Global medical inflation to hit 7.8 per cent this year

Inflation in the cost of group PMI is predicted to run at 7.8 per cent through 2017 globally, with UK like-for-like premiums expected to rise by 5 per cent, according to a poll of medical insurers.

The increase in Insurance Premium Tax, which has risen from 6 to 12 per cent in the last two years, is singled out as a key reason for price hikes in the UK, along with continued demand for private services as the state-funded National Health Service continues to struggle with delivering cartian types of care quickly, says the report by Willis Towers Watson.

The report says insurers in the UK are pursuing improved pricing agreements and leveraging their size to get more favourable pricing agreements with key hospital groups and medical providers. In addition, most now contract beneficial prices with narrow networks of high-quality clinicians and hospital groups.

The global increase of 7.8 per cent this year compares to a 7.3 per cent increase experienced in 2016.

Latin America projects the largest increases, driven by very high rates of inflation in some countries, with big increases also expected in the Middle East and Africa region is also projecting large increases, where prices are expected to rise by 9.8 per cent. Europe continues to show the lowest level of increase, while US insurers project a 7.5 per cent increase this year, slightly less than they experienced in 2016.

The report says UK providers are attempting to keep costs down by developing “softer” condition-specific self-referral pathways, to increase speed of access and create more effective intervention.

The outlook for reining in costs in the near term is not optimistic, with a majority of insurers in all regions except the Middle East and Africa expecting higher or significantly higher medical trend costs over the next three years.

When asked for the most significant cost-driving factors outside the control of employers and vendors, 63 per cent cited the high cost of medical technology, with 40 per cent citing providers’ profit motives. A big majority – 74 per cent – of insurers ranked overuse of care due to medical practitioners recommending too many services as the most significant factor driving costs related to employee and provider behaviour. More than half – 54 per cent – cited overuse of care due to employees seeking inappropriate care.

According to the survey, increasing numbers of employers are offering preventive care and empowering employees to take responsibility for their own health. Globally, 39 per cent offer well-being programs, with around half of insurers in Europe offering them. These offerings are projected to grow — some significantly — in the next year, the survey noted.

Health promotion programs are also gaining traction, with 65 per cent of respondents to the survey now offer personal health risk assessments and another 16 per cent planning to do so next year. Second medical opinions are offered by 71 per cent, with another 11 per cent planning to do so. Notably, 48 per cent of insurers offer lifestyle and health education programs, predicted to grow to nearly 65 per cent next year.

Willis Towers Watson’s Global Medical Trends Survey was conducted in October and November 2016, and reflects responses from 231 leading medical insurers operating in 79 countries.

Willis Towers Watson health and benefits co-head Cecil Hemingway says: “Controlling rising medical costs is without question a top priority for insurers and employers around the world.

“While progress is being made in some regions to stem costs, the vast majority of respondents continue to grapple with how to rein them in. And it’s not for a lack of effort or innovation. In fact, more employers are implementing both traditional and innovative approaches to managing rising costs.”