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The Actuary The magazine of the Institute & Faculty of Actuaries

Employer health care costs to rise 6.8% in 2020

Employer-sponsored health care benefits are expected to soar in 2020, with costs rising by an average of 6.8% globally, a survey of medical insurers has suggested.

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More than a quarter of the insurers expect mental health conditions to be among the three most common conditions affecting costs within five years, and some of the most expensive to treat.

The survey found also found that health care cost increases are likely to vary considerably across the five regions studied, ranging from 4.3% in Europe to 11.7% in Latin America.

In the UK, medical insurance costs are predicted to increase by 4.3% in 2020, which is a slight increase compared to the 2019’s rise of 3.9%.

Willis Towers Watson (WTW), which carried out the survey, said that controlling health care costs is a top priority for medical insurers and employers globally.

“Despite regional variation, cost increases continue to outpace inflation and remain unsustainable, making affordability a challenge,” said WTW managing director of health and benefits, Cecil Hemingway.

The survey also found that 40% of the respondents expect that medical costs will continue to rise at a higher rate over the next three years.

Asia Pacific insurers are the most optimistic, with 32% agreeing there will be a moderate increase over the next three years, while 12% believe costs will be lower.

Conversely, 54% of insurers in the Middle Eastern and African insurers believe medical expenses will increase, with virtually none anticipating lower costs.

Cancer, cardiovascular diseases, and conditions affecting musculoskeletal and connective tissue are the top three conditions by cost and are expected to remain so in the near future.

When asked what the most significant cost-driving factors will be outside the control of employers and vendors, seven in 10 cited the high cost of medical technology.

Nearly three in four ranked overuse of care due to medical practitioners recommending too many services as the most significant factor driving costs related to employee and provider behaviour.

In the UK, advanced therapy medicinal products are expected to have a material impact on costs, which include gene therapies, tissue-engineered products and somatic cell therapies.

“Employers that take steps now to understand the factors driving up costs and evaluate how they deliver health care benefits will be better positioned to manage costs in the years ahead,” Hemingway added.