Co-pay: A misunderstood strategy for managing healthcare inflation in Asia 

Cost pressures are emerging as a defining socio-economic risk across Asia, particularly in healthcare. Medical trend rates are projected to reach 12.5% in 2026, nearly six times the rate of inflation. 

In key Asian markets such as India, Singapore, Indonesia, the Philippines, and Vietnam, medical trend rates consistently outpace general inflation by two to three times, often ranging between 10% and 15% annually. In contrast, salary growth largely remains below 6%, further widening the affordability gap and putting employer-sponsored healthcare sustainability at risk.

Illustration 1: Disparity between medical trend rates and salary increase across market based on 2026 forecast
Source: Mercer Singapore Total Rewards Post Survey Meeting (November 2025)

Employees’ expectations around healthcare have evolved significantly post-pandemic. Today’s workforce demands more comprehensive healthcare that includes mental well-being, chronic disease management, and access to advanced diagnostics. Meanwhile, healthcare providers face inflationary pressures from rising technology costs, imported medical equipment, and talent shortages — factors that collectively contribute to escalating medical expenses.

Compounding these challenges is a growing pattern of passive healthcare consumption, where employees often utilize medical services simply because they have access, regardless of medical necessity. This overutilization is a key driver of rising medical costs and inflation. Mercer’s Asia Health Trends 2026 report reveals that 85% of employers are concerned about inefficient and wasteful usage, ranking it as the second-highest concern related to employer-sponsored medical affordability. Additionally, high-cost claimants remain the top concern for 87% of employers, as they disproportionately drive medical expenses and cost volatility.

In response, governments and progressive employers across Asia are championing a shift toward personal responsibility and behavior change. Singapore’s Medisave enhancements and new rider plans illustrate this shift by encouraging individuals to take greater ownership of their healthcare expenses and to use medical services more prudently.

This shift is critical because employee expectations and behaviours directly impact healthcare costs. To ensure sustainable benefits programs, employers must move beyond reactive coverage toward proactive education, transparent information, and guardrails that steer employees toward value-based care.

Co-pay, or cost-sharing, is often misunderstood as simply shifting costs to employees. In reality, it fosters shared accountability. In markets where healthcare is fully employer-funded, employees often perceive it as an entitlement, which can lead to overutilization — such as choosing more expensive clinics or specialists when cost-effective options exist, undergoing unnecessary medical tests, or opting for brand-name prescriptions when generics would suffice.

Introducing modest co-pay can encourage changes in employee behavior. When individuals share a portion of the cost, they tend to ask more questions, compare costs, and make more informed healthcare choices. From a behavioral economics standpoint, having “skin in the game” motivates people to become more discerning and responsible consumers of healthcare services, avoiding unnecessary expenditures.

Japan’s healthcare system offers a long-standing example, where employees typically contribute 30% of medical costs with caps to protect lower-income groups. This model effectively contains inflation while maintaining one of the world’s most efficient healthcare systems.

Across Asia, multinational companies spanning consumer goods, life sciences, energy and high tech have increasingly adopted co-pay models with success, balancing fiscal responsibility with employee empathy. Their experience shows that when change is transparent, equitable, and clearly communicated as part of long-term benefit preservation, employees are more likely to perceive it as fair.

According to Mercer’s 2025 Asia Benefits Insights Report, 85% of employers in Asia are planning to implement cost containment measures within the next three years. Among these measures, 21% of employers are considering claims-sharing mechanisms such as co-insurance, co-pays, and deductibles within their group medical plans.

Source: Mercer’s 2025 Health Benefits Insights

Building on this, early signals from market discussions and preliminary data collected for Mercer’s upcoming 2026 Health & Benefits Study suggest an increase in the adoption of cost-sharing mechanisms, reflecting a structural shift toward more sustainable plan design rather than short-term cost suppression. 

In Singapore, local group health insurance plans typically cover inpatient costs fully up to defined limits, often with sublimit applied to specific services such as room and board or intensive care. However, with rising medical costs, particularly in private hospital care, more employers have introduced co-pay provisions targeting these services. This encourages employees to consider more cost-effective options, such as government hospitals, where appropriate.

A multinational consumer goods company faced a 70% increase in medical insurance premiums over five years, despite stable headcount and business growth. This prompted its HR team to consider reducing benefits or introducing co-pay to rebalance costs.

While leadership initially worried about employee demotivation, internal focus groups revealed that employees cared more about maintaining access to quality healthcare than who paid for it. The company introduced a modest 10% co-pay alongside a preventive health education campaign.

Within two years, claim frequency dropped by 18%, while costs and employee satisfaction stabilized—demonstrating how shared accountability can drive better outcomes.

Introducing co-pay is not just an HR or finance decision; it requires leadership to be onboard as it takes courage to challenge market-aligned benefit models and empathy to bring employees along the journey.

The most successful leaders treat co-pay as a change management initiative, not merely a cost-cutting exercise. They actively communicate the “why” — that without shared responsibility, the sustainability of healthcare benefits is at risk.

Leaders who take this approach — focusing on employee engagement and behaviour change — are more likely to achieve meaningful and sustainable outcomes, as well as buy-in from employees. As healthcare costs continue to rise, thoughtful plan design, clear communication, and ongoing support are important to help drive responsible care use while maintaining benefits sustainability. 

By transparently sharing the rationale and reinvesting savings into wellness programs, health literacy, and preventive health screening, organizations build trust and create a cycle of sustainable, evolving care.

While cost sharing plays an important role in cost containment, it must be balanced with safeguards to ensure care remains affordable. Employers should focus on value-driven strategies that enhance efficiency while keeping benefits meaningful and sustainable.

The next decade in Asia will reward organizations that balance generosity with prudence. Medical co-pay is not a retreat from employee care — it is a strategic evolution that supports long-term sustainability.