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Cost of employee health benefits likely to rise faster this year, global study finds

Jul 18. 2014
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By The Nation

The cost of providing employee healthcare benefits has stabilised worldwide, although a new round of increases may be on the horizon for employers, according to a new survey by Towers Watson, a global professional-services company.
Asia-Pacific employers experienced a medical trend (increased costs) of 8.8 per cent in 2013, and expect to experience a slight rise in this trend to 9.3 per cent in 2014. The survey also found that health promotion and wellness programmes were becoming more widespread in all regions as employers look to supplement traditional cost-management tactics to contain rising expenses.
The 2014 “Towers Watson Global Medical Trends Survey”, completed by 173 leading medical insurers in 58 countries, found that the cost of employee healthcare benefits was projected to increase 8.3 per cent globally this year, slightly higher than the 7.9- and 7.7-per-cent increases experienced in the past two years. The average increase in the Asia-Pacific region is projected to remain above the global average.
“While the cost of providing healthcare benefits to employees has stabilised over the past few years, controlling rising costs remains a significant concern for employers worldwide,” said Francis Coleman, director of 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.”
Chris Mayes, benefits director at Towers Watson Thailand, said: “In Thailand the medical insurers participating in the study reported an average increase in employee healthcare benefits for 2012 and 2013 of only 6.3 per cent per annum, one of the lowest rates in Asia-Pacific. However, for 2014 the expected rate of increase jumps to 8.7 per cent, or 6.5 per cent 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 per cent) of insurers in all regions anticipate a higher or significantly higher medical trend over the next three years. Asia-Pacific insurers are particularly pessimistic, with more than two-thirds (69 per cent) 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 behaviour as compared with external factors such as the high cost of new medical technologies and the profit motives of providers. 
In terms of employee/provider behaviour, three-quarters of insurers (78 per cent) globally are most concerned about providers driving up costs by over-prescribing or recommending too many services. The second leading factor was the belief that many plan participants are seeking inappropriate care (45 per cent). A significant change this year was the increased number of insurers (38 per cent) that now cite insureds’ poor health habits as the third leading factor.
Cost-management initiatives
The use of contracted provider networks (63 per cent) and pre-approval for inpatient services (68 per cent) remain among the top three medical-cost-management programmes. However, a large number of insurers (71 per cent) 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 per cent) have introduced wellness programmes or well-being features into their health programmes as a means to manage medical costs,” said Dr Rajeshree Parekh, director of health and corporate wellness for Asia-Pacific at Towers Watson.
“This is encouraging, as it shows employers recognise 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 [return on investment], not just in terms of a healthier, happier workforce, but a healthier bottom line too.” 
Mayes added: “The increased trend for wellness programmes holds true in Thailand too.  
“Companies are turning to preventive 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 well-being, which should help drive lower healthcare costs in the future.”
Global Trends 
2012 – 2014
2012 2013 2014*
Global 7.7% 7.9% 8.3% 
9.1% 9.1% 9.7% 
Asia-Pacific 8.4% 8.8% 9.3% 
Europe 5.3% 5.2% 5.4% 
Middle East 
Africa 8.8% 9.8% 10.0% 

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