Medical insurers in the region are projecting significantly higher costs for 2016

The cost of employee health care benefits in the Middle East and Africa region is trending higher, driven largely by the higher cost of hospital and inpatient services, medical technology, and the overuse of services, according to a survey of medical insurers by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company. 

The 2016 Willis Towers Watson Global Medical Trends Survey found that medical insurers are projecting the cost of health care benefits in the MEA region to increase 12.2% this year, compared with 12.6% in 2015 and 10.3 % two years ago. It is also higher than the 9.1% global increase projected for this year.

More than half of insurers around the world anticipate higher or significantly higher medical trend over the next three years. Middle East and Africa insurers are particularly affected, with 85% expecting the trend in the next three years to be higher or significantly higher, the survey found. 

Steve Clements, Director, Health & Group Benefits at Willis Towers Watson, said: “Rising medical costs continue to be a major issue for employers around the world, outstripping salary inflation by 2-3 times. Interestingly, MEA employers are experiencing health benefit cost increases that are averaging several percentage points higher than those globally. New regulations and legislative changes across the U.A.E. and the wider Gulf region, notably Saudi Arabia, are driving the medical insurance market.”

When asked for the most significant cost-driving factors outside the control of employers and vendors, more than half (58%) cited the high cost of medical technology followed by providers’ profit motives (44%). Interestingly, three in four insurers (75%) ranked overuse of care due to medical practitioners recommending too many services as the most significant factor driving costs when it comes to employee and provider behavior.  

“We see considerable waste and avoidable costs when we examine many employers’ medical insurance plans. While employers and vendors can’t control the cost of medical technology, they can mitigate the cost and overuse of services by making employees better health care consumers.  Encouraging prevention and implementing wellness programs are just two examples of how to accomplish this. Employers can also implement provider and vendor management programs to better control overuse of services”, added Steve Clements. “Employers are understandably concerned about reducing valued employee benefits and from what we have seen this is not necessary as substantial savings can be achieved without any significant erosion of the plan design”. 

Other findings for the MEA region from the Global Medical Trends Survey include:

• Medical trend is projected at 15% for 2016, the same level as a decade ago. While there have been slight decreases in between, trend remains consistently high in the U.A.E.

• In MEA, claims for cardiovascular disease followed by respiratory conditions have significantly increased in prevalence of claims in the client medical portfolio over the past several years.

• There are currently some 60 insurance companies operating in the U.A.E. Abu Dhabi and Dubai have taken the lead and established health care systems that require employers to provide a minimum level of coverage for their employees. 

• Many insurers in the UAE are making significant investments in technology, which is helping to move the market forward in areas such as Customer service, Claim management and Wellness.

• The service categories to change over the next five years in the region are Basic medical/ Outpatient (54%), Hospital/ Inpatient (57%), Pharmacy (57%), Maternity (54%) and dental care (52%).

“Insurance companies worldwide have significant opportunities to help employers reign in rising medical costs and improve employee health. Insurers that can work with employers and create benefit programs that meet ever-changing needs, provide useful and timely data, and help incorporate wellness initiatives into their health programs will gain competitive advantage,” said Steve Clements.