Philippines' Healthcare Cost Inflation Projected to Hit 10.1% in 2020: Mercer Marsh Benefits Study

 

8 December 2020

PHILIPPINES, MANILA

 

  • Medical costs in the Philippines are expected to outpace inflation by six times.
  • Cost containment is critical, as 68% of insurers globally expect claims to increase due to COVID-19-related diagnostics, care and treatment.
  • Remote and flexible working to drive significant changes to employer-sponsored benefits programs.

 Philippine’s medical trend rate – which measures medical cost inflation – is projected to rise to 10.1% in 2020, up from 9.3% in 2019, according to a new report by Mercer Marsh Benefits (MMB). 

 

The sixth annual, MMB Health Trends: 2020 Insurer Survey (formerly known as Medical Health Trends Around the World survey), surveyed close to 240 insurers across 59 countries, excluding the United States, between early June and mid-July 2020.

 

In 2019, insurers in the Philippines reported cost increases of 9.3%, which was 3.8 times the rate of inflation. In 2020, medical costs in the Philippines are expected to outpace general inflation by six times with an average rise in medical costs of 10.1%, slightly below the Asia average of 10.7%.  Across the 11 Asian markets surveyed, the Philippines’s expected medical trend rate for 2020 came in fifth. Indonesia is top with a projected 13.8% increase, followed by Malaysia at 13.5% and Vietnam at 12%.

 

Teng Alday, Mercer’s CEO for the Philippines, said, “Medical costs in the Philippines continue to outstrip inflation which is unsustainable in the longer term. While the pandemic has put cost management into sharp focus, employers need balance economics and empathy to provide health programmes that are meaningful, but also maximise return on investment.”

 

COVID-19’s lasting impact on employee health benefits

 

Disruption to the delivery of healthcare and lasting changes to work patterns resulting from the COVID-19 pandemic will have a major impact on both the cost and design of employer-provided health benefits.

 

The survey revealed that 68% of insurers globally expect increased medical claims driven by COVID-19 diagnostics, care and treatment. Insurers also said they expect increases in medical costs to continue to vastly outstrip inflation. For 2021, 86% of insurers in Asia expect the trend to sustain or increase.

 

On the double-digit 2020 increase for Asia, Joan Collar, Mercer Marsh Benefits Asia Leader said, “The region was the first to be hit by COVID-19 and has “bounced back” faster than many other parts of the world, as a result of swift and widespread containment efforts. Much of the impact from COVID-19 claims deferral was felt in the first part of 2020. A significant portion of medical spend, including inpatient and outpatient expenses generally covered under medical plans – given that employees heavily rely on employer-sponsored medical in some of the region’s countries – has resumed.

 

“The rise in medical costs also reflects the increased unit cost of care due to providers passing on the cost of personal protective equipment (PPE) needed to safely perform services in their bills as well as the higher cost of supply imports due to exchange rate fluctuations.”

 

Broadening suite of solutions

 

The COVID-19 crisis has highlighted the fragility of current employee benefits systems, many of which are paper based and cannot be accessed or managed remotely. With many employers now looking for benefit providers that can offer additional benefits such as mental health, preventive care, and an enhanced range of digital and online services, insurers are increasingly looking to broaden their suite of solutions.

 

The survey found an increase in the number of insurers offering virtual health consultations, or “telemedicine” with 47% in Asia, saying it was an active part of their current approach to plan management, up from 32% in 2019.  Furthermore, 47% of insurers in Asia now cover preventive health initiatives, such as screenings, with an additional 22% indicating they are experimenting or have developed plans to initiate this within the next 24 months.

 

Ms Alday said, “We see a growing focus among companies on employee health and well-being. On-site clinics can play a critical role in not just providing primary care services, employee health and disease management as well as long-term cost-containment strategies, yet in some cases, they are being used as little more than first-aid stations.

 

“The pandemic means that now, more than ever, the onsite clinic will be the centrepiece of health management in the Philippines. They present both an opportunity for employers to actively manage employee health and an effective lever to address escalating medical costs.”

 

Employer-sponsored plans will continue to play an important role in providing people with the health services they need. For example, about 55% in Asia expect their employer-sponsored plans will cover COVID-19 vaccinations, while 82%, compared to a global average of 69%, expect to cover COVID-19 in-patient treatments.

 

Mental health support gap

 

The survey also found remaining gaps in mental health support, despite the increase in demand seen during the pandemic. For example, virtual mental health counselling is still not widespread, with only one-third of insurers offering it globally while 38% of insurers in Asia do not provide plans covering any mental health services. Less than half of insurers in Asia cover in-patient and outpatient treatment for mental health. This is despite the fact that in all regions, insurers rate private, employer-sponsored health care systems as more effective than public ones in providing the needed prevention, diagnostics and treatment of mental health disorders.

 

Ms Alday added, “The Philippines’ Department of Health has reported a significant increase in mental health calls amid the COVID-19 pandemic and has stressed the important role and responsibility of employers in improving the physical and mental resilience of their workforce. Companies need to put employees’ mental well-being at par with their physical health. Organizations that are not proactive on employee wellbeing are missing the opportunity to build a strong employer-of-choice reputation as well as better employee engagement.”

 

The report focuses on employer-sponsored health programs in 59 countries, excluding the United States, provided between early June and mid-July 2020. This year’s report contains the annual quantitative medical trends table, based largely on data provided by nearly 240 insurers, and added content beyond the financial aspects of insurance coverage.

 

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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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