There’s no stopping the rising tide in benefit costs, with many insurers and plan administrators in the U.S. and worldwide expecting employee medical costs to continue to grow. And while health care costs are growing more slowly than in years past, the increases are unsustainable over the long-term, say those in the industry.

The cost of providing employee health care benefits has stabilized around the world but is expected to increase 8.3% globally this year – slightly higher than the 7.9% and 7.7% recorded over the past two years, according to a survey from Towers Watson.  

“[Employers] need to be very aware that growing at double digits, these costs will soon catch up, and that impacts their bottom lines,” says Francis Coleman, director of international consulting at Towers Watson.

Meanwhile, 55% of the more than 170 medical insurers surveyed anticipate higher trends for current rates going forward. A lot of the growth is attributed to international companies coping with high costs of new medical technologies and provider fees, as well as the poor health habits of many plan participants.   

“I think a little while ago private medical wasn’t commonplace necessarily worldwide; it definitely is the case now,” Coleman explains. He adds that a lot of health options now include cost containment methods that have been typical in the U.S. for decades, such as directing participants to specific networks and implementing cost-sharing arrangements.

Additionally, wellness and health promotion programs are continuing to make strides worldwide which, Coleman explains, “is definitely one piece of the puzzle for employers to tackle.”

Also see: 7 strategies to control rising health insurance costs

A recent RAND Corporation study for the Department of Labor found that half of U.S. employers with at least 50 or more workers and more than 90% of employers with more than 50,000 employees offered wellness programs in 2012. The research also found that workplace wellness programs can lower costs for workers with chronic diseases.

“Health care is the big looming battle for [employers], especially worldwide where the costs are projected to increase and we can see a lot of the state or national health systems continue to curtail or limit [benefits] and shift health care provisions to the employers and individuals,” Coleman explains to EBN.

As health costs climb higher than the rate of inflation many countries, costs for all medical plans in the U.S., meanwhile, are projected to increase by nearly 9%, a slower rate than reported over the past two years, according to Buck Consultants.

In its 28th National Health Care Trend Survey of over 120 insurers and administrators, Buck finds that preferred provider organization plans, point-of-service plans, health maintenance organization plans and high-deductible health plans are projected to grow between 8.5% and 8.7% this year.

Some survey respondents cited reduced utilization as the primary reason for the decrease.

“This may be a result of the economic slowdown and its impact on consumers' willingness to seek medical treatment,” says Harvey Sobel, FSA, a Buck principal and consulting actuary who co-authored the survey. “Even though the decline is good news, most plan sponsors still find 8-9% cost increases unsustainable.”

Register or login for access to this item and much more

All Employee Benefit News content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access