Human Resources talked exclusively to Alan Oates, principal & actuary for health solutions at Aon for a closer look at what the findings of its Global Medical Trend Rates Report means for employee benefits. Robert Blain reports

Given the global health crisis that the Covid-19 pandemic has created since early 2020, it would be natural to assume that corporate medical insurance costs would have escalated at an even greater rate than during a so-called normal calendar year. However, such acceleration has not occurred. In fact, there has been a slowing in the rate of medical inflation in most jurisdictions.

For deeper insights into Aon’s Global Medical Trend Rates Report, Alan Oates, principal & actuary for health solutions at Aon, elaborated on the findings.

“One of the ironies of the Covid-19 pandemic is that this health crisis has not in general resulted in higher claims in corporate sponsored group life, disability and healthcare programmes,” said Oates.

He pointed out that while organisations in many industries are responding to widespread disruption in demand, supply chains and operational infrastructure, the disruption in most APAC countries has not manifested in increased healthcare claims of the workforce.

“Claims in many countries were lower during periods of restricted movement, some of these claims have been deferred and others avoided completely. Lower claims have resulted in surpluses for many insurers, creating short-term opportunity for plan sponsors but also uncertainty, which needs to be carefully managed,” Oates added.

However, this restricted movement has increased employee wellbeing risks. Managing these risks is become one of the most important goals of long-term cost management interventions.

“Close attention should be paid to the behaviours of physicians and clinics. The indirect cost effects of Covid-19 have resulted in losses at many private clinics and they will be keen to recover some of their losses.”

Scrutinise costs related to physicians and clinics

Arising out of the pandemic are risks that HR, in particular compensation & benefits specialists, should be mindful of. Unique market forces have emerged for organisations as a whole that need to be assessed, quantified and managed.

According to Oates, “Close attention should be paid to the behaviours of physicians and clinics. The indirect cost effects of Covid-19 have resulted in losses at many private clinics and they will be keen to recover some of their losses.

“It is recommended that organisations undertake claims audits for duplicate claims, high levels of personal protective equipment (PPE), high levels of unusual activity with particular physicians or clinics, or high levels of particular diagnoses,” he added.

“Compensation and benefits specialists must also review proposed changes to the policy terms and conditions proposed by insurers – particularly exclusions due to Covid-19 and other pandemic risks – to ensure the risk protection offered by the coverage is not being materially changed.”

“C&B specialists must review proposed changes to the policy T&Cs proposed by insurers – particularly exclusions due to Covid-19 – to ensure the risk protection offered by the coverage is not being materially changed.”

Regional comparisons: Hong Kong, Singapore and mainland China

Drilling down to individual jurisdictions in Asia, it’s interesting to note that Hong Kong is experiencing less pressure from medical inflation than the likes of Singapore and mainland China.

According to the Aon report, “In Hong Kong, Covid-19 cases and related treatments are handled by public hospital facilities. However, due to a decrease in elective surgeries and outpatient routines within the private insurance market, plan utlisation has been favourable to the insurers.”

This decrease in plan use has resulted in a corresponding downward trend projection medical trend of 5.3% for 2021, up from 8.1% for 2020. It’s a somewhat different expectation in Singapore.

“The expectation for Singapore is that inpatient care is likely to spike back up whereas outpatient care will return to approximately 70% of the pre-Covid levels and eventually normalise” and that “insurers are looking at a 7.0% medical trend rate for 2021 to continue plan sustainability,” the report stated.

While in mainland China, an interesting trend is that outpatient utlisation has depreciated appreciably while consultations have dramatically increased during the pandemic. However, the medical trend rate (7.0% for 2021) continues to be affected by an increase in prices on medical goods and services.

“(This is) driven by an ageing population, and the development of advanced technology applications, alongside the increased familiarity with medical plans and the convenience in claims submissions using technological means.”

Overall, the medical trend rate for 2021 for APAC is 8.0% driven up by projections in India (9.0% for 2021), due to costs increases as a result of Covid-19 security measures – such as extensive use of PPE, testing and mitigation controls for inpatient admissions.

Workforce resilience and reduced medical costs
As a measure to keep medical inflation at bay, the report alludes to the concept of workforce resilience – pointing out that better employee wellbeing can help to bring healthcare costs down for employers.

“Consider whether the employee experience of the policy can be enhanced in a remote working environment through online and virtual services – such as electronic claims processing, telemedicine and direct billing.”

“Lower levels of employee wellbeing can link to a decrease in organisational productivity. It starts with the diminishing health of the individual, which has the effect of reducing the hired labour force and increasing costs,” said Oates.

“This in turn increases the stress on the healthy portion of the workforce, limits access to factors of production, increases healthcare utilisation, causes hardship and reduces investment. That stunts revenue growth and leads to missed opportunities.”

Oates added that the stress caused by such trying business conditions can create a vicious cycle – compounding the pressure on individual health, forcing organisations back through this process and lowering productivity even further.

“Wellness initiatives are premised on being able to modify the incidence of non-communicable disease, mostly caused by lifestyle.”

With hybrid working becoming increasingly popular since the beginning of the pandemic in early 2020 – and numerous data showing this to have a positive effect on employee wellbeing – medical services can be adapted accordingly.

“Consider whether the employee experience of the policy can be enhanced in a remote working environment through the development of online and virtual services. Examples include electronic claims processing, telemedicine, direct billing and employee assistance programmes,” said Oates.

In terms of physical health conditions, the report found that
non-communicable diseases represent eight out of ten of the largest contributors to disability adjusted life years – that is, days that would otherwise have been spent contributing productively to the labour force. However, this can be managed by focusing on metabolic risk factors which in turn can directly reduce claims incurred.

The top metabolic risk factors across the APAC region identified by Aon’s report were high blood pressure, physical inactivity, the ageing process, bad nutrition and high glucose levels. 

Final word
The big question remains as to how soon inpatient claims will revert back to ‘normal’ levels after the pandemic is finally contained and what affect this will have on healthcare benefits costs.

“It’s possible but we have yet to observe whether inpatient claims will simply return to pre-pandemic levels or if there will be an excess period to catch up for deferral of treatment,” said Oates.

“It may be that the expected increase will occur over a longer deferral period or that it simply will not come. We are monitoring claims patterns continuously so we can get an early sense of this risk emerging.”

This is extract from the Market Analysis section of Human Resource’s 40-page Corporate Health Insurance Guide 2021. To download the full guide, click here.

Highlights of the guide include:

  • Market analysis: Full article (with graphics) from Aon’s Medical Trends Report
  • Industry viewpoints: Insider knowledge for corporates, SMEs and start-ups
  • HR perspectives: The pros share their wisdom on boosting employees’ healthcare benefits
  • Handy overview of Hong Kong’s top medical insurance providers