Insurers’ health benefit costs rising faster than inflation, says report

Rising costs faced by Canadian health insurers represent a global trend

Insurers’ health benefit costs rising faster than inflation, says report
Global advisory solutions firm Willis Towers Watson has released the results of its 2017 Global Medical Trends Survey, which polled 231 insurers across 79 countries In October and November. The overall survey results reflected a global struggle for insurers to contain costs.

“While progress is being made to stem costs, the vast majority of respondents continue to grapple with how to rein them in,” Cecil Hemingway, co-head of Willis Towers Watson's health and benefits practice, told the Society for Human Resource Management.

In North America, medical costs faced by US health insurers rose by 8.8% in 2015, and 7.8% the following year; net of general inflation, the reported cost increases were 8.7% and 6.6%, respectively. For 2017, the report forecast a gross increase of 7.5% and a net increase of 5.2%.

Canadian insurers saw gross medical cost increases of 8.2% in 2015 and 8.4% the year after. Taking general inflation into account, they reported rises of 8.7% and 6.8%. Forecasts for 2017 in Canada were a 9.4% gross increase in medical costs and a 7.3% increase net of inflation.

The report said that Canadian respondents cited concerns about rising behavioural health claims and utilization of high-cost drugs coming to market.

Across all respondents worldwide, the most significant cost drivers identified were:
  • Overuse of care due to medical practitioners recommending too many services (74%);
  • High cost of medical technology (63%);
  • Overuse of care due to employees seeking inappropriate care (54%); and
  • Health providers’ profit motives (40%)

The top three conditions (excluding maternity) that were expected to weigh the most on benefit plans for insurers in the Americas were cardiovascular (79%), cancer (56%), and musculoskeletal/back issues (37%).

As for cost-sharing approaches, insurers in the Americas cited member coinsurance as the most typical tactic (75%). Insurers from the region were also global leaders in the use of annual deductibles (82%), along with annual out-of-pocket expense caps (64%) and premium cost sharing (67%).

The report also cited direct education as a possible cost-mitigation tool. In Canada, insurers and plan providers have begun to offer pharmacy navigation services, which could help members find the most appropriate and lowest-cost medications to satisfy their needs.

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