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Employee health care costs rising significantly across EMEA

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The average cost per employee for health-related benefits rose by 3.6 percent in 2012. UK sees 8.2 percent increase in health benefit cost, attributing it primarily to increases in large claims. Government reforms will put added pressure on employers to provide private health insurance. Employee wellness tops list of cost-management strategies Companies are lacking data analysis which is critical to cost management.

The cost of providing health-related benefits for companies in EMEA (Europe, Middle East and Africa) rose by an average of 3.6 percent in 2012, according to a new survey conducted by Mercer Marsh Benefits . Survey respondents reported that cost rose at a similar rate, 3.4 percent – in 2011. The biggest drivers of cost in 2012 were the increasing utilization of health services, the growing complexity and expense of medical procedures and the impact of large claims, such as those for cancer treatment. These findings come from Mercer Marsh Benefits’ EMEA Health Care Survey, which solicited responses in October 2012 from more than 500 companies across 16 countries in EMEA. The report provides insights into healthcare and benefits trends across the region. Cost pressures varied across the surveyed countries. Rising utilization of health services was the most commonly cited reason for cost increases by respondents in the UAE, Spain and Portugal. The majority of UK companies attributed the cost increase to the impact of large claims. Companies in France pointed to the impact of regulatory and legislative changes as having the most impact – a new law in France obliges companies to implement a minimum supplementary health scheme if nothing is in place. “Companies across EMEA are under pressure to keep costs low but they are also responding to a rapidly changing health and benefits landscape. Companies that operate across multiple countries with different health and social care systems and different workforce demographics have to tailor their programmes by market,” said David Levey, the regional business leader for Mercer Marsh Benefits. “What is surprising to us is that, despite all this, nearly 4 out of 10 companies lack the data needed to provide them with an understanding of what is driving their costs and how they can control them.” This disconnect may come from the fact that companies place the highest priority on improving employee engagement and satisfaction with 65 percent of respondents ranking it as one of their top three benefit programme priorities. ‘Cost control’ (55 percent) is ranked second, followed by ‘ensuring benefits competitiveness’ (47 percent). Eighty-three percent of respondents consider benefits as a key attraction and retention tool.

Improving the usage of data, says Mercer Marsh Benefits, would help to manage costs and provide additional support for the commitment that most EMEA companies have to improve workforce health. Mercer Marsh Benefits believes that better use of data will occur. This is because much legislation, being introduced by governments as part of their health and social welfare reforms – will increase obligations of corporate health care provision. This, says the consultancy, will make management of health care costs a much higher priority. Health benefit costs as a percentage of payroll averaged 3.9 percent in 2011, the latest complete financial year at the time of the survey. Respondents in the UAE reported significantly higher average costs (5.9 percent of payroll), followed by Turkey (4.5 percent), Spain (4.2 percent) and the UK (3.5 percent). France (3.3 percent) Portugal (2.9 percent) and Italy (2.8 percent) reported the next highest cost, but were below the regional average. Germany and Poland both spent around 2.4 percent of payroll on health benefits costs. By contrast, in the US, employer-sponsored health benefits account for about 13 percent of total payroll cost.

Employers offer a range of health-related benefits. About three-fourths of respondents (76 percent) provide private medical insurance to all of their employees and to their dependents. While coverage for employees is almost always subsidized, 26 percent of respondents require employees to pay the full cost of dependent coverage. Asked about steps they will take to manage the cost of their health benefits, relatively few employers reported that they are likely to restrict benefit eligibility (12 percent). Rather more suggested that they would cut back on the scope of benefits offered (17 percent) or shift more cost to employees (16 percent). Employers seem more included to address the workforce health issues driving cost than to cut back on health benefits: two-fifths (40 percent) say they likely to invest in employee wellness programmes to reduce health risks. This is understandable given that more respondents are concerned about offering a competitive health benefits package (56 percent) than about the cost of health benefits (47 percent).

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