EMPLOYEE BENEFITS
Employer medical costs expected to rise sharply
Medical cost increases for UK employers are projected to rise by 8% in 2008, part of a significantly above-inflation global trend, according to a survey of insurance companies conducted by Watson Wyatt Worldwide.
As many as 71% of respondents to the global survey expect higher or significantly higher medical cost trends over the next five years. Additionally, 81% report that medical costs are eclipsing the general rate of inflation in their country.
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The UK is, if anything, likely to experience lower medical cost inflation than many other countries:
Insurance companies in Asia and Africa are expecting double-digit increases in employer medical costs in 2008, with the exception of companies in Hong Kong and Singapore.
The same is true in Latin America, except for Brazil and Chile, where costs are expected to increase by around 7%.
In Europe, most insurers – except those in Italy – are projecting increases in the single digits, although respondents in all European countries said they expect higher trends over the next five years.
A final word
"If UK medical benefits are to increase at 5% or more above both price and wage inflation in the medium term, then employers may well wish to review plan designs and strategies that offer them opportunities to exert greater control and predictability over future programme costs.
Factors such as reduced waiting times for NHS treatment and the apparent rationalisation of new, higher-cost drugs, bring into question where traditional employer medical plan designs will offer 'added value' to employees in the future. Some employers may decide to move the focus of their medical benefits away from timely access to treatment, private rooms and a choice over hospitals and specialists, and towards providing employees access to drug therapies and other treatments that the NHS will not, for cost reasons, be prepared to offer." - Elliott Hurst, a senior consultant at Watson Wyatt.
Want to know more?
The results are based on a Watson Wyatt survey of 85 insurance companies that provide medical insurance to employers throughout Asia, Africa, Europe and the Americas.
For more details about the report Contact Watson Wyatt Data Services, tel: 0207 222 8033 or email: wwdsuk@watsonwyatt.com.
Watson Wyatt Worldwide is the “trusted business partner to the world's leading organisations on people and financial issues”. The firm’s global services include: managing the cost and effectiveness of employee benefit programmes; developing attraction, retention and reward strategies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,000 associates in 32 countries and is located on the web at www.watsonwyatt.com.