Until recently, says Tim Dwyer of risk, retirement and health solutions company Aon, the issue of employee health and well-being was seen in Asia in terms of the “year-on-year increase in medical plan cost.” The finance function worked with HR on keeping a lid on the explosive growth of healthcare expenses.
Not anymore, says the CEO, Health & Benefits, Asia Pacific at Aon. “As I meet with senior executives in industry sectors as diverse as manufacturing and professional services,” he writes in the introduction to Aon’s inaugural report, Asia Healthcare Trends 2017/18, “our discussions concerning employee health encompass productivity, absenteeism, employee engagement and talent attraction & retention.”
CFOs should plan on paying more in healthcare insurance premiums in the short and medium term. Across Asia, Aon estimates the regional median medical inflation at 9.6% in 2017 and 10.7% in 2018
This is not surprising in a fast-growing region that faces an imminent labor shortage of 12.3 million workers by 2020, according to the latest Korn Ferry Global Talent Crunch study. The research’s economic modelling also forecast an acute talent shortage by 2030 across Asia – there will be 3.7 positions in financial and business services that will not be filled and 2 million in telecommunications, media and technology.
Focusing on employee health is a smart way in winning the talent war, including in the finance function. Still, CFOs will be remiss in their duties if they neglect managing the financial costs of healthcare obligations. The challenge is to make sure company spending on staff health and well-being is in line with market rates – and generates a return on investment in recruitment and retention, employee engagement and productivity.
Rise of Non-Communicable Diseases
The Aon report provides basic information that is useful to finance and HR departments in 11 markets in Asia. The data includes the medical inflation outlook for each economy, which is actuarially modelled on 2017 and 2018 medical inflation estimates and forecast three years out.
Aon then examines what drives medical inflation, whether it is hospitalization (inpatient) or general practitioner/specialist visits (outpatient). “This information is important,” it notes, “because it provides valuable insights into questions relating to the appropriateness of where treatment is being delivered for chronic illnesses and whether there is excessive utilization of outpatient facilities for acute care, e.g. respiratory conditions.”
If you’re an Asia CFO, you already know that “there are substantive variations between markets related to regulatory environment, infrastructure, health risk factors, cost drivers and cultural norms that impact upon healthcare delivery and financing,” as the report puts it. Thus, in your planning, budgeting and risk management, it is important to view insurance and other risk management solutions “through the prism of each individual market to ensure relevance.”
But it seems that some trends are applicable across the region. For example, non-communicable diseases, particularly cancer and cardiovascular conditions, are now the leading causes of death, a remarkable change in the space or one or two generations – infectious diseases such as tuberculosis, malaria and typhoid used to be more deadly.
Yet there is little evidence that companies are managing the cost of the chronic illnesses that dominate their claims registers, says Aon. Only a minority of insurance carriers are tracking inpatient readmission rates or working with healthcare providers on managing chronic diseases. “There is an urgent need for all stakeholders to reassess the status quo and implement systemic improvements,” urges the report.
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