Multinationals Adjust Health Benefits

As health contribution costs rise, more adopt global workforce health strategies and wellness programs

By Stephen Miller, CEBS May 19, 2011

Multinationals should change the way they supervise private health care provision in light of the health care reforms taking place across Europe, as national reforms increase companies’ local operating costs, advised HR consultancy Mercer. Without action, as the reforms progress, multinationals risk being hit by unsupervised and escalating costs and might fall foul of regulatory requirements.

According to Paul Ashcroft, a principal at Mercer, “Each European country faces similar cost pressures in their national health programs. They are grappling with the problems of aging populations, increasing demand for health care, rising medical costs and competition for tax revenues. Responsibility for health care—and the rising costs—is now being shunted onto employers and the individual employees.

“Companies are having to rapidly adapt their benefit plans to ensure regulatory compliance and manage their costs,” he continued, ”and more rarely, to know when to take any advantage of increased coverage being provided by the state.”

In many cases, a regional committee might need to be established, most likely chaired by the regional benefits manager from the largest market and meeting biannually, Ashcroft suggests. The role of the committee should be to:

Formulate corporate policy on the levels and principles of health care provision.

Establish guidelines for managing costs and ensure local compliance.

The implementation of the strategy and negotiation with health care providers would be handled at the local level.

An Array of Reforms

Most European countries are seeking to reduce the costs of delivering health care by restructuring service provisions or negotiating terms with health system providers such as private hospitals and pharmacies. Some countries are looking to improve coverage and access by broadening the population that receives health care coverage through public-sector insurance programs or private-sector insurance companies.

In the U.K., for example, the previous Labour government focused investment in the National Health Service (NHS) to improve outcomes for the treatment of cancer and heart disease. As a consequence, as public provision in these areas has improved, employers have been in a position to re-evaluate the coverage they provide for these conditions in their medical plans.

A sampling of other reforms taking place in European countries, from West to East, as highlighted by Mercer, includes:

Ireland. 2011 has seen the main government-run insurer announce the biggest price increase in the history of the market: Premiums for employers and individuals using the Voluntary Health Insurance program will rise by up to 45 percent.

Germany. In 2010, Germany's cabinet approved a controversial health reform law raising employer and employee contribution rates as of January 2011, allowing insurers to increase employee premiums as needed. The reform calls for cost reductions by doctors, hospitals and insurers.

Russia. Russian Prime Minister Vladimir Putin has indicated that Russia needs to start large-scale health care reform. These measures are to be paid for through an increase in the obligatory medical insurance tax paid by companies, which will increase from 3.1 percent to 5.1 percent starting in 2011.

Workforce Health a Higher Priority

Globally, a majority of multinational corporations plan to place a higher priority on workforce health initiatives over the next few years, according to HR consultancy Towers Watson.

The Towers Watson Workforce Health Strategies: A Multinational Perspective survey was conducted in early 2011 and includes responses from 149 multinational corporations representing 5.2 million workers. The survey found that nearly half of the surveyed multinationals (47 percent) plan to implement a global workforce health strategy over the next two years. In 2011, less than one-third (32 percent) of multinationals had a global workforce health strategy.

“Given the variety of health systems and market practices around the world and the significant differences in costs for employers to sponsor health plans, the need for a global workforce health strategy has never been greater,” said Francis Coleman, a senior international consultant with Towers Watson. “Multinationals with a clear strategy can better coordinate local health activities to improve their overall workforce health and increase the efficiency of their total spending on health care.”

When asked to rank the three most important objectives for their health strategy, more than half (54 percent) of respondents said it was to demonstrate their continued interest in employee well-being, resiliency and stress management, while slightly fewer (52 percent) said it was to help control rising health costs.

Regional Distinctions

There were, however, significant differences by region. More than two-thirds (69 percent) of multinationals headquartered in the Europe, Middle East and Africa (EMEA) region ranked employee well-being and stress management in the top three. By contrast, 62 percent of Asia-headquartered respondents ranked providing competitive rewards among the top three objectives. Not surprisingly, 59 percent of North American companies—primarily U.S.-based—listed controlling costs in the top three.

“Multinationals in various regions have different needs and goals,” said Coleman. “Corporations in the Americas, for example, are much more focused on medical cost containment, while European corporations are concerned with disability, lost productivity and absenteeism. EMEA employers are focusing on using their strategy to directly influence employees’ health. Asia-based corporations view their health programs as a way to attract and retain top talent.”

Wellness Programs Gain Popularity

Overall, 75 percent of multinationals offer a wellness program, which can include preventive care, health screenings or education, and these programs have been growing in popularity over the past few years. The one exception can be found among Asia-headquartered multinationals, where only 62 percent of employers offer a wellness program.

“Wellness programs, not surprisingly, can be found mostly in advanced economies. In many emerging economies, these programs are offered only to senior managers,” said Nicole Serfontein, a senior international consultant at Towers Watson. “To get full value from health and wellness programs, multinational employers should clearly define the role wellness and health and productivity programs will play in their global health strategy, and in their overall business strategy. If an organization is in an industry that competes for talent, for example, its approach to health—especially in some regions—could be a factor in attracting and retaining employees.”

Other findings from the Towers Watson survey include:

Companies that have a health strategy are not sharing it broadly with employees. Only 13 percent of respondents say they’ve explained their strategy to their entire global workforce.

Multinationals will rely increasingly on more global governance of their health care benefits programs. Data management, third-party vendor support and offering of prevention and wellness programs are the areas most likely to come under some type of global governance.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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