The FINANCIAL — The cost of providing medical care to staff continues to vastly outpace inflation in 29 major economies, according to new research by Mercer Marsh Benefits, a global network across global consultancies Mercer and Marsh. The research Medical Trends Around the World, is based on a survey of insurers and showed that in 2014 – across 21 out of 29 countries – the average per person increase in healthcare costs was more than double the rate of inflation. 2014 saw a 10% increase in medical costs, with 2015 medical inflation anticipated to be around 10.5%.
The report solicited claims and cost data from insurers in each market and has been produced to highlight the main causes of, and responses to, medical inflation.
According to Amy Laverock, author of the report and a Partner at Mercer Marsh Benefits, “Our report is designed to provide a cross-border overview for multinationals and it’s clear that company spend on healthcare continues to soar. The causes vary by region, but cancer and cardiovascular disease remain high cost items.
“There are grounds for optimism, especially for cardiovascular claims,” she continued. “Many of these claims are lifestyle related and caused, for example, by smoking, poor diet or a lack of exercise. Through access to personalized multi-disciplinary health advice, monitoring and even pharmaceutical care, companies can address these lifestyle choices, improve the health of their workers, improve their productivity, reduce absences and crucially manage corporate medical costs.”
The report found that access to healthcare for the most common physical healthcare needs is largely in place. However, it found that other areas – such as counselling and treatment for mental health conditions – are less consistently addressed. Employers were expanding coverage in areas of women’s health, but there was limited access being extended to LGBT (Lesbian, Gay, Bisexual and Transgender) concerns, for example. Broadly, the consultancy anticipates that as demographics and workforce patterns change and new regulations emerge, governments will continue to place greater emphasis on employers for coverage that responds to the modern-day needs, including preventative care. A reassuring finding of the survey was that more than half of those insurers who participated indicated they are using the International Classification of Disease to track diagnostic causes of paid claims, which will in turn lead to better global analytics over time.
Europe
Europe was the region with the lowest levels of inflation – as reported by participating insurers – running at 7.5% in 2014, with an anticipated increase of 7.7% in 2015. Russia, Turkey and Ireland are forecast the highest 2015 increases in the region of 16.9%, 15.7% and 13.6%, respectively. In Europe, cancer was cited by insurers as the main source of claims (57%) followed by diseases of the circulatory system (53%) and gastrointestinal diseases (26%).
“Governments are putting a greater onus on employers in many European countries” says John Deegan who leads Mercer Marsh Benefits in Europe. “Compared to other regions, Europeans are seeing greater traction in employer-sponsored plan design provisions to shift some costs onto employees such as new cost sharing and accountability provisions.”
Asia
In the region, companies are facing forecast 2015 medical inflation averaging around 11.6%, following 2014 medical inflation rates of 10.7%. By country, the highest cost increases are expected in Vietnam (23.4%), Thailand (17.8%) and Malaysia (16.1%). Sixty-one percent of insurers across Asia cited cancer as the main source of claims followed by diseases of the circulatory systems (51%) and respiratory conditions (35%).
Asian countries vary widely in their approach to health care and the underlying issues, says Rose Kwan of Mercer Marsh Benefits in Singapore. “There are a number of factors driving costs in Asia including stress and the double burden of chronic and infectious disease. Employers are trying to manage these while responding to a challenging war for talent and deal with coverage gaps (e.g. prevention and primary care). The latter is becoming more pronounced as employee expectations on company benefits grow. In many countries, insurer funded healthcare focuses on expenses incurred in hospital – this provides much needed catastrophic coverage, but does not necessarily promote cost effective care.”
The Americas
Costs in Canada are expected to increase by 11% in 2015, following a 2014 increase in medical costs of 8%. Across Latin America, medical inflation is more than two times the inflation rate in most countries (excluding Argentina and Venezuela which are passing by an atypical socio-political situation). Employers are worried about medical costs going up at a speed more than twice as fast as inflation and payroll, with inflation projected to be into double digits in some countries [e.g. Brazil (17%) and Mexico (10.5%)]; As with other regions, in Latin America, cancer was cited as the top cause of claims (85%), followed by diseases of the circulatory system (58%) and obstetrics and pregnancy (50%).
Renato Cassinelli who leads Mercer Marsh Benefits in Latin America said; “Medical inflation is a major concern throughout the region, growing much faster than salaries. In the absence of strong social security systems, employers bear the great majority of the premium paid to private insurers. Employees rely extensively on their employers for accessible and convenient care, while at the same time, employers are very concerned about the sustainability of the programs. There are still gaps in terms of health quality, health vendors’ performance and prevention in the region. Strategies focused on sharing the risk with employees will be an alternative to keep sustainable medical plans. More accountable employees in the future could be making decisions to select their plans, change behaviors, and contribute financially according to their specific needs, becoming smarter health consumers. In addition, we cannot ignore the parity of local currencies versus the dollar, which also greatly affects the health cost in the region due to the imported medicines, equipment and materials; as we can see it is affecting the costs in the case of cancer and cardiovascular conditions. The industry needs innovation to address these complex issues.”
Interestingly, when compared to other regions, in the Middle East, most (64%) insurers cited respiratory conditions as the main source of claims followed by diseases of the circulatory system (50%) and cancer (43%). The report also found that, uniquely, pregnancy claims figure high in Latin America. In this region, options and the high rate of Cesarean both increase the cost and clinical risk of this life event. The report also found that that claims to treat mental conditions were reported by three out of four Canadian insurers as the highest claims cost.
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