General Insurance Article - Health care benefit costs may increase by six percent

According to a survey of medical insurers by Willis Towers Watson employer-provided health care benefits costs are expected to increase modestly around the globe in 2019. Insurers blame 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 medical insurers globally are projecting health care benefits costs to rise 7.6% in 2019, a slight increase over 7.1% this year. The smallest increases (5.0%) are projected in Europe while the largest increases are expected in the Middle East and Africa, where costs are projected to jump 12.4%. The rate at which cost are rising in the U.S. are expected to decline slightly, from 8.7% this year to 7.9% next year.

 In the UK, medical insurance cost increases are projected to hit 6.3% in 2019, which is a slight decrease compared to this year’s rise of 6.9%. Between October 2015 and June 2017, insurance premium tax (IPT) doubled from 6% to 12% 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%) expect higher or significantly higher medical trend costs over the next three years, however, 60% of Middle East and African insurers and 54% of insurers in Europe anticipate higher costs. Globally, nearly half of insurers (49%) expect cost increases will be higher or significantly higher.

 Global medical trends: Annual cost increases, 2017 – 2019

 “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%) and behavioural and mental health care (50%) 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%) in the Americas and 66% 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%) cited the high cost of medical technology followed by providers’ profit motives (48%). Interestingly, seven in ten insurers (70%) 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%) 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. 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,” said Francis Coleman, managing director, Health and Benefits, Global Services & Solutions, Willis Towers Watson.

 Other findings from the survey include:

 • Top Three Conditions: Insurers report musculoskeletal (66%), cardiovascular (54%), and cancer (43%) as the top three conditions that cause the highest number of claims in Europe. Respondents don’t expect the situation to change in the next five years.

 • Top cost management methods: Nearly two-thirds (64%) use contracted networks, while 60% require pre-approval for scheduled inpatient services to help manage costs. Over six in 10 (64%) place limits on certain medical services to help control costs.

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