Disruption to the delivery of healthcare and lasting changes to work patterns resulting from the COVID-19 pandemic will have a major impact on both the cost and design of employer-provided health benefits, according to a new report by Mercer Marsh Benefits (MMB).
The sixth annual, MMB Health Trends: 2020 Insurer Survey (formerly known as Medical Health Trends Around the World survey), reveals that 68% of insurers expect increased medical claims driven by COVID-19 diagnostics, care and treatment.
Insurers also said they expect increases in medical costs to continue to vastly outstrip inflation in 2021. In 2019, insurers in Asia reported cost increases of 10.2%, which was 5 times the rate of inflation. In 2020, medical costs in Asia are expected to outpace general inflation by 7.5 times with an average rise in medical costs of 10.7%, compared to the global average of 9.5%. For 2021, 86% of insurers in Asia, compared to 90% globally, expect the trend to sustain or increase.
On rising medical costs, Hervé Balzano, President, Health at Mercer and Mercer Marsh Benefits International Leader, said: “COVID-19 has had profound effects on all parts of society and the economy, including healthcare. With an expected rebound in elective treatments deferred during lockdown, a rise in negative health issues related to remote working and sedentary lifestyle, including musculoskeletal and mental health issues, and ongoing concerns about the long-term physical and mental health implications of COVID-19, we expect medical costs to continue to increase.”
Mr. Balzano continued: “In order to meet the new challenges posed by remote working and contain expanding costs, companies need to radically rethink the range of benefits they offer their employees and the way in which they deliver them.”
On the double-digit 2020 increase for Asia, Joan Collar, Mercer Marsh Benefits Asia Leader said, “The region was the first to be hit by COVID-19 and has “bounced back” faster than many other parts of the world, as a result of swift and widespread containment efforts. Much of the impact from COVID-19 claims deferral was felt in the first part of 2020. A significant portion of medical spend, including inpatient and outpatient expenses generally covered under medical plans, given that employees heavily rely on employer-sponsored medical in some of the region’s countries, has resumed.
“The rise in medical costs also reflects the increased unit cost of care due to providers passing on the cost of personal protective equipment (PPE) needed to safely perform services in their bills as well as the higher cost of supply imports due to exchange rate fluctuations.”
The COVID-19 crisis has highlighted the fragility of current employee benefits systems, many of which are paper based and cannot be accessed or managed remotely. With many employers now looking for benefit providers that can offer additional benefits such as mental health, preventive care, and an enhanced range of digital and online services, insurers are increasingly looking to broaden their suite of solutions.
The survey found an increase in the number of insurers offering virtual health consultations, or “telemedicine” with 47% in Asia, saying it was an active part of their current approach to plan management, up from 32% in 2019. Furthermore, 47% of insurers in Asia now cover preventive health initiatives, such as screenings, with an additional 22% indicating they are experimenting or have developed plans to initiate this within the next 24 months. Employer- sponsored plans will continue to play an important role in providing people with the health services they need. For example, about 55% in Asia expect their employer-sponsored plans will cover COVID-19 vaccinations, while 82%, compared to a global average of 69%, expect to cover COVID-19 in-patient treatments.
The survey also found remaining gaps in mental health support, despite the increase in demand seen during the pandemic. For example, virtual mental health counselling is still not widespread, with only one-third of insurers offering it globally while 38% of insurers in Asia do not provide plans covering any mental health services. Less than half of insurers in Asia cover in-patient and outpatient treatment for mental health. This is despite the fact that in all regions, insurers rate private, employer-sponsored health care systems as more effective than public ones in providing the needed prevention, diagnostics and treatment of mental health disorders.
Renee McGowan, Mercer’s Asia CEO said, “Mercer’s Healthy Minds at Work Assessment reflected that the pandemic is taking a growing mental toll on employees in Asia and the urgency for companies to take action is greater than ever. But beyond providing access to adequate care, employers should implement a broader mental-wellbeing strategy which considers the removal of stigma, consistent mental health policies and training for supervisors and employees. Access to mental healthcare is critical for a healthy and productive workforce.”
She added: “With a looming recession against a backdrop of rising medical costs, organisations need to be laser-focused on the benefits that make the most difference and deliver the most value. They need to be bold and willing to push boundaries beyond market practice to offer modern, digital solutions that will enhance the health and well-being of the workforce while keeping costs under control. The pandemic has provided an opportunity for us to rethink and reimagine health plans beyond just buying insurance. More importantly, we hope business leaders can step up to the challenge of addressing inequities in care accessibility, affordability and quality so communities and societies can, too, be strengthened.”
The report focuses on employer-sponsored health programs in 59 countries, excluding the United States, provided between early June and mid-July 2020. This year’s report contains the annual quantitative medical trends table, based largely on data provided by nearly 240 insurers, and added content beyond the financial aspects of insurance coverage.