Crush healthcare costs: Elevate your plan design 

The global data show the medical trend rate is expected to reach 12.4% in 2024 due to inflation, higher levels of utilization and changes in treatment mixes.¹

For instance, in the Philippines, medical personnel shortages caused by outward migration, the ongoing impact of COVID-19, higher claims utilization and a preference for face-to-face care over telemedicine has resulted in a medical trend three-year average of 20%.

Meanwhile, in Argentina, medical expenses are growing even faster than general inflation due to hyperinflation and scarcity of goods. This means the cost of prepaid medicines doubled in 2022 and is expected to increase by at least 91% in 2024.

In Poland, the three-year medical trend average of 23% is driven by high general inflation, increased minimum wages in the health sector and a challenged public health system, which is resulting in greater use of private services.

Although there are several key drivers for increased health trend rates and rising costs, the most significant concern is inflation. Eighty-six percent of insurers globally believe medical inflation had a significant or very significant impact on the 2023 medical trend. This is particularly acute in Europe, where 95% of insurers say medical inflation is a driver of medical trend.

Against this backdrop, employers and their advisers must negotiate with insurers to make sure sensible cost containment measures; fraud, waste and abuse (FWA) controls, and claims-sharing features, are updated and competitive.

That means employers should to:

• Monitor claims experience over time to get ahead of trends
• Understand which plan features are important to the workforce
• Create an intentional, strategic plan to manage costs over the long term

The good news is that insurers that responded to the survey expect plan design to take precedence over cost containment measures, with 57% of insurers globally saying they believe employers will prioritize making plan improvements, compared to 43% who believe sponsors will reduce coverage.

To achieve this, employers should consider cost-sharing features such as:

• Deductibles
• Copays
• Covered expense sublimits
• Out-of-pocket maximums

Ideally, these features should be designed to encourage individuals to behave in a way that promotes a culture of health while also reducing plan costs. Examples of such behaviours include getting treatment on an outpatient basis when appropriate and seeking treatment from preferred network providers.

We believe cost sharing with plan members will continue to be needed to keep plan costs sustainable and plan management effective. However, these measures should be combined with better communication and improved access to preventive care.

Insurers are also focused on the application of artificial intelligence to support future cost containment; for example, by detecting fraud, waste and abuse. Close to half (44%) of insurers globally are considering introducing this feature, including 60% in the Middle East and Africa.

Although cost-of-living crises and soaring inflation have affected both employers and employees, good-quality health plans remain crucial to business objectives for growth, including attracting, retaining, and engaging employees, and for contributing to broader societal and sustainability objectives.

A good starting point is to understand some of the key health issues driving the higher cost and frequency of claims. Health Trends 2024 data show cancer was the top cause of claims in 2022 by dollar amount globally. This disease, alongside diseases of the circulatory system, also had a significant impact on claims frequency.

The same  research shows that endocrine and metabolic diseases — most notably, diabetes, a major cause of kidney failure as well as heart attacks and strokes — continue to affect claims experience, particularly in Latin America and the Caribbean.

Overall, the top three causes of claims by frequency all relate to noncommunicable diseases (NCDs). Diseases of the circulatory system, such as hypertension and cardiovascular disease, are now the top cause of claims frequency globally, and respiratory disease is the third highest after cancer.

Employers can mitigate the risk of NCDs through prevention, diagnosis, treatment and workplace support.

For instance, physical inactivity, tobacco use, alcohol consumption, unhealthy diets and air pollution increase the risk of NCDs. Employers should ensure that their benefits encourage and provide preventive care, including health screenings.

Often, individuals may be unaware that they have a condition, in part, due to unaffordable testing and limited access to care. Employers should examine key barriers and consider navigation and advocacy services to help their employees access the healthcare they need. Equally important, employers must also consider benefits coverage gaps, including plan maximums, case management, prescription drugs and income continuation.

Of course, employees who are unwell need support as they perform or return to their duties. Human resources can help by creating accommodation policies and ensuring managers are trained on supervision of known or invisible conditions, including promoting anti-stigma team dynamics and communication.