Anticipating Rising Health Care Costs
The implications of Brexit on the health care system: The United Kingdom’s decision to leave the European Union has created a tremendous level of uncertainty throughout Europe and around the world. And while the exact implications are unknown at this point, there is plenty of speculation about the impact of this decision on everything from capital markets to the political landscape and immigration.
Similarly, potential scenarios that may play out in the UK health care system are also being debated, especially given that many who championed the cause for "Brexit" indicated that funds could be redirected from the EU and invested in the National Health Service (NHS). However, that claim was quickly dismissed following the referendum, leaving many to question the real implications of Brexit on health care.
Impact on employers and consumers: Before the referendum, the NHS was facing a shortage of around 116,000 workers by 2020. The UK has traditionally tried to fill the gap by recruiting workers from other EU countries, a strategy that becomes significantly more challenging should Brexit occur. The NHS had also planned to gain £22 billion in efficiency savings over the next few years by focusing on primary and long-term care based care models. However, the lack of trained manpower will make this transition very difficult.
As a result of the funding gap and staff shortage, the Economic Intelligence Unit predicts that by 2020, the NHS' spend per capita will be reduced by £135 a person, impacting access to high quality care.
The impact of Brexit on the NHS will also have implications for employers. Frustrated with the public health system, many individuals will look to their employer for support, driving demand for private health insurance, which in turn impacts employer budgets.
Furthermore, the anticipated slowdown in the UK economy and labor force could result in decreased demand for certain health and benefits products. This creates a significant pricing challenge as current carrier rates are based on membership numbers and breaching those numbers could trigger revised rates. This dynamic, combined with a spike in claims that is typically correlated with economic recessions, would further drive up health care costs.
Impact on insurance carriers: There is much speculation regarding UK interest rates set by the Bank of England and whether or not they will fall below the current level of 0.5 percent. Any reduction in interest rates could negatively impact the costs of health insurance related benefits, as carriers respond by building lower investment yields into their pricing models.
Another implication for carriers is the fact that previously, UK based insurers could operate across the EU as a result of 'passporting.' Unless the continuation of 'passporting' is agreed to as part of the post-exit negotiations, it will be very difficult for insurance to be provided across the EU.
Impact on innovation and quality: The UK health care market currently benefits from investments from the European Commission to the tune of over €5bn since 2007. By being outside of the EU the UK would lose their ability to benefit from these investments.
Additionally, companies seeking to conduct clinical trials for new drugs across the EU can run multi-country studies by registering in a single EU clinical trial database. In a post-Brexit environment, companies in the UK seeking to conduct multi-country clinical trials will be forced to apply individually to each country, resulting in significant cost and administrative burden.
Finally, future coordination between the UK and the EU in dealing with pandemics, as well as other health threats, could prove challenging as the UK will need to coordinate with individual countries within the EU. While frameworks could eventually be put in place for the creation of a new EU-UK joint coordination mechanism, this process could take a few years.