Rise in healthcare costs outpaces local inflation
- The Philippines’ medical inflation rose by 12.4% in 2017, outpacing local inflation of 3.3%
- Global medical costs increased on average by 9.5% in 2017 and is seen at 9.1% in 2018
- Employers are advised to review their organizations’ current healthcare plans, invest in data analytics, and adopt a holistic approach to improve employee well-being and mitigate costs
Mercer Marsh Benefits’ 2018 Medical Trends Around the World survey projects the Philippines’ medical inflation rate, based on the cost of private healthcare plans, to reach 13.1% in 2018.
Despite having one of Asia’s youngest populations with its median age of 23 years, the Philippines is expected to see the highest medical inflation rate in Asia that will outpace the 4.9% full-year inflation forecast by the Bangko Sentral ng Pilipinas (BSP) for 2018.
This also continues the trend of the Philippines’ medical inflation rate outpacing local inflation. In 2017, the Philippines’ healthcare costs rose by 12.4% from 2016, outpacing the country’s 3.2% full-year inflation.
Mercer Marsh Benefits surveyed 225 insurers across 62 countries for the study. It found that the global medical cost in 2017 increased at 9.5%, almost three times the inflation rate of 3.4%. It also pegged medical inflation for 2018 at 9.1%
With the financial strain this is expected to bring many companies who pay for employee health insurance premiums, especially those with large workforces like those in the business process outsourcing (BPO) sector in the Philippines, Mercer Marsh Benefits recommends that employers review their organizations’ healthcare plans, invest in data analytics, and adopt a proactive and holistic approach in order to effectively manage employee healthcare costs. Mercer Marsh Benefits is Marsh & McLennan Companies’ international employee benefits business.
The economic burden of an unhealthy population
Insurers attribute the rise in costs to the increasing incidence of non-communicable disease such as heart disease, cancer, stroke, chronic respiratory disease, diabetes, and kidney disease.
“Aside from the obvious threat to the life-span and quality of life of its population, the increase in chronic non-communicable diseases in the Philippines can become a big economic hurdle,” said Teng E. Alday, CEO, Mercer Philippines, Inc. and Health Business Leader, Marsh Philippines, Inc. “The country’s upwardly-mobile young population has been one of our country’s key economic drivers. However, if more of them are getting sick, their long-term treatments will be a financial burden both the private and public sectors will have to bear.”
Another trend seen to drive medical inflation rates is increased workplace and/or personal-related stress/pressure. “Studies have shown how these impact not just physical health, but mental health as well,” said Alday. “However, it can be challenging to fully grasp how prevalent mental health issues are in the country as many who suffer are unable to speak up due to the stigma and misunderstanding they anticipate they will face.”
Employers are encouraged to have a proactive and holistic approach to wellbeing, in which mental health is recognized alongside physical health, as one of the essential building blocks to help employees fulfill their potential.
“Traditional medical insurance designs are mainly based on receiving crisis treatment in a clinic or hospital setting while seldom involve the principal of encouraging a healthy lifestyle. Adding the preventive elements into the design will help lower the employee health care cost,” Alday advised.
Stronger data and digital capabilities more critical than ever before
Other factors seen driving medical inflation rates are supplier increases (such as availability and access to new medical technologies), changes to health provider fee guides/schedules, rising employee expectations, changes to public/government social security schemes and/or health reform/legislation.
“Given how dynamic these factors are, employers need to be smarter about their organizations’ healthcare plans, using data and harnessing digital advancements to fine-tune their approach,” said Alday.
The 2018 Medical Trends Around the World report can be downloaded here.
Notes to Editors
The report asked insurers for information on the rising cost of medical care compared to inflation in each market as well as the types, costs and frequency of medical conditions that were claimed for by company employees in 2017. As Mercer’s research parameters for the two reports are different, US data has been excluded from this release; however according to Mercer’s National Survey of Employer-Sponsored Health Plans 2017, US employers experienced a 2.6% increase in the average total health benefit cost per employee in 2017.
About Mercer Marsh Benefits
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 professionals 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. Mercer and Marsh are two of the Marsh & McLennan Companies, together with Guy Carpenter and Oliver Wyman.
1The above medical trend rates reflect insurer survey results and may not be MMB’s view.
‡ Average of 50 participating countries with an acceptable number of responses
† Sources for inflation rates include:
• For all countries unless otherwise noted: International Monetary Fund, World Economic Outlook Database, April 2018
• For Latin America: Mercer's Latin America Economic Trends, April 2018
* Argentina: The source of the inflation data the source is Latin Focus Consensus Forecast.
Note for China cities and Mexico cities, the data refer to China and Mexico overall country data respectively. Inflation rate information is strictly for general reference purpose; Mercer gives no guarantees as to their accuracy and will not accept liability for decisions based on them.
Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer and Oliver Wyman. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, tax, accounting or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. Marsh makes no representation or warranty concerning the application of policy wording or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Although Marsh may provide advice and recommendations, all decisions regarding the amount, type or terms of coverage are the sole responsibility of the insurance purchaser, who must decide on the specific coverage that is appropriate to its particular circumstances and financial position. Insurance coverage is subject to the terms, conditions, and exclusions of the applicable individual policies. Policy terms, conditions, limits, and exclusions (if any) are subject to individual underwriting review and are subject to change.