Most expatriates tend to pay close attention to the general rate of inflation in their everyday lives, especially in fast-growing, emerging economies like China where as little as a few months can show a rather significant jump in the weekly supermarket tab. Whilst medical inflation is much less visible in our daily lives, its effects can be similarly or more significant on the finances of businesses and international schools and their employees alike.
So what is medical inflation, what are its causes, and what can employers and expats do to manage seemingly ever rising medical costs?
What is medical inflation, and how does it affect you?
Expat families in China and elsewhere in the world see the effects of general inflation when going grocery shopping, going out to eat, or buying new clothes for the school year. Medical inflation is the same concept in the world of health care. Over time the prices of treatments, services, and medical products increase, and medical consumers feel the effects when renewing their health insurance plans. These effects may come in the form of higher premiums, co-pays, or reductions in benefits.
Medical inflation typically runs at a much higher rate than general inflation. For example, the United States Medical Consumer Price Index (MCPI) has shown a 3-5% per year increase over the last 10 years for health care expenses like physicians, prescription drugs, and health insurance premiums. International medical insurers have quoted increases in costs and prices anywhere from 7% to 15% in the last 10 years. The bottom line is that medical costs continue to increase and employers and insurers bear the consequences.
What causes medical inflation?
One of the driving factors behind medical inflation is an aging population that is living longer due to advances in medical care. As we are living longer we now need more medical treatment more frequently than before. In addition, the development of new technologies, drugs, and procedures needs to be financed. Companies who produce new drugs or medical devices spend vast sums of money on research and development. The costs of these are reflected in the prices that doctors and hospitals pay for the end product.
For international medical insurers a second significant driver of costs in recent years has been an increasing rate of utilization by plan members due to the global recession. When the economy isn’t doing so well utilization rates of plans will go up. Expats put more effort into saving small amounts of money by settling medical claims for less significant amounts, whereas in a better economic position they may be less worried about paying these costs out-of-pocket. Also, the threat of being laid off from work will cause people to use up their benefits while they still have them. All of these factors combine together to result in an overall increase in costs for hospitals and clinics, which ends up being paid for in large part by higher premiums from health insurance customers.
What can you do?
The good news among what may seem like an insurmountable tide of rising costs is that whilst insurers continually negotiate with providers to keep costs down, businesses, international schools, and individuals and families can also help mitigate the effects of medical inflation.
As a business or international school:
Use your HR department as a strategic partner
Your human resources (HR) department can be a valuable asset in keeping down rising premium renewal costs. With the assistance of a specialist health insurance broker like One World Cover, you should be reviewing your claims information each year and making changes to the benefits structure if needed. There may be areas of opportunity to lower costs by reducing coverage that doesn’t seem necessary, or negotiating with an insurance provider to make adjustments to the plan that will reduce the risk of higher-cost claims.
You also may want to look at any tendencies that may have a specific correlation to your business’ or school’s operations. For example, a shipping company may see a lot of medical claims in a year relating to strained muscles or joint injuries. This can be addressed by further occupational hazard training to reduce the amount of claims in this specific area of treatment. Further to this, hiring on-site support such as a physical therapist to deal with smaller issues may reduce the long-term costs of increased claim utilization.
Balance public and private service use
Companies and international schools that operate in countries that offer public health services to its citizens should pay close attention to the services that can be obtained without using their private health insurance plan. Especially for local employees on the plan, less life-threatening issues or minor chronic conditions may be able to be taken care of by the public health system without a need to use the more costly private plan.
Find a plan with a global network
Having a plan with a global network of providers will give a company, international school, and individuals and families leverage when deciding to where to undergo treatment. With a large amount of choices you can find a medical care provider that will offer you the lowest cost of treatment for your needs. Also, when an international insurance company receives the bill for the medical treatment from the hospital or clinic it will be reviewed. If the insurance provider determines the bill is too high they may challenge the hospital or clinic to try to lower the bill.
As individuals and families:
Shop around
Different insurance companies offer a wide range of benefit plans to suit different needs of individuals and families. Going straight to an insurance company to look for a plan will not enable you to review all the possibilities available in the market. Therefore be sure to enlist the services of a specialist health insurance broker like One World Cover to assess your individual situation, and find a plan that can work best for you.
Talk with doctors about your medical procedures
Doctors decide which treatments and procedures patients should undergo and as such are the ultimate decision makers about the cost of service. Talk with your doctor about how much certain treatments cost, and alternative possibilities that may be less expensive and suitable for your own lifestyle.
Find alternatives to using your medical insurance plan
The best way to keep the costs of medical care down will always be to not use it! Keeping a healthy lifestyle in the long run will always reduce the amount of medical treatment someone needs. You may not always feel like you have the time to exercise or the energy and will power to eat healthy, however it is important to think of these matters in financial terms. High blood pressure, diabetes, and heart disease – to name just a few – are extremely costly conditions that can be effectively prevented by leading a healthy lifestyle.
As medical care technology continues to advance and our population continues to grow and age, medical inflation will certainly continue to be unavoidable. However, by paying close attention to your plan and dutifully managing your and your company’s or school’s benefits structure you can find savings in your private health insurance plan that will show up in the bottom line.
For assistance with obtaining a sustainable, cost effective medical insurance solution, please directly contact us at +86 21 5100 1960 to speak with an expert One World Cover insurance consultant.