A RECENT survey revealed that employer-provided medical benefit costs are forecasted to grow by 8.2 percent next year.
The 2022 Global Medical Trend Rates Report, released recently by Aon plc, a global professional services firm, said the growth will outpace general inflation by 5.8 percent.
In the past year, the use of outpatient services recorded the most significant drop in Asia Pacific due largely to Covid-19 pandemic-related restrictions. However, global health benefit costs are also seen to rise by 7.4 percent as medical utilization returns to pre-Covid-19 pandemic levels.
Last year, the use of medical plans recorded a low in April 2020 and is expected to exceed pre-Covid-19 pandemic levels during 2022 as further relaxing of mobility restrictions are implemented. This, along with rising inflationary pressures and the view that Covid-19 healthcare costs will transition to the private sector, is increasing cost expectations.
Lower utilization
Tim Dwyer, Head of Health Solutions, Asia Pacific, Aon said the pandemic caused overall lower utilization levels in 2020, which provided plan sponsors with some respite.
“However, the dual effect of higher expected utilization and inflationary pressures presents new cost challenges that need to be managed. The normalization in utilization patterns, emerging risks such as mental and musculoskeletal health and the potential for a greater Covid-19 cost burden to fall on the private sector will require employers to carefully analyze their medical plans as cost pressures increase over the next two renewal cycles,” he said.
The report showed that over the last year, the increase in work-from-home setups were likely to have contributed to a significant spike in musculoskeletal conditions. Medication-related expenses experienced the largest inflationary increases. The report also noted that a significant dip was seen in outpatient upper respiratory tract infection claims compared to previous years. However, expectations are high that it will recover next year when social distancing and mobility restrictions are finally lifted.
“The good news is that there are plan design and behavioral interventions available to mitigate the cost increases. The route will be uncertain and will vary by country, so it is important that companies use data and insights to make better informed decisions to secure commercial protections at their renewals to deal with the volatility,” Dwyer added.
Medical plans
On a global scale, employer-sponsored medical plans in 2022 are forecasted to grow to 7.4 percent compared to this year’s 7.2 percent, although the projected medical trend rates may vary significantly depending on the region. Costs are seen to go up the most in the Middle East and Africa, where the average medical trend rates are projected to be at 11.1 percent versus this year’s 12 percent. Contrastingly, Europe is forecasted to record the lowest average medical premium rate increase, pegged at 5.6 percent, while Latin America and the Caribbean, on the other hand, will shoot up to 10.6 percent from this year’s 8.8 percent mark.
For select APAC countries, the forecasted health care benefit cost growth this year will be highest in India at 13 percent from nine percent this year, while Thailand will shoot up to 11.7 percent, almost double from this year’s 6.6 percent, followed by Australia at 3.1 (from 2.5 percent), Hong Kong at 5.6 percent (from 5.3 percent), and South Korea at eight percent (from 7.5 percent).
No movement
Countries like the Philippines, China, and Singapore, on the other hand, will experience no movement in forecasted health care benefit cost growth with eight percent, seven percent, and seven percent, respectively. There is no projected or forecasted growth or movement in Japan.
However, Indonesia will drop to 12.2 percent next year from 13 percent, Malaysia at 12 percent from 14 percent this year, and Vietnam at 5.5 percent from 8.7 percent this year.
The report also showed that there is growing impact of non-communicable diseases on health care costs globally. Among the diseases that drove health care costs in APAC, on the other hand, were cardiovascular disease, cancer/tumor growth, ENT/lung disorder/respiratory, diabetes and musculoskeletal/back.
Also confirmed by the report in terms of growing prevalence of modifiable risk factors from unhealthy personal habits globally and in the APAC region were high-blood pressure, physical inactivity, poor stress management, high cholesterol and ageing, which directly contribute to the emergence of non-communicable disease.
“Insurers have responded to emerging needs created by the pandemic by delivering virtual consultations, prescription delivery and support for employee physical and mental wellbeing. While these services are likely to introduce short-term cost pressures, they should – over time – have a controlling effect on medical trend rates,” according to Alan Oates, Principal and Actuary, Asia Pacific, Health Solutions at Aon.