According to the Mercer Marsh Benefits 2019 Medical Trends Around the World report, medical costs continue to outpace general inflation by close to three times with the global average 9.7% in 2018. A similar increase is expected for 2019 and even higher for 2020.
This global trend is mirrored in Ireland where underlying medical costs rose by 4.2% in 2018, six times higher than the inflation rate of just 0.7%. Costs are expected to increase by a further 4.5%, compared to an inflation rate forecast of 1.2%. After a relatively benign period of low (or no) health insurance premium inflation, we have seen more significant increases applied by all three Irish health insurers this year.
As the cost of health benefit programmes continues to rise globally, employers have the opportunity to contain cost through enhanced plan design and employee access to quality-focused healthcare. In Ireland, many organisations are placing increasing focus on mental wellbeing initiatives and preventative wellness programmes. Amongst European countries surveyed, mental health and emotional risks were identified as the second biggest factor influencing the costs of employer-sponsored health schemes.
Globally, the top three health risk factors influencing medical cost remain metabolic and cardiovascular risk, dietary risk and emotional/mental risk. On a regional level, there is variation in the top risk factors (see also Table 1):
Aisling Kelly, Consultant, Mercer Marsh Benefits said: “The global trend is that medical costs are rising at a much more rapid rate than general inflation, and Ireland is no exception. Increasing costs are feeding through into higher health insurance premiums. One approach employers in Ireland are taking to contain costs is to place increased focus on mental wellbeing initiatives and preventative wellness programmes. By embedding wellness in the organisational culture, with strong support at all levels, companies can improve their employees’ health, reduce absenteeism through sickness, and help to address the issue of rising premiums.”
In its fifth year, this latest report surveyed 204 insurers across 59 countries*, assessing how health conditions, supplier factors and consumer habits are driving cost, as well as providing insights into how insurers are responding.
Medical costs are also being driven higher by the increasing cost of drugs and the availability of new diagnostic methodologies and testing procedures, often at considerable cost. Wastage has also been identified in healthcare systems through the over prescription of low value health tests and procedures
In response to cost pressures, the number of insurers investing in initiatives to enable quality-focused care, to better guide members to the right care options for them more quickly, has more than doubled. Globally, 29% now name it a top strategic investment area. Insurers are responding by helping members make smarter healthcare choices with 63% of insurers providing education, tools and incentives to drive positive behaviour, Insurers are also increasingly funding unconventional methods of care – such as AI “doctors and symptom checkers.
Hervé Balzano, Mercer Marsh Benefits International Leader, observed: “High prices for pharmaceuticals worldwide coupled with rising claims across all medical conditions mean climbing medical costs show no signs of abating. Indeed, according to our research a majority of insurers globally now believe that in 2020 medical inflation will either remain constant or increase”.
“The future of work demands healthy and engaged employees. As the cost of providing medical benefits continue to rise, employers should assess how to make the most of plan design, including giving access to quality based care to drive better outcomes. Plans should be reviewed with both cost optimisation and employee engagement lenses.”
To download a copy the report, please click here.
Notes to Editors
*Excludes the US.
Table 1: Insurers were asked to highlight the 3 risk factors that most influence employer sponsored group medical costs
The report asked insurers for information on the rising cost of medical care compared to inflation in each market as well as the types, costs and frequency of medical conditions that were claimed for by company employees in 2018. As Mercer’s research parameters for the two reports are different, US data has been excluded from this release; however according to Mercer’s National Survey of Employer-Sponsored Health Plans 2018, US employers experienced a 3.6% increase in the average total health benefit cost per employee in 2018.
About Mercer Marsh Benefits
Mercer Marsh Benefits provides clients with a single source for managing the costs, people risks and complexities of employee benefits. The network is a combination of Mercer and Marsh local offices around the world, plus country correspondents who have been selected based on specific criteria. Our benefits professionals located in 135 countries and servicing clients in more than 150 countries, are deeply knowledgeable about their local markets. Through our locally established businesses, we have a unique common platform which allows us to serve clients with global consistency and locally unique solutions. Mercer and Marsh are two of the Marsh & McLennan Companies, together with Guy Carpenter and Oliver Wyman.