Global medical costs rising at double-digit levelsNews added by Benefits Pro on July 2, 2012

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By Amanda McGrory

Employee medical benefits costs are rising at double-digit levels globally; however, some regions are experiencing stabilized cost increases, according to a new survey from Towers Watson, a global professional services company.

The survey also finds that traditional cost management approaches are most widely used, but wellness programs and health promotion strategies are becoming increasingly popular as employers strive to promote healthy lifestyles among their employees and improve outcomes.

In 2012, the global cost of employee medical benefits is expected to grow 9.6 percent. Although this figure is lower than the 9.8 percent increase in 2011 and 10.2 percent increase in 2009, costs are anticipated to rise at double-digit levels in four of the five global regions this year. Only Europe is expected to experience single-digit increases.

Top cost drivers have also remained consistent as the three factors most often reported are new medical technology causing overuse of care at 52 percent, practitioners recommending too many services at 50 percent and providers’ profit motives at 31 percent. These are the same cost drivers from 2011.

“The news is not all gloom and doom. Across all regions, we are seeing projections increase at a slower rate than in the recent past — perhaps evidence of the global economic slowdown,” says Francis Coleman, director, international consulting at Towers Watson. “Nevertheless, with trend rates expected to continue rising, even if less quickly, employers will be compelled to look for innovative solutions to manage their medical costs. In particular, many will investigate how a strategy of holistic health promotion can help curb long-term costs effectively.”

Contracted provider networks and preapproval for inpatient services continue to be the most popular methods of medical cost management at 57 percent, but less traditional methods are becoming more widely used. In fact, 42 percent of respondents say they use chronic condition or disease management tools, and 29 percent report using wellness programs.

A second medical opinion is still the most common prevention feature at 80 percent, and insurers are also offering more wellness services, such as health risk assessments and chronic condition and disease management programs.

“Employers are moving slowly but steadily toward an increased focus on wellness,” says Nicole Serfontein, senior international consultant at Towers Watson. “This slow progression for multinational companies is not surprising given challenges such as finding vendors that can provide wellness services on a global or regional basis, poor infrastructure and other inefficiencies. But these obstacles can be overcome with a commitment to organizational health promotion — a strategy that will not only enable employers to manage their costs, but also drive employee health, engagement and productivity over the long run.”

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