As we enter 2021, employers will be looking at their health and wellness strategies for the year ahead and planning their budgets for PMI renewal premiums. But 2020 was a year like no other with the private medical sector enduring significant shake ups likely to affect medical costs across the board.
Aon’s 2021 Global Medical Trend Rates report, based on insight across 107 Aon global offices, looks at how these global medical costs are likely to change and the key factors driving these changes.
So what are the key elements employers should be aware of when they come to plan their budgets and develop wellbeing strategies for the coming year?
UK medical cost inflation will likely go down in 2021 – but there are still many unknowns
The inflation rate of employer-provided medical plan costs in the UK is likely to decrease this year from 6.5 per cent to 5.5 per cent due to a wide number of unknown outcomes relating to the pandemic.
But, as Rachel Western, principal at Aon points out, the nature of this uncertainty is likely to impact medical inflation in ‘the short and long-term’ meaning that inflation could ultimately increase again.
“Medical inflation is often hard to quantify,” she explains. “It’s the cost of providing treatment this year versus the following year. Costs can driven up through increased equipment costs, advances in technology as well as increased utilisation. Alternately, advances in technology whilst driving medical inflation costs up in the short-term due to initial investment, in the longer term, can actually drive inflation down because of improved health outcomes.”
For 2021, the predicted inflation decrease is assuming a ‘non-pandemic’ situation but in the face of unprecedented unknowns.
Deferred claims could ultimately push up costs from sudden high utilisation
The re-allocation of private hospitals and facilities for NHS use earlier in the year led to a sharp drop in private treatments. With subsequent delays in treatments, Western believes there will be a need to ‘catch up’ on ‘unknown levels’ of deferred claims since the start of the first UK lockdown. Western warns this catch up could lead to high utilisation which will push up costs, impacting on individual premiums.
“The NHS took control of all private facilities in case they were needed to treat COVID-19 patients,” says Western. “All private healthcare procedures were delayed and it continues to impact diagnoses of countless other health conditions and delay investigations and treatment.”
There’s a likelihood too, that a significant proportion of delayed treatments or untreated conditions have become worse. Someone with a back issue would ordinarily have seen a specialist early on and received straightforward treatment but if it’s been untreated, it could now be more complex with surgical intervention a requirement.
Even despite private hospitals re-opening, Western explains there is still reduced capacity: there is no ‘work around the clock’. Hospitals can only do a certain number of procedures a day: certain amount of time needs to be left now between procedures for cleaning routines due to increased infection risk. All procedures also carry extra costs due to additional safety and security measures such as COVID-19 testing and PPE usage.
“The pandemic’s impact is yet to fully play out,” Western adds. “It might be that in six months we’ll see a catch-up of deferred claims and costs will rise rapidly because of high utilisation and reduced capacity and that will impact on individual premiums. Yet we might see the expected catch up much lower levels than expected.”
Find out more. Download our 2021 Global Medial Trends report now >
Mental health could be one of the top claimed conditions for 2020
According to Western, musculoskeletal disorders are typically the highest claimed-for condition in the UK on a corporate medical plan. But during to the pandemic, many corporates will see mental health spend as their top claimed condition in 2020. This is due to the increased need for mental health support exacerbated by the ability for mental health conditions to be treated remotely throughout lockdown phases.
Cancer, mental health, musculoskeletal and ‘long-Covid’ are future risks
Western believes cancer, mental health, musculoskeletal and long-COVID-19 are likely to be key future health risks. Cancer treatment in particular, is very expensive, and with a lot of people delaying diagnosis and treatment during the pandemic, it’s likely delayed treatment will drive up costs even more.
Mental health has been the biggest claim on medical insurance in the UK although treatment is arguably cheaper and logistically easier to access than other health conditions thanks to availability of remote counselling and other talking therapies. Yet, mental health will continue to be a long-term risk. “There is going to be a lot of people out of work, worried about jobs, people who are struggling, those with relationship issues, worried about Christmas. All this will have a negative impact, so going forward, mental health will need to be a key focus,” Western explains.
With more people working from home in the short to medium term and expectations that home working will become a more permanent fixture for many corporates, musculoskeletal health will be an area requiring more focus. “Undoubtedly risk has increased in this area although the impact is likely to be more long term than short. Managing employee risk in this area will be essential,” she says.
And while it’s too early to say just how ‘long COVID-19’ is likely to impact on people’s health, Western says it’s something the industry needs to be braced for. “It could be a few years before we know the long-term health implications of the virus. And it may cause other long-term health conditions. We just don’t know the impact yet.”
Shift to remote services
The Aon 2021 Global Medical Trends report identified a massive shift to remote services among private healthcare providers – no surprise there. But these virtual services, including virtual GPs, video consultations with specialists and the general move towards digitalisation over the past year has created a shift in the marketplace, according to Western. “It’s reformed digitalisation in healthcare,” she says. “During the pandemic, insurers provided these digital services for free and utilisation has been high and expected to continue.”
Insurers focus is on driving down costs
Western says this year in particular, insurers ‘key focus’ has been on driving down costs for their clients. But the uncertainty of the pandemic has made it hard to price schemes. “We know what the risks are and most insurers have made a commitment not to profit from COVID-19, but we still don’t know how these risks will play out in the long-run,” she explains. “There are many unknowns, including the true numbers of deferred claims, the cost of future treatment and emerging health risks from long-COVID-19 and conditions which have been either untreated or undiagnosed this year. We’re in stormy waters.”
Ultimately, Western is of the opinion that the decreasing inflation rate is a good thing because it shows that insurers are taking the time to manage costs. But, there’s a caveat: the decrease in inflation rate is based on the assumption that the pandemic didn’t happen – except of course, it did. Insurers and providers therefore have their work cut out for them to circumnavigate all these complexities and the resulting impact on inflationary costs.
Find out more. Download our 2021 Global Medial Trends report now >
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