How do insurers around the world manage the medical trend of increasing healthcare costs?

The 2022 Global Medical Trends Survey by Willis Towers Watson reveals considerable variation in healthcare cost increases worldwide. With COVID-19 cases surging in different countries at different times in 2020 and 2021, the uneven trajectory of the pandemic created considerable volatility in healthcare utilisation and costs.

After dropping to 4.8% in 2020 and rebounding to 8.1% this year, the projected healthcare benefit cost trend is expected to continue at a similar level for 2022, at a global average of 8.1%.

Average increases across different regions next year are expected to range from 14.2% in Latin America to 10.6% in the Middle East and Africa to 7.6% in Asia Pacific to 6.7% in Europe. The average medical trend in the U.S. is projected at 7.6% in 2022 based on other Willis Towers Watson research.

Healthcare costs are expected to continue to accelerate beyond 2022, with over three-quarters of health insurers anticipating higher or significantly higher medical trend over the next three years. Eighty-six percent of insurers in Europe expect higher or significantly higher medical trend over this time period as do 82% of insurers in the Middle East and Africa, 74% of insurers in Latin America and 64% of Asia Pacific insurers.

Over three-quarters of health insurers anticipate higher or significantly higher medical trend over the next three years

How are insurers managing the increasing healthcare cost medical trend?

We take a closer look at how insurers are managing the medical trend in this abstract.

Cost Sharing

Insurers identified member coinsurance as the most typical cost-sharing approach in all regions but Europe, where socialised medicine skews the results.

There is also wide regional variation. In Latin America, 55% of insurers say member coinsurance is very typical, while only 19% of respondents in Asia Pacific report that this is the case.

Among other cost-sharing mechanisms are deductibles, which are very typical in Latin America (39%) and Europe (27%). In addition, 46% of insurers in the Middle East and Africa indicate that deductibles are a typical practice, as do 23% of those in Asia Pacific.

Less prevalent are annual limits on out-of-pocket expenses, which less than one-fifth (16%) of insurers report as a very typical practice.

Methods and tools for managing medical healthcare costs

Contracted networks

Seventy-five percent of insurers globally indicate that using contracted networks of providers for all treatments is the most effective method for managing medical healthcare costs.

This is the most popular cost management method in Latin America (96%), Europe (82%) and Asia Pacific (64%), and the second most prevalent cost management practice in the Middle East and Africa (85%), where limits on certain services (87%) is the leading method of managing costs.

Preapproval for scheduled inpatient services

Preapproval for scheduled inpatient services was the second most popular cost management tool, with 67% of insurers globally citing this as an effective approach to managing costs.

Roughly three-quarters of insurers in Latin America (78%) and the Middle East and Africa (77%) find this to be an effective medical healthcare cost management method.

Telehealth

Telehealth emerged as the third most popular method of managing costs, with 63% of insurers globally indicating that telehealth is an effective cost management method, up from 54% last year.

There is a significant increase in insurers reporting that telehealth is an effective cost management tool in Latin America, where 79% of insurers hold this view, up from 38% last year.

Increases were also seen in Asia Pacific, where 60% report that telehealth is an effective cost management method versus 46% last year, and in Europe where the percentage of insurers holding this view rose from 61% to 67%.

Medical insurance program exclusions

Insurers globally continue to exclude a significant number of conditions for which there is a demonstrable need for care among the insured population and for which there are treatments to make these conditions manageable.

These include HIV/AIDS as well as alcoholism and drug use. In the case of HIV/AIDS, the percentage of group policies for more than 500 employees excluding this condition jumped from 41% last year to 54% today.

There are also some key regional differences when it comes to these exclusions.

In Latin America, only between 7% and 10% of group policies regardless of size exclude HIV/AIDS, while in Asia Pacific and the Middle East and Africa, over half of group policies regardless of size exclude this condition.

Additionally, over half of all group policies in the Middle East and Africa have exclusions for alcoholism and drug use, while in Europe, between 40% and 43% of all group policies have this exclusion.

Also appearing on this year’s exclusion list are pandemics, which may reflect the fact that in some countries, governments may be bearing most of the pandemic costs. Globally, 39% of group policies covering more than 500 employees exclude pandemics.

Key changes to medical portfolios in 2021

Telehealth services

Globally, 37% of organisations added telehealth services to their medical portfolios, a number that rises to 47% in Europe.

New wellbeing services

A quarter of organisations globally (26%) added new wellbeing services to their programs, a figure that jumps to 35% in Asia Pacific and 45% in the Middle East and Africa.

About the survey

Willis Towers Watson is a global advisory, broking and solutions company. The 2022 survey tracks medical costs from a global network of 209 insurers in 61 countries.

Click here for the full report.

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