Serious illness continues to drive up company healthcare costs

The cost for companies to provide healthcare to staff continues to vastly outpace inflation in most major economies, according to new research by Mercer Marsh Benefits, a partnership between global professional services firms Mercer and Marsh.

In the UK, medical costs are set to increase 6.4% against an inflation rate of 0.8%. The research into company-provided employee healthcare plans also found that the costs were largely driven by claims related to employee lifestyle choices such as smoking, a lack of exercise and a poor diet.

The research Medical Trends Around the World is based on a survey of 171 insurers across 49 countries (outside of the United States) and shows that across 40 countries, the average per person increase in healthcare costs is globally almost triple the rate of inflation.

Globally, 2015 saw an average 9.9% increase in medical costs, with 2016 forecast at 9.8%. Cost increases are being driven by non-communicable diseases; those that cannot be caught from other people but are frequently caused by the lifestyle choices of individuals. Average overall price inflation reduced from 3.9% to 3.5% over the same period.

For Jacques Goulet, Mercer’s President of Retirement, Health and Benefits, the results yielded by this year’s survey underscore the importance of the role employers can play globally in controlling healthcare costs. “Stakeholders need to embrace disruption in health care. The window of opportunity is now for employer-led healthcare transformation – in the United States but also in other geographies where employers have not played a direct traditional role but where having a cost-effective and high-quality healthcare system is an enabler for business success.”

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. This approach, however, will require some initial investment, strong executive support and rigorous analysis of what is and is not working for specific workforce populations.”

“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 programmes, 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.”

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 2015.