Employee health insurance grows onerous

Companies are advised to maintain tighter controls

The rapid rise of employer-provided health insurance has quickly become one of the biggest financial challenges facing companies throughout the world, and Thailand will share the same fate if the current trend continues for another five to 10 years.

So says a senior consultant and benefits practice leader for professional services company Towers Watson (Thailand), Chris Mayes.

He was commenting on a global medical-trends survey conducted by Towers Watson, which attracted responses from 170 medical insurers in 37 countries throughout Asia, Africa, Europe and the Americas.

It found that average medical costs around the world were expected to rise by 10.5 per cent this year, compared with costs in 2010. The increase was expected to be 10.2 per cent in the Asia-Pacific region. Ninety-five per cent of respondents said medical costs were increasing more rapidly than the rate of inflation.

In Thailand, the cost of employee-provided medical insurance is expected to rise by 9 per cent this year, after an 8.4-per-cent increase in 2010, and 8.8 per cent in 2009. After taking account of inflation, net medical costs in Thailand increased by 9.6 per cent in 2009 and 5.4 per cent last year. They are forecast to rise by 7.2 per cent this year.

Mayes said double-digit percentage increases in medical costs were now commonplace around the world. These increases have become one of the biggest challenges facing companies in all countries, because the cost of employer-provided medical insurance has continually risen above the rate of salary increases.

"[For Thailand], if this trend continues for five to 10 years, it will become a problem. It has already become an issue in many markets," he said.

The respondents to Towers Watson's survey rated new medical technologies as the leading factor (65 per cent) pushing up medical costs, followed by overuse of care through medical practitioners recommending too many services (56 per cent), profit motives of medical-service providers (29 per cent), and limited or poor networks to effectively control costs (19 per cent).

At the same time, the survey found that interest in wellness programmes is growing both in Asia Pacific and the rest of the world, with most respondents adding wellness features to their healthcare offerings. Globally, nearly three in every four respondents (72 per cent) said they offered lifestyle and health-education programmes to employees, while 63 per cent offered personal-health assessments. Four in 10 respondents said they offered chronic-condition or disease-management programmes.

--The survey also found that:

-The most effective tools for managing medical costs are those where either the patient is directed through specific networks to care services where discounted costs can be obtained, or pre-approval is required for scheduled services. Both methods allow the insurer to better control the outcomes and costs.

-Three quarters of respondents cited cardiovascular [complaints] among the top three conditions that caused the highest prevalence of medical claims, while 63 per cent cited cancer.

Mayes said that from his experience, most workers in countries like the United Kingdom use up all of their holiday entitlements, but in Thailand, employees tend not to do so.

Towers Watson (Thailand)'s managing director Pichpajee Saichuae said there were still many "old-fashioned" factories in Thailand where employees were given gold as a reward for not taking holiday leave.

Mayes said more companies in many countries were setting up workforce health strategies in bid to reduce their medical costs as well as to increase productivity.

"I think the key thing is not to keep people stressed, but to keep them challenged, and give them opportunities to learn new things and grow," he said.

Another recent survey conducted by Towers Watson confirmed that workforce health was a growing priority for multinational organisations around the world. This survey, called "Multinational Workforce Health" found that 75 per cent of respondents expected workforce health to become a greater priority for their organsations this year and next year, while 87 per cent expected it to become a greater priority from 2013 to 2015.

While only 32 per cent of all respondents had a global workforce health strategy in place - up from 26 per cent in 2010 - 47 per cent planned to adopt one within two years.

Pichpajee said benefits, including medical coverage, constituted about 10 to 15 per cent of total remuneration given by average Thai companies. At some firms, benefits represent as much as 20 per cent of total employee rewards, but employees fail to realise or value these benefits.

Mayes said that changes to accounting standards, which will affect all public companies by the end of this year, will require them to include provisions for future employee-benefit obligations.

When a similar standard was applied four years ago in India, the implementation had to be postponed by one year because Indian banks were concerned about the impact on their balance sheets. In Thailand, the impact is expected to be less because employee-benefit liabilities of Thai firms are generally lower, he said.

The Towers Watson consultants suggested that companies should consider adopting flexible benefit programmes, which, despite some initial costs, will help employees to appreciate and value the benefits provided by their companies and allow the firms to maintain tighter control of their costs.

pichaya@nationgroup.com