Finding ways to look after the well-being of your employees while also protecting the financial resilience of your business has never been more important.

 

With healthcare benefit costs rising, smart employers are developing strategies to make sure that programs are sustainable, useful and provide good return on investment.

 

Mercer Marsh Benefits (MMB) new research MMB’s Health Trends into global market trends shows the challenges facing organizations, both globally and in emerging markets.

 

Medical trend rates outpaced inflation for several years but have been muted in many countries by the pandemic. Now, as more people seek treatment for COVID-19 and non-COVID-19 conditions, the cost of employer-sponsored health benefits is escalating.

 

Our research shows that medical trend rates rebounded in 2021, and this is set to continue in 2022 with a projected global rate of 9.5%.

Important geographical differences

 

There are also important geographic differences leading to regional variation. For instance, the Middle East and Africa region and Asia had higher-than-average medical trend rates.


Medical trend rates explained


The medical trend is the year-over-year cost increase for claims under a medical plan on a per-person basis. It reflects a variety of factors including:

 

  • Medical inflation (increase in costs for the same service/supply)

  • Altered treatment mix (e.g., moving to more expensive treatments)

  • Use patterns (e.g., people not accessing services due to COVID-19-related restrictions)

  • Regulatory changes

In Asia, in our experience, medical inflation typically results in the underlying cost of care increasing year-over-year, which, we also note is a global phenomenon and usually around 10% per year in most countries.

 

However, due to the unique circumstances that government-mandated Movement Control Orders (i.e., lockdowns) created in some of the developing countries in Asia (notably, Indonesia, Malaysia and the Philippines), employees actually underutilized their healthcare plans in 2020, staying home rather than going to their doctor and seeking treatment. This created a negative medical trend for these geographies, leading to some clients seeing reductions in their insurance premiums in 2021 against the prior year.

 

This trend is not projected to continue, and MMB forecasts that medical inflation rates are likely to return to and even surpass pre-pandemic levels (and beyond). We are proactively working with clients to consider relevant and future-proof cost management measures to ensure preparedness regarding renewal rates on health insurance policies in 2023.

 

In Latin America and the Caribbean, our research shows that 85% of insurers reported seeing higher life insurance claims, especially in Colombia, Mexico and Panama.

 

In part, these higher insurance costs are driven by the COVID-19 pandemic. Almost 90% of insurers in Latin America expect to bear the costs of inpatient COVID-19 treatments, and over 50% of insurers in Asia and the Middle East expect to cover outpatient treatments related to the pandemic.

 

If the crisis continues, more insurance claims may lead to higher premiums, tighter underwriting practices or exclusions. In India, for example, we have seen insurers reduce product availability and require vaccine records before offering renewal terms.

Non-communicable health conditions are a top concern

Of course, COVID-19 isn’t the only issue at play in rising medical trends. Non-communicable health conditions are a top concern, with insurers ranking metabolic and cardiovascular risk as the top factor influencing employer-sponsored group medical costs.

 

Insurers reported cancer as the top cause of claim costs by dollar amount, both globally and more specifically in the Asia and Latin America regions[1]. Meanwhile, diseases of the circulatory system were identified as the top driver of claims by frequency, as well as the top cause of claims by dollar amount in the Middle East and Africa. 

 

Non-communicable diseases (NCDs) kill 41 million people each year, accounting for 71% of all deaths globally. Reducing NCDs must be a key priority for employers and insurers, both for the health of their employees and their businesses.

How to manage the risks of non-communicable health conditions

The pandemic has affected how people interact with the healthcare system and how they behave with regard to their well-being. For instance, a study of breast cancer detection in Taiwan found that the percentage of early breast cancer diagnoses decreased from 71% to 49% once the COVID-19 pandemic hit[2].

 

Research by American Health & Drug Benefits shows that not only does early intervention improve cancer survival rates and treatment success, it also decreases claim costs. This research also concluded that: “Knowledge of the relevant stage-specific cost data provides support for strengthening programs, such as breast cancer screening, that are designed to shift breast cancer diagnosis to earlier disease stages[3].” 

