HEALTH BENEFITS
UK medical inflation at 4% as claims increase
The cost of providing health benefits to employees increased by 4% in 2008, according to a report from Mercer. The report also shows that the number of claims rose by 3% over the period.
Mercer analysed historical claims data from 250 companies in the 12 months to December 2008. The annual claims spend for the survey data was £144 million, sourced from Mercer’s health & benefits business which is the UK’s largest intermediary for corporate medical insurance plans.
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According to Steve Clements, a principal in Mercer’s health & benefits business: “Inflationary costs are easing from the 6% recorded in 2007, primarily due to deflationary pressures. But 4% is still a substantial increase given the current environment, and reflects the longer term upward trend.”
He added: “Interestingly, our data shows that there was a marked increase in scheme utilisation from August 2008 onwards. This may well have been due to the stressful environment of the credit crunch as, anticipating redundancy or a reduction in health benefits in 2009, more people sought to make claims while they could. However, average bill costs have remained fairly static over 2008, largely due to reduced inflationary pressures on medical treatment costs.”
Staff not required to contribute to health benefit costs in seven in ten companies
According to separate data released by Mercer, 72% of UK companies still do not require employees to contribute to their health benefit costs, despite the increase.
Mercer’s 2008 Pan-European Heath Benefits Issue Survey showed that:
The majority of companies in the UK (76%) thought that the cost of providing health care benefits was justified by the increased productivity that they brought.
However, 70% of companies expected health care costs to increase significantly in the next ten years mainly due to issues surrounding an ageing workforce.
Healthcare costs are rising in 42% of companies due to the increasing cost of care, increasing numbers of claims (25%) and the increasing complexity of medical conditions (9%).
The proportion of “high claims” with a total cost of over £10,000 has been increasing in recent years. In 1997, fewer than 6% of all claims were registered as high claims, however in recent years this proportion has risen to over 11%.
According to Mercer, some companies are responding to increasing medical costs by linking access to treatment with NHS waiting times and so reducing workplace absence by accelerating access to care. Others are increasing employee and dependant contribution levels either through premium sharing or at the point of claim, or both. Some are introducing medical underwriting to exclude pre-existing conditions from cover or introducing annual maxima for all treatment or for specific high cost conditions.
A final word
“Undoubtedly some companies will prefer short-term tactics to reduce the costs, but all the evidence points to preventative measures being more effective to preserve the productivity and health of the workforce and maintaining a valued company benefit. Companies should above all be aware that insurance companies may not yet have adjusted their costs and may still be working to 2008 inflationary figures, so negotiation should be a top priority.” - Steve Clements, a principal in Mercer’s health & benefits business.
Want to know more?
Title: Medical Inflation Report 2009, Mercer.
Availability: For questions about a Mercer survey purchase or to participate in a survey, email client.services.europe@mercer.com or tel: +48 22 434 5383.
Mercer is a “leading global provider of consulting, outsourcing and investment services”. Its 18,000 employees are based in more than 40 countries. For more information, visit www.mercer.com.