Cost of providing healthcare benefits continues to rise

The cost of providing healthcare benefits to employees continues to escalate at double-digit levels around the globe, and is expected to increase by 9.6% this year, according to research by Towers Watson.

The research, the 2012 Towers Watson Global medical trends survey, which polled 237 medical insurers in 48 countries, found that, while traditional cost management approaches continue to dominate, wellness programmes and health-promotion strategies are becoming more popular.

While the 9.6% increase is slightly lower than the 9.8% increase in 2011 and the 10.2% increase in 2009, costs are expected to continue to increase at double-digit levels in four of the five global regions in 2012. Only Europe is expected to see single-digit increases.

The three top drivers for the increased cost are: new medical technology causing overuse of care (52%), practitioners recommending too many services (50%) and providers’ profit motives (31%).

Although the most popular methods of medical cost management remain contracted provider networks and pre-approval for inpatient services, both cited by 57% of respondents, some less traditional methods are also being used by employers.

For example, more than two in five (42%) respondents reported using chronic condition or disease management tools, and more than one in four (29%) are using wellness programmes.

The most common prevention feature remains the second medical opinion, which is offered by nearly 80% of respondents. Insurers are also increasing wellness services, such as health-risk assessments and chronic condition or disease management programmes, offering these either in-house or through the use of partner organisations.

Francis Coleman, director of international consulting at Towers Watson, said: “The news is not all gloom and doom. Across all regions, we are seeing projections increase at a slower rate than in the recent past, perhaps evidence of the global economic slowdown.

“Nevertheless, with trend rates expected to continue to rise, even if less quickly, employers will be compelled to look for solutions to manage their medical costs. In particular, many will investigate how a strategy of holistic health promotion can help curb long-term costs effectively.”

Justin Crossland, senior international consultant at Towers Watson, added: “Employers are moving slowly, but steadily, toward an increased focus on wellness.

“This slow progression for multinational organisations is not surprising given challenges, such as finding vendors that can provide wellness services on a global or regional basis, poor infrastructure and other inefficiencies.

“However, these obstacles can be overcome with a commitment to organisational health and wellbeing, a strategy that will not only enable employers to manage their costs, but also drive employee health, engagement and productivity over the long run.

“In the Europe, Middle East and Africa (EMEA) region, we have seen an increase in cost sharing in plans, such as the use of co-insurance and premium sharing with employees, and this has now become more common globally as a method for managing medical cost increases.

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“We have seen increasing interest in wellness programmes and health and wellbeing solutions offered by insurers. However, those provided may not be robust integrated solutions in all cases and progress may not be rapid in all markets.”

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