Cost of Employee Healthcare Plans Continues to Outpace Inflation

The cost for companies to provide medical and healthcare plans to staff continues to outpace inflation in most major economies but has stabilized to an increase of around 10% per annum, according to new research by Mercer Marsh Benefits (MMB), a partnership between global professional services firms, Mercer and Marsh.

Globally, medical inflation for 2017 (9.7%) is down from 9.9% in 2016 but is still forecasted to be nearly three times the forecast 2017 inflation rate (3.7%).

The picture varies by geography. In Asia, for example, medical costs are set to increase to 10.2% against an inflation rate of 2.8%. The data also showed that globally the highest level of spend on medical costs was related to cancer, heart disease and respiratory diseases; however the incidence of reported claims was more diverse and varied by region.

“The picture varies by geography but the most prevalent causes for increased medical spend was attributed to higher costs for medicines and technologies,” says John Deegan, international leader for Mercer Marsh Benefits.

“Their introduction can offer new hope for better treatments but adoption introduces challenges - such as increased costs - for employers, payers, policy makers and regulators. What is clear though is that ageing workforces in many markets means that employers will continue to face cost increases. This can be overcome if companies analyse their workforce populations and provide targeted healthcare provision based on the workforce health profile.”

Rose Kwan, Growth Markets Director for Mercer Marsh Benefits explained  that across Asian markets, local government policies have greatly impacted consumers’ healthcare experiences.

“For example, in 2015, Malaysia saw a surge in medical costs as a result of the implementation of government service taxes and an increase in physician fees. The trend stabilized in 2016, and we expect it to continue in 2017,” says Kwan.

Graham Pearce, Mercer’s Global Consulting Group Leader, adds, “With medical inflation again outpacing price inflation by a factor of nearly three, companies need to redouble their efforts to manage their spiraling healthcare plan costs. The quality of the claims reporting and loss prevention measures available varies significantly between the global insurance networks – both these factors are becoming key drivers in the choice of insurance providers at the local and global level.”

MMB’s report also challenges employers to consider the following opportunities:

  • Question the ‘status quo’ of healthcare consumer choice options so that higher costs are also delivering better health outcomes
  • Drive better value by ensuring health benefits plan design addresses the precursors to top claims, with an aim to mitigate high-cost care that drives inflationary trends
  • Create incentives for health maintenance and prevention scenarios to positively impact the health of the workforce
  • Improve overall employee engagement with health benefits using modern, digital communication platforms and tools*

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