The coronavirus pandemic will have a lasting impact on the cost and design of employer-provided health benefits for years to come, according to new research.
Mercer Marsh Benefits (MMB) says medical costs are expected to vastly outstrip the rate of inflation in 2021, with seven out of 10 insurers expecting claim to increase due to Covid-related diagnostics cre and treatment.
As a result MMB says cost containment will be critical over the next few years.
MMB says medical costs have continued to outstrip inflation in recent years. In 2019, insurers reported cost increases of 9.7 per cent, which was just under 3 times the rate of inflation. In 2020, they expect a rise in medical costs of 9.5 per cent, roughly 3.5 times the inflation rate.
For 2021, 90 per cent of insurers expect the trend to sustain or increase.
This findings are in MMB Health Trends: 2020 Insurer Survey, the sixth year the consultancy firm has published this report.
Hervé Balzano, president, health at Mercer and Mercer Marsh Benefits International leader says: “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.”
Balzano adds: “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.”
MMB points out that the coronavirus 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 59 per cent saying it was an active part of their current approach to plan management, up from 38 per cent in 2019.
Furthermore, 55 per cent of insurers now cover preventive health initiatives, such as screenings, with an additional 20 per cent indicating they are experimenting or have developed plans to initiate this within the next two years.
MMB partner and UK head of corporate consulting Chris Bailey adds: “The severe disruption in the health system caused by the pandemic has meant many people have been unable to access treatment for key conditions such as cancer muscoskeletal and mental health issues. We can expect to see a bounce back from this disruption in 2021. Whilst the return of treatment is welcomed and much needed, releasing the backlog of demand is likely to drive up costs. This will mean further challenges for companies already focused on managing cost and keeping afloat in a tough economy.
Bailey adds: “Our survey also shows that there has never been a time when health benefits have been of greater significance and value to employees. Employers without future-ready digital solutions will find it increasingly difficult to cope with the demands of a modern workforce. By focusing on delivering services digitally the disruption in services can be managed, treatment accessed, and health and wellbeing enhanced even as the pandemic continues.”
Globally the research founds that employer-sponsored plans will continue to play an important role in providing people with the health services they need. For example, just over half of insurers expect their employer-sponsored plans will cover Covid-19 vaccinations, especially in Latin America.
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 32 per cent of insurers do not provide plans covering any mental health services. 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.
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