Health Care Costs Continue to Soar Worldwide

The 2012 Towers Watson Global Medical Trends Survey, a survey of 237 leading medical insurers in 48 countries, found that the global cost of employee medical benefits is expected to increase 9.6% this year. While this is slightly lower than the 9.8% increase experienced in 2011 and a 10.2% increase in 2009, costs are expected to continue to increase at double-digit levels in four of the five global regions this year, with only Europe expecting to see single-digit increases.

In North America, Towers Watson projects a 11% increase in the cost of employee medical benefits, relatively unchanged from an 11.4% increase in 2011, 12.1% in 2010 and 10.8% in 2009. However, separate Towers Watson research indicates that leading employers in the U.S. are experiencing a much lower trend (6% to 8%), possibly the result of stronger health management initiatives.

As cost increases have remained somewhat constant, so have the top cost drivers. The three factors cited most often, which repeat from 2011, are new medical technology causing overuse of care (cited by 52% of survey respondents), practitioners recommending too many services (50%) and providers’ profit motives (31%).

While traditional cost management approaches continue to dominate, wellness programs and health promotion strategies are gaining traction as employers look to promote healthy lifestyles among their employees and improve outcomes.

“[W]ith trend rates expected to continue rising, even if less quickly, employers will be compelled to look for innovative solutions to manage their medical costs,” said Francis Coleman, director, international consulting at Towers Watson. “In particular, many will investigate how a strategy of holistic health promotion can help curb long-term costs effectively.”

Although the most popular methods of medical cost management remain contracted provider networks and preapproval for inpatient services (both cited by 57% of respondents), some less traditional methods are receiving attention, too. More than two in five (42%) respondents reported using chronic condition or disease management tools, and more than one in four (29%) are using wellness programs.

The most common prevention feature remains the second medical opinion, which is offered by nearly 80% of respondents (both in-house and through a partner). Insurers are also increasing wellness services, such as health risk assessments and chronic condition/disease management programs, offering these either in-house or through the use of partners.

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