Healthcare Costs Rise

Survey shows global increase.

A survey of medical insurers by Willis Towers Watson has concluded employer-provided health care benefits costs will increase modestly around the globe next year. The business says UK health care benefit costs will increase by 6.3 per cent, less than the global average of 7.6 per cent. The average figure is up from 7.1 per cent last year and 6.7 per cent in 2017.

Insurers are blaming the high cost of medical technology and the overuse and overprescribing of services as the major cost-driving factors and caution that soaring pharmacy costs will become a significant factor over the next five years.

The 2019 Global Medical Trends Survey, the largest of its kind in the industry, found that the smallest increases (5.0 per cent) are projected in Europe while the largest increases are expected in the Middle East and Africa, where costs are projected to jump 12.4 per cent. The rate at which cost are rising in the U.S. are expected to decline slightly, from 8.7 per cent this year to 7.9 per cent next year.

In the UK, medical insurance cost increases are projected to hit 6.3 per cent in 2019, which is a slight decrease compared to this year’s rise of 6.9 per cent. Between October 2015 and June 2017, insurance premium tax (IPT) doubled from 6 per cent to 12 per cent and is cited as one of the contributing factors to higher costs during this period.

The study also found the outlook for cost increases over the next three years varies greatly by region. Only a third of insurers in the Americas (34 per cent) expect higher or significantly higher medical trend costs over the next three years, however, 60 per cent of Middle East and African insurers and 54 per cent of insurers in Europe anticipate higher costs. Globally, nearly half of insurers (49 per cent) expect cost increases will be higher or significantly higher.

“Rising health care costs continue to be a major issue for insurers and employers globally as increases continue to outstrip inflation by a two-to-one margin and are unsustainable over the long term,” said Cecil Hemingway, managing director and Global co-head Health and Benefits, Willis Towers Watson. “While some employers are cautiously optimistic that future cost increases will hold steady or increase only slightly, concerns linger over how medical treatment is being provided, the reliance on pharmacy services, and the cost implications of innovative future treatments, all of which can fuel sharp cost increases down the road.”

According to the survey, European insurers are predicting that costs for hospital and inpatient care (52 per cent) and behavioural and mental health care (50 per cent) will become an increasingly significant part of medical expenses over the next five years. This is in contrast to other regions, with eight in ten insurers (80 per cent) in the Americas and 66 per cent of Middle East and Africa insurers expecting the bulk of medical expense increases to come from pharmacy costs over the next five years.

When asked for the most significant cost-driving factors outside the control of employers and vendors, nearly two-thirds (65 per cent) cited the high cost of medical technology followed by providers’ profit motives (48 per cent). Interestingly, seven in ten insurers (70 per cent) ranked overuse of care due to medical practitioners recommending too many services as the most significant factor driving costs related to employee and provider behaviour. Just over half (52 per cent) cited overuse of care due to employees seeking inappropriate care.

“We know from our research and consulting that insurers and employers are working to develop programmes that aim to stem rising medical costs and improve employee health,” said Francis Coleman, managing director, Health and Benefits, Global Services & Solutions, Willis Towers Watson. “While traditional cost management programmes remain popular, we expect insurers and employers will look closely at telemedicine, second medical opinion services and other innovative design programmes that can help to control costs and meet the needs of their employees.”

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