How to reduce the effect of rising medical costs on your benefits
Investing in the health of employees is central to the success of any organisation. Private healthcare supports the workforce health, cuts sickness absence costs and improves competitiveness of the benefit package.
With the NHS increasingly challenged, UK employees are becoming increasingly reliant on employer private healthcare.
However, global medical inflation continues to rise. In WTW’s 2023 Global Medical Trends Survey, 78% of the 257 global insurers surveyed said they expect ‘higher’ or ‘significantly higher’ cost increases over the next three years. The survey estimated UK medical inflation at 8.8% for 2023, with some insurers quoting higher than this.
Driving factors
The causes of medical inflation are numerous and complex.
WTW’s Global Medical Trends Survey asked insurers to confirm the three most significant factors driving medical inflation linked to member or provider behaviours. The top three were: overuse of care due to medical professionals recommending too many services or over-prescribing (74%), members’ poor health habits (52%) and underuse of preventive services (50%).
Other key factor include the continuing introduction of increasingly effective, but also increasingly expensive, medical technologies and treatment.
Before considering how to mitigate cost rises, employers should first define the outcome they want from offering medical benefits in the first place.
The implications of change
In WTW’s 2023 Benefit Trends Survey, UK employers cited ‘competition for talent’, followed closely by ‘rising costs’ as the top key business issues influencing their benefits strategies.
In times where benefit budgets are being scrutinised but competition for talent is increasing, it is imperative to consider the wider impact of any changes to the benefits programme.
Removing or scaling down healthcare plans can be counterproductive as cost-cutting measures. Although premiums are reduced, benefit packages will be less attractive to potential new hires, long-term sickness spend will increase and there is also the risk of reduced engagement by the existing workforce if they no longer feel their wellbeing is prioritised.
But with a well-designed communication strategy to help employees see the rationale for change, it is possible to make amendments to plan design that can meaningfully and sustainably reduce costs.
The best area for re-design will depend on the scheme and its claims history, business health risks and employee demographics.
For example, for schemes where claim incidence is high, adding or increasing a policy excess can help. An excess will mean more treatment will be self-funded. And the number of claims will fall because members are discouraged from claiming for minor conditions that could be managed through self-care or resolve naturally over time.
Similarly, introducing an outpatient treatment cap can help limit over-treatment.
Insurer networks, clinical expertise and virtual care
Depending on the geographic area in which the workforce resides, employers can consider altering the insured hospital network to exclude high cost facilities.
Alternatively, introducing guided care (or open referral) can reduce claims spend, but improve clinical outcomes. Guided care means that instead of GPs referring to named consultants, insurers give individuals a choice of several consultants to see.
If an employee has a GP referral to see a surgeon for a joint condition, for example, insurers can discuss a range of treatment options with the insured, including non-surgical routes which can reduce cost, recovery time and improve the treatment outcome.
Virtual care is a fast-growing choice. As well as providing quick and convenient access to virtual GPs for diagnostics and referrals, telemedicine is rapidly expanding into the areas of physiotherapy and mental health treatment too.
Cancer care
A cancer claim on a medical plan can have a significant impact on overall costs. While it is possible to apply time or financial limits to treatment under corporate healthcare plans, this is a difficult step for employers to take.
Imposing limits can ultimately result in treatment being curtailed early. Progressive and paternalistic companies generally wish to provide the highest level of cancer cover they can.
Instead, employees can be incentivised to use the NHS for initial treatment. The NHS is still well placed to provide leading comprehensive cancer care for many. And employers can increase the NHS cash benefits paid for cancer, as well as other conditions.
The insurers’ cancer nurses can support with transitioning employees back into the private healthcare system, if recommended treatment cannot be provided by the NHS.
Spotting health problems early
Early intervention, such as health screenings or direct access, can be particularly effective in detecting emerging health issues before they become more severe and costly to treat.
Noncommunicable diseases (NCDs), including cancers, stroke, cardiovascular disease and mental health illness, are expensive to treat. However, an estimated 80% of NCDs are preventable through lifestyle factors.
By incentivising and educating employees on healthy lifestyle changes, employers can achieve long-term improvements to workforce health and productivity and reduce sickness absence and healthcare claims costs.
Ask an expert
Seeking professional advice from an employee benefits intermediary can unlock considerable savings. Independent advisers can benchmark and review the healthcare plan, hospital network, financing mechanism, balance of the premium cost due for employees versus dependants and administration margin, and can conduct a wide market review to look at appropriateness and competitiveness of the provider.
It’s a long-term strategy
A medical scheme and strategy that works well is likely to see good member take-up.
Investing in preventative care and appointing experienced advisors to monitor claims experience and support with interventions, which positively impact pricing as well as support employee health, means employers will be well placed to withstand the effect of medical inflation and will benefit from having a healthy, engaged workforce.
In partnership with WTW
WTW is a leading global advisory, broking and solutions company.