 

This is just one example, but it demonstrates why it is important to encourage employees to continue with preventive care, such as annual health screening, and to ensure they respect local guidelines and restrictions.

 

The pandemic is also having long-term impacts on healthcare access when it comes to chronic disease management. There are good examples of how firms can help. In the Middle East, for example, telemedicine providers let members easily obtain refill prescriptions without incurring consultation costs. This not only helps members who no longer need to travel to a hospital or clinic, but also saves employers on costs related to outpatient expenses.

 

Basic health education can boost awareness and help build a health culture. This is a popular solution in the Middle East, but the quality of providers is quite variable. Employers should consider creating feedback channels for workers, as this will help identify high-quality providers and enhance overall engagement.

Employers should:

 

  1. Run communication campaigns to educate about the risk of delaying preventive care.

  2. Listen to employees to better understand their unmet needs and which areas are of greatest concern.

  3. Create feedback channels such as surveys to improve the value and quality of providers and services, lower costs and boost engagement.

  4. Explore opportunities to embed self-care and digital health into benefit plans.

How to manage ongoing claims uncertainty and drive down costs

Insurers are understandably cautious about projecting when health insurance claims will return to ‘normal’. Take-up of health services and preventive care will depend on how the pandemic evolves. Managing health insurance claims uncertainty therefore is a crucial part of the puzzle for employers.

 

January 2022 renewals are beginning to tell a story in countries such as India and the Philippines where hospital footfall is returning to pre-pandemic levels. This is good news if it means people are getting the preventative and/or diagnostic care they need. And, while firms could see a short-term increase in the insurance premiums they pay, this could also translate to lower costs in the long term as conditions are identified and treated earlier.

 

Due to the strict COVID-19 zero policies in China and Hong Kong, MMB has seen that hospital footfall is still below pre-pandemic levels, with commensurate adjustments in January renewal insurance premiums.

 

It is crucial to manage your plan throughout the year, not just at renewal. This helps you to better understand claim drivers and manage costs. An annual benefit cycle with quarterly experience reviews can help employers project future claims activity and reduce volatility risks.

 

This means considering factors such as how the plan is designed, financed, administered, communicated, risk managed and governed. Firms will also benefit from staying in tune with employee needs, monitoring trends and having a heightened awareness of legislative changes.

 

Being appointed as a broker allows MMB to take a more detailed data-driven approach. In the UAE, for example, we have the teams and tools to analyze data by type of outpatient, inpatient and pharmaceutical claims. Depending on how these trends develop over the policy period, we can then work with clients on bespoke cost savings solutions.

 

Developing a clear strategy and planning for renewals well in advance means that you can better control costs. This should be done as part of a cost-containment framework that educates stakeholders on benefits being an investment, not a cost.

Core actions to take include:

 

  1. Plan for medical trend rates to return to pre-pandemic levels but remain agile in the face of volatile claims and new variants, and if the pandemic is protracted.

  2. Review your medical plan claims experience regularly to ‘get ahead’ of changing claims activity.

  3. Update cost-containment strategies to balance economics with empathy and to position benefits as an investment, not an expense.

 

Footnotes

[1] According to MMB Health Trends report, 2021.

[2] Chou, C. P., & Lin, H. S. (2021). Delayed Breast Cancer Detection in an Asian Country (Taiwan) with Low COVID-19 Incidence. Cancer management and research, 13, 5899–5906. https://doi.org/10.2147/CMAR.S314282.

[3] Blumen, H., Fitch, K., & Polkus, V. (2016). Comparison of Treatment Costs for Breast Cancer, by Tumor Stage and Type of Service. American health & drug benefits, 9(1), 23–32.

Hannah Proctor
by Hannah Proctor

MMB Multinational Network Leader, Asia and Pacific, Mercer Marsh Benefits

Andrew Brody
by Andrew Brody

Leader, MENA Regional Consulting Services, Mercer Marsh Benefits

For more information, contact your Mercer Marsh Benefits client executive or local office.

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