Employee healthcare costs rising to worrying levels

59% of employers expect to spend more on healthcare in 2012 and 81% worry over its blunting effect on competitiveness.

Employers interviewed in a new Mercer Marsh Benefits survey across the Asian region, including those in Singapore, expressed anxiety over the ballooning healthcase costs.

As a response, more firms are looking to shift their health programs budget to more health risk assessments (47% of respondents), stress management interventions (46%) and chronic diseases management interventions (43%) in the next two years.

These health and wellness programs, according to Mercer, aim to curb the growing health deterioration and costs among their younger employee ranks.

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As the number of unhealthy, high-risk employees continues to rise in Asia Pacific, employers are beginning to feel the impact of corresponding significant increases in their direct and indirect health costs. Across the region, 35% of the 899 companies that participated in a recent Mercer Marsh Benefits survey spent over 6% of their annual payroll on health benefits in 2011, with 10% of those spending in excess of 15%.

Alarmingly, 59% of responding employers expect their health benefits spend to rise in 2012, and senior management is growing increasingly anxious about their employees' health. 81% of companies shared that they are concerned about their employees' health and worry how this may impact their ongoing success and competitiveness.

Organizations have typically focused their efforts on managing rising health benefits costs on direct medical spending, implementing strategies such as co-payments, cost-shifting to employees and switching providers. However, in Mercer Marsh Benefits' experience, these strategies do not address the major drivers of health care costs, and many employers now realize that some of the measures they took in the past were only temporary fixes.

The thought of paying higher and higher premiums, or slashing benefits when employee utilization is increasing, has finally prompted a significant increase in calls from employers in key markets, such as Singapore, Hong Kong, the Philippines and India, seeking help in tackling escalating health benefits costs.

"We've seen a huge spike in requests to help organizations obtain greater value from their benefits spend in 2012, with many finally acknowledging that unhealthy employee behaviors are driving their health benefits costs," said Rosaline Chow Koo, Mercer's Asia Pacific Employee Health and Benefits Leader for Mercer.

Employees in the region are increasingly exposed to major health risk factors including stress, sedentary jobs and lifestyle, insufficient sleep, poor diet, smoking, too much alcohol, not following medical care advice, and not taking any action to reduce or curb behaviors. These behaviors are quickly turning into some of the costliest health problems in the region today. "Our clients are experiencing the real benefits of implementing health and wellness programs, as without such preventative programs in place their employee health profiles continue to deteriorate, particularly among younger employees," observed Ms. Koo.

The good news is that many companies in the region are looking to enhance their health programs in the next two years through an expanded use of health risk assessments (47%), and interventions including stress management (46%) and chronic disease management (43%), as indicated by survey respondents.

Christine Owen, Mercer's Health Consulting Leader, Asia Pacific, said that many employers acknowledge the value of promoting and maintaining the health and wellness of their employee populations. Ms. Owen remarked, "There are clear commercial motives for investing in employee health and wellness including improving productivity and performance, attracting and retaining talent and promoting protection and well-being in the workplace." 60% of respondents in the Mercer and Marsh Asia Pacific Total Health and Choice in Benefits 2011 Survey (of which 87% were multinationals) cited improvements in productivity and performance as one of the top three drivers for promoting health and wellness in their organization. Other top drivers included the attraction and retention of talent (52%) and promoting employee protection and wellbeing (40%).

Unhealthy behaviors result in risk factors that lead to poor health among employees. They drive up health care usage and costs, and drive down productivity and performance. In most organizations, the majority of employees are likely to be reasonably healthy, productive and engaged in their work. "Healthy employees actually account for the smallest portion of your health costs," Ms. Owen remarked. But she went on to caution, "If you do nothing, however, each year a number of your employees will automatically shift from being healthy to unhealthy, so it's actually very important to help these employees stay healthy."

A minority of employees are likely to be unhealthy and disengaged in their work, which impairs their productivity. "Unhealthy employees account for the bulk of your health costs though," Ms. Owen remarked. "From Mercer Marsh Benefits' experience in working with a multitude of clients, generally 20% of the employee population drives 80% of an organization's health care costs. So, it's in an employer's best interest to help these employees improve their health."