most high-end international health insurance plans for expatriates include generous maximums in the range of US$2 million to US$5 million or more.
Why Reducing the Maximum Doesn’t Save You Much
Insurers typically price their plans based on actual and expected claims utilization. Since the vast majority of staff will never come close to hitting the annual maximum – even in severe medical cases – reducing the maximum has minimal impact on claims projections and therefore minimal impact on pricing.
In fact, we sometimes see insurers agree to increase the annual maximum from US$2 million to US$5 million without increasing the premium. Likewise, when asked to reduce the limit, they may offer little to no discount — because it doesn’t significantly reduce their risk.
So while a high maximum might look expensive, the reality is that this is not a major driver of premium cost.
Where the Real Cost Lies: High-Frequency Claims
If your goal is lowering health insurance premiums, you need to look at the benefits that are actually being used, such as:
- Outpatient general practitioner visits
- Physiotherapy
- Mental health therapy
- Diagnostic tests (MRIs, bloodwork)
- Prescription medications
These high-frequency, lower-cost claims make up a significant portion of the insurer’s payout – and that’s where pricing pressure builds. Modest plan design changes in these areas can result in real savings while maintaining high-value coverage for staff.
For example:
- Introducing a deductible (US$250 per year, for example)
- Adding a small co-pay for outpatient visits
- Capping physiotherapy sessions at 20 per year
These changes encourage more mindful use of care while preserving the peace of mind that the plan will still provide full protection for major medical events.
Why the Policy Maximum Still Matters
Even if it’s rarely used, having a high annual maximum – such as US$5 million – provides essential reassurance to your employees. It sends a clear message that the company is committed to their long-term well-being, even in the worst-case scenario.
A US$2 million limit still offers strong protection. But we do not recommend going below this threshold, especially for globally-mobile teams. Unexpected high-cost claims might result in bills that approach this level — even if extremely rare.
If a plan is capped too low, it risks failing the very purpose of insurance: to protect against the unexpected.
Smarter Strategies for Sustainable Savings
Lowering your annual maximum from US$5 million to US$2 million might sound like a cost-saving move, but in reality it will have little to no impact on your premiums. If you’re serious about reducing your health insurance spend, it’s far more effective to look at outpatient coverage, benefit utilization patterns, and cost-sharing mechanisms like deductibles or co-pays.
At One World Cover, we help employers of expatriates optimize their plan design to reduce cost without sacrificing value. We’ll help you identify where savings can be made – and where cuts could hurt retention, morale, and protection for your team. Want to explore smarter ways to reduce your premiums?
To learn more please get in touch: [email protected] or click here to contact us.
