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North American insurers project average cost trend of 11.6% in 2011, up from 11.3% in 2010
The cost of employer-provided health insurance is expected to increase by more than 10 percent around the world in 2011, according to a survey of health insurers by consultancy Towers Watson. Additionally, little relief is in sight, with the vast majority of respondents expecting high medical costs over the next five years.
Towers Watson Global Medical Trends survey was conducted in September and October 2010, with responses from 170 medical insurers in 37 countries throughout Asia, Africa, Europe and the Americas. Globally, the average medical cost trend is expected to be 10.5 percent in 2011, the survey revealed.
Respondents in Latin America and North America project the largest average medical trend for 2011 (13.7 percent and 11.6 percent, respectively). Only European respondents expect a single-digit average medical trend (9.1 percent) for 2011.
The medical cost trend is expected to be 2.5 percentage points higher in emerging economies than in advanced economies. Additionally, virtually all respondents (95 percent) show a medical trend that is two or three times the rate of general inflation. Without inflation, the average global medical increase for 2009 was 6.9 percent.
Gross Medical Cost Trends
Source: Towers Watson.
The survey found that, while medical cost trend increases slowed recently, nearly three out of four respondents (72 percent) expect costs to rise over the next five years. The most significant factors driving medical cost increases are:
“The growing demand for private health care, particularly in developing nations, has placed enormous upward pressure on the cost of providing this valuable employee benefit,” said Francis Coleman, a senior international consultant at Towers Watson. “With double-digit medical cost increases now the norm, there appears to be a shift among employers and insurers toward a more holistic and consumer-directed approach to health care—one that helps employees to become more aware of risks and more responsible for maintaining a healthy lifestyle.”
Health care costs,
and the extent to which they are passed along to employees, can be measured in different ways. A 2010 survey by Mercer showed that growth in the average total health benefit cost per employee in the U.S., which had slowed to 5.5 percent in 2009, rose 6.9 percent in 2010 to $9,562, the biggest increase since 2004. Health benefit cost rose three times faster than the U.S. consumer price index in 2010 (see the
SHRM Online article "Employers Shift Benefits as Health Costs Jump 6.9% in 2010").
A 2010 survey by PricewaterhouseCoopers projected that in 2011, for the first time, a majority of U.S. workers are expected to have health insurance deductibles of $400 or higher as more employers raise out-of-pocket limits, replace flat-dollar co-pays with percentage-based co-insurance and move to high-deductible health plans (see the
SHRM Online article "Increased Health Care
Cost-Shifting Expected in 2011).
Wellness Programs Embraced Globally
The survey noted that interest in wellness programs is growing in all regions, with most respondents adding some form of wellness feature to their health care offerings.
Globally, respondents indicated that they offered employees:
“The clear interest all regions are showing in employee wellness is encouraging, and we expect that wellness features will play a greater role in managing global medical costs,” said Nicole Serfontein, a senior international consultant with Towers Watson. “In a global economy that will likely continue to experience medical inflation in the short and medium terms, these approaches supplement traditional methods by addressing some of the more common medical issues that drive up health care costs.”
Stephen Miller is an online editor/manager for SHRM.
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