Asia's employers urged to tackle rising health-care costs

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Mercer Marsh Benefits urges Asia’s employers to tackle rising health-care costs

  • 09 April 2014
  • Hong Kong, Hong Kong

Corporate health costs are set to double in Asia in the next four to seven years, according to the Asia Total Health and Choice in Benefits report from Mercer Marsh Benefits™, which studies the future challenges of providing employee benefits in the Asian market place.

While people are living longer they are getting sicker as poor lifestyle habits have resulted in deteriorating general health and an increase in incidence of chronic illness. And the costs are being passed on to employers through employer sponsored health programs.

“While medical advances have allowed us to cope with chronic illnesses, the net effect is that people are living longer but with poorer health, resulting in greater demand for medical care. However, the cost of medical care is increasing every year, and medical inflation is outstripping general inflation significantly,” said Rose Kwan, Partner, ASEAN Business Leader, Mercer Marsh Benefits.

Medical inflation table

Country

General inflation
20131

Medical inflation
20132

Expected change in
Medical premiums2

Australia

1.0%

5%–7%

5.5%–6.5%

China

2.7%

5%–7%

10%–12%

Hong Kong

3.5%

4%–5%

10%

India

10.9%

18%

16%–22%

Indonesia

7.3%

12%–13%

10%–12%

Japan

0.1%

3%- 4%

**0.3%

Malaysia

2.0%

15%

10%-15%

Pakistan

8.5%–9.5%

12%–14%

15%–17%

Philippines

2.8%

8%–10%

10%–15%

Singapore

2.3%

3%–4%

4%–8%

South Korea

1.4%

2%

7%

Taiwan

1.2%

2%–3%

4%–6%

Thailand

2.2%

18%–22%

15%–20%

Vietnam

8.8%

20%–25%

15%–20%

1 Projected IMF estimates, World Economic Outlook Database, Oct 2013 (information as extracted October 2013)
2 Extracted from Mercer’s Inflation Summary subject to changes due to updates
* *Refers to the increase in statutory Japan Health Insurance Association (HIA) premiums.
Note: The figures stated above are subject to change during the year as these are estimates and based on current market conditions

While governments around the world are grappling with this, health care provision in most Asian economies is ill-equipped to deal with the challenge, says Mercer Marsh Benefits.

With people living longer, Mercer Marsh Benefits warns business leaders of three underlying risks that need urgent attention. These are the risk associated with the increasing use of care by employees and their families leading to ever increasing health care costs; the risk of poor health and illness as a result of unhealthy lifestyles and the loss of individual productivity due to poor health and illness.

“Employee health and wellbeing directly affects company profitability, from the cost of absence days and loss of productivity to rising insurance premiums due to smoking, obesity and other lifestyle choices,” said Kwan.

Mercer Marsh Benefits warns that any strategy that seeks to provide health care after employees get sick does not address the underlying issues.

“Targeted intervention and prevention should be a priority so that companies are able to control the ongoing cost of benefits programs and avoid future costs. Doing anything less simply perpetuates the vicious cost-increment cycle,” said Kwan.

Mercer Marsh Benefits says the number one phenomenon that the 2013 survey demonstrates is that HR professionals are actively looking for new ways to manage the impact of benefits programs. However, many HR professionals continue to support multiple programs that are not necessarily aligned with the right business outcomes.

“In a climate of slower economic growth, business leaders will find it a challenge to shoulder the increasing costs and the associated erosion of profit,” said Kwan. “HR professionals will need to be more financially vigilant, with targeted implementation and prevention a priority so companies can control the ongoing cost of benefits programs and avoid future costs that may not yet have manifested. Alternative solutions require investment, but HR professionals must be equipped with the necessary data, tools and knowledge to justify any investment to their business leaders.”

Notes for Editors

Mercer Marsh Benefits provides clients with a single source for managing the costs, people risks, and complexities of employee benefits. The network is a combination of Mercer and Marsh local offices around the world, plus country correspondents who have been selected based on specific criteria. Our benefits experts, located in 135 countries and servicing clients in more than 150 countries, are deeply knowledgeable about their local markets. Through our locally established businesses, we have a unique common platform which allows us to serve clients with global consistency and locally unique solutions.

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