Balancing cost containment and quality in medical coverage 

General inflation has been top-of-mind globally for the last two years.  It has affected individuals’ cost-of-living, as well as businesses in terms of increased pay demands, higher prices, and challenging operating environments.

As medical inflation rates tend to be run higher than general inflation, related insurance pricing is inevitably effected, according to Mercer Marsh Benefits Health Trends 2024, our global insurer research report. After end-of-year results are analyzed, we expect premium increases in 2023 to be higher than in 2022.  

Given this anticipated trend, employers face a difficult balancing act. Skills shortages are constraining growth in many sectors; attracting, retaining, and engaging employees with good quality benefits provision will continue to be a priority. At the same time, our research indicates that around one- third of markets with double-digit percentage increases in the cost of cover. This will put pressure on HR teams to rein in the scope and breadth of coverage.

Understanding and addressing drivers of costs is vital. Health Trends 2024 shows that cancer continues to be a major source of claims, both in terms of per-dollar value and frequency. 

^{Source: Mercer Marsh Benefits Health Trends 2024}

Developing clear strategies that address cancer prevention, diagnosis, treatment, and putting into place practical work supports for impacted employees can directly mitigate costs. These approaches can have relevance for other non-communicable diseases (NCDs). Providers recognize the need to innovate and extend services to support treatment of cancer and other NCDs, with over a quarter (27%) planning to add communications about cancer prevention (61% already do so) and 30% considering adding genetic testing as part of their offering.

^{Source: Mercer Marsh Benefits Health Trends 2024}

Broadening the definition of cancer support is one example of how healthcare is transforming, often by leveraging digital health. In most of the world’s regions, our survey findings reveal a perception that public health services have deteriorated and health service provision has declined since the onset of COVID-19. On the flipside, private healthcare is improving in both scope and quality.

Select digital health services, including telemedicine, are now well-embedded in most private health insurer offerings. Other digital solutions offer great potential for the next five years, including AI-driven tools that permit remote patient monitoring and offer first-line diagnosis and pharmaceutical developments.

While there may be major shifts in the way that healthcare is structured and delivered in the longer term, cost containment remains a primary focus for many employers.  

^{Source: Mercer Marsh Benefits Health Trends 2024}

Affordability is a significant issue, with 42% of respondents globally saying that private healthcare affordability is worse now than before the pandemic. That has implications for inclusivity of care as well as breadth of included services that address gaps in need in the workplace. 

^{Source: Mercer Marsh Benefits Health Trends 2024}

Research shows that insurers’ response to the need for cost control is most effective when employers work with them. It is vital to check that insurers have updated medical cost sharing, deductibles, and limits. This is not always done proactively. Again, AI has the potential to improve cost containment through algorithms that detect fraud, identify waste or abuse, as well as direct people to centers of excellence for high-quality care.

Providers have sharpened their focus on broader aspects of inclusivity, for example making sure that communications are inclusive and accessible. There has been progress in expanding cover for diagnoses, learning supports, and occupational therapy to support neurodiversity. Although there is progress, the research highlights that insurers are less engaged with ensuring diversity in their own medical provider networks and in using member demographic data to proactively address health care gaps and needs. Significant care gaps remain, especially around women’s/reproductive health and mental health support. 

Women’s/reproductive health benefits present a mixed picture. Cover is patchy across regions. For example, support during pregnancy is limited, with just 21% of insurers globally saying that they support high-risk pregnancies.

Mental health remains a workplace and societal challenge. Insurers across all regions, except Middle East and Africa (MEA), identify emotional and mental concerns as a top-five risk factor for medical claims. Providers are exploring additional areas of support, notably around coverage of targeted services for children, teenagers, and parents. Health Trends 2024 research shows this is valued highly by employees.

^{Source: Mercer Marsh Benefits Health Trends 2024}

Cover for psychological and/or psychiatric counselling sessions remains ripe for improvement. Over half (52%) of surveyed insurers cover 10 or fewer counselling sessions, which may not be sufficient to address need, especially for more complex mental health issues. Employers need to be aware of these limitations and either anticipate additional costs or discuss opportunities to extend support. 

Insurers are optimistic that over the next two years inflation will ease and medical trend rates will begin to stabilize. In the short term, employers and providers will need to weather the storm of higher premiums. Employers should explore cost-containment opportunities while continuing to offer employees the scope and quality of health insurance protection they need. Doing so will help meet the business goal of attracting and retaining scarce high-quality talent.