The cost of providing employee health care benefits has stabilized around the globe, although a new round of increases may be on the horizon for employers, according to a new survey by Towers Watson. Asia-Pacific employers experienced a medical trend of 8.8% in 2013, and expect to experience a slight rise in this trend to 9.3% in 2014. The survey also found that health promotion and wellness programs are becoming more widespread in all regions as employers look to supplement traditional cost management tactics to contain rising costs.
The 2014 Towers Watson Global Medical Trends Survey, completed by 173 leading medical insurers in 58 countries, found that the cost of employee health care benefits is projected to increase 8.3% globally this year, slightly higher than the 7.9% and 7.7% increases experienced in the past two years. The average increase in Asia-Pacific is projected to remain above the global average.
“While the cost of providing health care benefits to employees has stabilized over the past few years, controlling rising costs remains a significant concern for employers worldwide,” said Francis Coleman, director, International Consulting, at Towers Watson. “In fact, in all regions, health costs continue to rise at twice the rate of inflation. That’s a major concern for employers, with many insurers projecting costs to again escalate in the coming years.”
“In Thailand the medical insurers participating in the study reported an average increase in employee health care benefits for 2012 and 2013 of only 6.3% per annum, one of the lowest rates in Asia Pacific,” said Chris Mayes, Benefits Director, at Towers Watson Thailand. “However for 2014 the expected rate of increase jumps to 8.7%, or 6.5% net of price inflation, which is the second highest net rate expected in Asia Pacific in 2014.”
According to the survey, more than half (55%) of insurers in all regions anticipate higher or significantly higher medical trend over the next three years. Asia-Pacific insurers are particularly pessimistic, with more than two-thirds (69%) saying they expect medical trend in the next three years to be higher or significantly higher than current rates.
This year’s survey examined factors driving medical costs in two ways: those cited to be employee or provider behavior as compared to external factors such as the high cost of new medical technologies and the profit motives of providers. In terms of employee/provider behavior, three-quarters of insurers (78%) globally are most concerned about providers driving up costs by overprescribing or recommending too many services. The second leading factor was the belief that many plan participants are seeking inappropriate care (45%). A significant change this year was the increased number of insurers (38%) that now cite insureds’ poor health habits as the third leading factor.
Cost Management Initiatives
The use of contracted provider networks (63%) and preapproval for inpatient services (68%) remain among the top three medical cost management programs. However, a large number of insurers (71%) are also placing limits on certain services, thereby capping claims for some treatments in an effort to control costs.
The survey also found that respondents continue to report increased capability to offer health promotion features either directly or through a partner. The top three features offered by nearly two-thirds of insurers are second medical opinion, biometric screening, and lifestyle and health education.
“In Asia, the survey found that almost half of employers (44%) have introduced wellness programs or wellbeing features into their health programs as a means to manage medical costs,” said Dr. Rajeshree Parekh, director, Health and Corporate Wellness for Asia-Pacific at Towers Watson.
“This is encouraging as it shows employers recognize that they can manage health costs holistically — by enabling employees to become actively involved in their own health and making long-term, sustainable changes to their lifestyles. This less traditional method of cost management is slowly picking up speed across Asia-Pacific, and the employers leading the charge will find that it will result in a tangible ROI, not just in terms of a healthier, happier workforce, but a healthier bottom line too,” said Dr. Parekh.
“The increased trend for wellness programs holds true in Thailand too”, added Chris Mayes. “Companies are turning to preventative measures to improve employee health, productivity and engagement – whether it is introducing employee assistance plans to support employees during stressful times or by providing medical check-ups and health risk assessments to allow employees to understand their current and future state of health. Thai companies are really starting to embrace the concept of the “happy workplace” to improve employee wellbeing which should help drive lower healthcare costs in the future.”
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