Rising employee healthcare costs in Asia largely driven by NCDs
A new research into company-provided healthcare plans, titled “Medical Trends Around the World”, found that rising costs were largely driven by claims related to employee lifestyle choices, such as smoking, a lack of exercise and a poor diet. The new research by Mercer Marsh Benefits, a partnership between global professional services firms, Mercer and Marsh, also found that cost for companies to provide medical care to staff continue to vastly outpace inflation in most major economies.
Healthcare cost increases are being driven mostly by noncommunicable diseases (NCDs). These are diseases that cannot be caught from other people but are frequently caused by an individual’s lifestyle choices.
Based on a survey of 171 insurers from across 49 countries (except the United States), the research shows that across 40 countries, the global average per person increase in healthcare costs is almost triple the rate of inflation. 2015 saw an average 9.9% increase in medical costs worldwide, with 2016 forecast at 9.8%.Average overall price inflation reduced from 3.9% to 3.5% over the same period.
In 2016, medical costs across Asia are expected to increase by 11.5% against an average regional inflation rate of 2.1%.
The highest cost increases are expected in Vietnam (19.3%), Malaysia (17.3%) and Indonesia (11.8%). Diseases of the circulatory system (59%), Cancer (52%) and respiratory conditions (46%) and gastro-intestinal diseases (46%) were the main cause of claims cost in 2015.
Rose Kwan of Mercer Marsh Benefits in Singapore explained that the role of governments in specific markets in the region greatly impacts consumers’ healthcare experiences.
“For example, as our report indicates, with recent legislation coming to Vietnam from the Ministry of Health, the country is bracing for an anticipated 30% increase in costs for some public hospital services and products. One core and fundamental strategy available to employers is to help employees live a healthier life, improve their productivity, reduce absences and increase engagement. Wellness programs, education of the impact of lifestyle choices and the redesign of medical insurance plans have all had an important role to play in better controlling long-term medical plan cost trends,” Kwan said.
On the other hand, the lowest levels of forecast medical inflation are in Europe, running at 7.8% in 2016 against a regional average rate of inflation of 2.5%.
Russia, Lithuania and Ukraine are forecasting the highest expected increases in medical costs of 17.8%, 17.3% and 15% respectively. Lowest levels of forecast medical inflation are France (1.8%), Netherlands (2.5%) and Italy (2.9%). The UK is forecasting cost increases of 6.4%.
In Europe, the top claims (based on total cost) in 2015 were cancer (53%), osteomuscular diseases (43%), and diseases of the circulatory system (41%). In addition to these claims, gastro-intestinal diseases were among some of the most frequent claims reported, and the report shows that stress-related health concerns are also growing in Europe.
Costs in Canada are expected to increase by 6% in 2016 against a background inflation rate of 1.3%. Across Latin America, medical inflation averages 12.8% compared to an average inflation rate of 8%. Cost increases are expected to be highest in Argentina (33.3%), followed by Brazil (18.6%) and Mexico (11%).
As with Europe, cancer was the most common cause of claims cost (82%) followed by diseases of the circulatory system (68%) and respiratory conditions (27%) and obstetrics and pregnancy (27%). In Latin America, employers and insurers are seeking to address health risk issues and changes in demographics that are impacted by continued general inflation and more recently by large exchange rate fluctuations.
According to Graham Pearce, Partner at Mercer, “We believe that, quite frankly, a medical cost inflation rate close to three times that of overall inflation is just not sustainable. It is therefore of the utmost importance that employers become much more serious about ‘bending the trend’ with a long-term healthcare strategy. “
However, Pearce added that this approach will require “some initial investment, strong executive support and rigorous analysis of what is, and is not, working for specific workforce populations”.
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